Executive Summary: Key Legal and Evidentiary Issues

• Four Alberta electric utilities challenged the Commission's 2025 Decision on the characterization of contributions in aid of construction under the Electric Utilities Act.

• Statutory interpretation of s 122(1)(a) of the Act is central to determining whether contributions qualify as capital investments entitled to a return.

• The Commission classified contributions paid by Distribution owners as expenditures rather than capital amounts, denying both Transmission and Distribution owners a rate of return.

• An earlier 2021 Decision reaching similar conclusions was quashed on procedural fairness grounds, and the other issues were remitted to the Commission for reconsideration.

• Respondents FortisAlberta and the System operator opposed the appeal, arguing the issues were mixed fact and law or lacked serious arguable points of law.

• Permission to appeal was granted on both the "Allocation Issue" and the "Return Issue," as the Court found both to be likely questions of law of significant general importance.

The regulatory landscape of Alberta's electrical utilities

Alberta's electrical utility system operates through a layered structure of transmission and distribution. Transmission facility owners, such as AltaLink, own, operate and maintain the high-voltage power lines that transport electricity over long distances. Distribution facility owners, such as FortisAlberta, own and operate the low-voltage lines that connect to the transmission grid and deliver electricity directly to end-use customers. EPCOR, ATCO, and ENMAX operate as both Transmission and Distribution owners. Overseeing the entire energy grid is the Alberta Electric System Operator, a not-for-profit statutory body that oversees and operates Alberta's entire energy grid, including generators, and transmission and distribution facilities.

How contributions in aid of construction arise

Distribution owners charge end users a rate based on fixed and variable amounts, referred to as the transmission rate. Included in the transmission rate is a tariff amount set by the System operator, known as the operator's tariff. The operator's tariff is paid to the System operator, who then pays the Transmission owner a transmission tariff intended to compensate Transmission owners for building, maintaining and operating the transmission grid, and for enabling Distribution owners to access that grid. When the need for new or upgraded transmission facilities is driven by end-use customer demand, a Distribution owner makes a service request to the System operator. If approved, the System operator directs a Transmission owner to construct and operate the new transmission facility. The Distribution owner then attempts to recover the cost of accessing the new or upgraded transmission facility from its customers through an amount determined by the System operator, referred to as a contribution in aid of construction. Historically, these contributions were considered an investment in a utility-owned asset and included as part of the Distribution owner's approved capital structure, entitling Distribution owners to a return under s 122(1)(a) of the Electric Utilities Act.

The Commission's 2021 and 2025 Decisions

In 2021, following a challenge to the existing contribution regime by a Transmission owner, the Commission determined that while the legislative framework permits the existing tariff recovery mechanism through contributions, those contributions are not an investment in a utility-owned asset by either the Transmission or the Distribution owner. This characterization prevented both Transmission and Distribution owners from earning a return pursuant to s 122(1)(a) of the Act. Several electric utilities sought permission to appeal the 2021 Decision, which was granted in AltaLink Management Ltd v Alberta (Utilities Commission), 2022 ABCA 18. On appeal, the Court of Appeal quashed the 2021 Decision due to procedural fairness concerns and remitted the other issues back to the Commission for reconsideration. On July 22, 2025, the Commission released Decision 29006-D01-2025. The Commission's conclusions in the 2025 Decision largely mirror its conclusions in the 2021 Decision. Specifically, the Commission found that the System operator is permitted under the operative legislative regime to establish a policy requiring Distribution owners to pay contributions in relation to transmission facility construction or upgrades triggered by system access service requests; that the Commission is not compelled by legislation to require Transmission owners to pay or repay these contributions, to include the amounts in their capital base, or to earn a return on such expenditures; and that the Commission did not err in law by treating contributions paid by Distribution owners as expenditures rather than as capital amounts entitled to a return, as these contributions are not investments in utility-owned assets by either Transmission or Distribution owners and thus do not qualify for a return under s 122(1)(a) of the Act.

The two core issues on appeal

The four applicants framed their grounds of appeal around two primary issues. The first, referred to as the "Allocation Issue," concerns the Commission's interpretation of s 122 of the Act and whether Transmission owners should be entitled to earn a return on contributions paid by Distribution owners in support of transmission facility construction or upgrade. The second, the "Return Issue," concerns the Commission's determination that contributions should be treated as expenditures which must be recovered in the year they are incurred, rather than as capital amounts which would be entitled to earn a rate of return amortized over time.

Opposition from FortisAlberta and the System operator

FortisAlberta argued that the Allocation Issue is not an extricable question of law. It stated that because the Commission followed the modern approach to statutory interpretation in interpreting s 122 of the Act, the issue is more accurately framed as a question of mixed fact and law. The System operator argued the proposed questions do not raise serious, arguable questions of law and the applicants stand no real chance of convincing the Court that the Commission's decision with respect to those questions is incorrect. The System operator further argued that allowing permission to appeal would result in additional delay that would unduly hinder the progress of the already long-delayed holistic tariff review process.

The Court's analysis and ruling

Justice Tamara Friesen of the Alberta Court of Appeal noted that the proposed issues for appeal are the same ones that were before the Court in 2023, wherein the Court concluded both issues raised questions of law. While acknowledging that FortisAlberta may be right that the Allocation Issue is ultimately a question of mixed fact and law subject to a more deferential standard of review, Justice Friesen was not prepared to make that determination at the permission stage. Based on the information before her, she was satisfied the questions posed by the applicants are likely questions of law of significant general importance raising serious, arguable points of law. She noted that the Commission's interpretation of the operative provisions of the Act — namely that neither Transmission nor Distribution owners are eligible to earn a return on contributions and that such contributions are treated as expenditures that must be recovered in the year incurred rather than as capital and amortized over time — are both marked departures from how these provisions were previously interpreted and applied in the context of the historical electrical utility regime in Alberta. On the question of delay, Justice Friesen accepted that the appeal will continue to hinder the progress of the tariff review but was not satisfied that this fact has any bearing on whether permission to appeal should be granted, holding that the System operator's valid concern regarding delay does not override the importance of the questions posed and the necessity of ensuring the Commission has correctly interpreted the Act. Permission to appeal Commission Decision 29006-D01-2025 was granted to all four applicants — AltaLink, EPCOR, ATCO, and ENMAX — on both the Allocation Issue and the Return Issue. No specific monetary amount was at issue in this decision, as the ruling concerned the threshold question of whether the appeal could proceed; the merits of the appeal remain to be determined.