2005 BCCA 330 Joint Industy Electricity Steering Committee v. British Columbia Utilities Commisssion

Before:	The Honourable Madam Justice Rowles
	The Honourable Mr. Justice Hall
	The Honourable Madam Justice Levine

R.B. Wallace and D.R. Bennett	Counsel for the Appellant Joint Industry Electricity Steering Committee
W.J. Andrews	Counsel for the Appellants GSX Concerned Citizens Coalition, British Columbia Sustainable Energy Association and Society Promoting Environmental Conservation
C. Sanderson, Q.C. and R.A. Skolrood	Counsel for the Respondent British Columbia Hydro and Power Authority
G.K. Macintosh, Q.C. and L.G. Keough	Counsel for the Respondent Duke Point Power Limited Partnership
Place and Date of Hearing:	Vancouver, British Columbia
3 June 2005
Place and Date of Judgment:	Vancouver, British Columbia
14 June 2005

Written Reasons Granting Leave to Appeal by:

The Honourable Madam Justice Rowles

Written Reasons Dismissing Leave to Appeal by:

The Honourable Mr. Justice Hall (Page 34, para. 74)

Concurring Reasons Granting Leave to Appeal on one issue by:

The Honourable Madam Justice Levine (Page 52, para. 96)

Reasons for Judgment of the Honourable Madam Justice Rowles:

I. Introduction

[1] The applications before us are brought under s. 9(6) of the Court of Appeal Act, R.S.B.C. 1996, c. 77, to review the order of a chambers judge dated 12 April 2005, refusing leave to appeal an order of the British Columbia Utilities Commission (the “Commission”) dated 17 February 2005, by which the Commission accepted an Energy Purchase Agreement ("EPA") entered into between the British Columbia Hydro and Power Authority ("BC Hydro") and the Duke Point Power Limited Partnership ("DPP"), subject to certain conditions. The reasons of the chambers judge for denying leave may be found at 2005 BCCA 233 and on QuickLaw at [2005] B.C.J. No. 860.

[2] The applicants appeared as intervenors on the hearing which culminated in the Commission’s order approving the EPA. The Joint Industry Electricity Steering Committee ("JIESC"), the applicant in appeal CA032700, is an association of many of the major industrial users of purchased electric power in British Columbia. Their operations are largely in the pulp and paper, mining and mineral processing, and electro-chemical production sectors. JIESC and its predecessors have appeared before the Commission and its predecessors on most BC Hydro hearings since the 1980s. During oral submissions, we were told that the industrial users of electricity which make up the association purchase about 25 percent of the electricity consumed in this Province. JIESC is primarily concerned about matters affecting the reliability and cost of generating and delivering electricity in British Columbia.

[3] The applicants in appeal CA032708, GSX Concerned Citizens Coalition, British Columbia Sustainable Energy Association, and Society Promoting Environmental Conservation ("GSXCCC"), are associations concerned with environmental conservation and sustainable energy.

[4] The Commission is a statutory body created pursuant to the Utilities Commission Act, R.S.B.C. 1996, c. 473 (the "Act"). In addition to its general duty to regulate public utilities, the Commission must determine, under s. 71 of the Act, whether energy supply contracts are in the public interest. Section 71 of the Act provides:

71(1) Subject to subsection (1.1), a person who, after this section comes into force, enters into an energy supply contract must

(a) file a copy of the contract with the commission under rules and within the time it specifies, and

(b) provide to the commission any information it considers necessary to determine whether the contract is in the public interest.

(1.1) Subsection (1) does not apply to an energy supply contract for the sale of natural gas unless the sale is to a public utility.

(2) The commission may make an order under subsection (3) if the commission, after a hearing, finds that a contract to which subsection (1) applies is not in the public interest by reason of

(a) the quantity of the energy to be supplied under the contract,

(b) the availability of supplies of the energy referred to in paragraph (a),

(c) the price and availability of any other form of energy, including but not limited to petroleum products, coal or biomass, that could be used instead of the energy referred to in paragraph (a),

(d) in the case only of an energy supply contract that is entered into by a public utility, the price of the energy referred to in paragraph (a), or

(e) any other factor that the commission considers relevant to the public interest.

(3) If subsection (2) applies, the commission may

(a) by order, declare the contract unenforceable, either wholly or to the extent the commission considers proper, and the contract is then unenforceable to the extent specified, or

(b) make any other order it considers advisable in the circumstances.

(4) If an energy supply contract is, under subsection (3) (a), declared unenforceable either wholly or in part, the commission may order that rights accrued before the date of the order under that subsection be preserved, and those rights may then be enforced as fully as if no proceedings had been taken under this section.

(5) An energy supply contract or other information filed with the commission under this section must be made available to the public unless the commission considers that disclosure is not in the public interest.

[5] Section 101(1) of the Act provides that “An appeal lies from a decision or order of the commission to the Court of Appeal with leave of a justice of that court." While not expressly stated in s. 101, it is accepted that an appeal from the Commission is restricted to questions of law.

[6] On their leave applications, the applicants argued that significant aspects of the process by which the Commission arrived at its decision to approve the EPA failed to accommodate the “public interest” requirements of s. 71 of the Act and failed to accord with the common law duty of fairness in the regulatory context. The issues of law on which JIESC sought leave were couched in these terms:

(i) whether the Commission erred in its interpretation and application of section 71 of the Utilities Commission Act by placing inappropriate limitations on the scope of the hearing and reversing the onus regarding the question of the public interest;

(ii) whether the Commission committed a breach of the rules of natural justice by receiving and relying on confidential information;

(iii) whether there was a reasonable apprehension of bias; and

(iv) whether the Commission committed a breach of the rules of natural justice by directing BC Hydro to enter into a contract for gas transmission with TGVI [Terasen Gas Vancouver Island] for the Island Cogeneration Plant.

[7] The third issue in JIESC’s grounds arises from the Commission’s Order No. L-10-05, pronounced 27 January 2005 (Reasons issued 9 February 2005), in which the Commission Panel refused to accede to the intervenors’ assertions of a reasonable apprehension of bias arising from statements made by the Chairperson of the Commission during an in camera session called at his request. This issue was also raised in the application for leave to appeal filed by GSXCCC and we heard extensive submissions on the question of whether the chambers judge had erred in not granting leave on this ground.

[8] On the review application before us, JIESC contends that the chambers judge erred in principle by applying too stringent a test in determining whether leave to appeal should be granted. In the submission of counsel for JIESC, the learned chambers judge erred in principle by considering whether the various points would succeed on an appeal rather than considering whether the proposed grounds raised “substantial issues to be argued”.

[9] The governing authority in this Province on leave applications from statutory tribunals is Queens Plate Dev. Ltd. v. Vancouver Assessor, Area 09 (1987), 16 B.C.L.R. (2d) 104, 22 C.P.C. (2d) 265 (C.A.) [cited to B.C.L.R.], per Taggart J.A. (In Chambers), in which the factors relevant to an application for leave to appeal are summarized at 108-110:

Since September 1982, a justice of this court has been authorized to hear applications for leave to appeal from special tribunals established by provincial legislation. Neither the Court of Appeal Act nor the Acts establishing special tribunals set out the principles which a justice must follow in reaching his decision. However, the decisions made on applications for leave to appeal since September 1982 refer to some of the principles that are applicable. A very useful article written by Patrick G. Foy entitled "Leave to Appeal: Civil Cases in the British Columbia Court of Appeal" was published in The Advocate, vol. 45, Pt. 3, p. 339 (May 1987); see especially para. 4 at pp. 342-43. From that source, and from a review of decisions given since September 1982, it seems a justice may have regard for one or more of the matters listed below:

(a) whether the proposed appeal raises a question of general importance as to the extent of jurisdiction of the tribunal appealed from (Chevron Can. Ltd. v. Vancouver Assessor, Area 09, [1986] B.C.W.L.D. 2210, No. CA005532, 17th April 1986 (not yet reported));

(b) whether the appeal is limited to questions of law involving:

(i) the application of statutory provisions (Allard Contr. Ltd. v. Coquitlam Assessor, Area 12, [1986] B.C.W.L.D. 2601, No. CA003122, 29th March 1985 (not yet reported));

(ii) a statutory interpretation that was particularly important to the litigant (Richard's on Richards Cabaret Ltd. v. Gen. Manager, Liquor Control & Licensing Branch, [1986] B.C.W.L.D. 2032, No. CA005509, 2nd April 1986 (not yet reported); and Alkali Lake Indian Band v. West Coast Transmission Co. (1984), 57 B.C.L.R. 110 (C.A.)); or,

(iii) interpretation of standard wording which appears in many statutes, for example the in force provisions of retroactive legislation (Avon Can. Inc. v. Min. of Fin., No CA006313, 23rd December 1986 [now reported 8 B.C.L.R. (2d) 56, 14 C.P.C. (2d) 208, 33 D.L.R. (4th) 154]);

(c) whether there was a marked difference of opinion in the decisions below and sufficient merit in the issue put forward (Shewan v. Bd. of Sch. Trustees, [1986] B.C.W.L.D. 2086, No. CA005520, 24th March 1986 (not yet reported), and B.C. Assess. Commr. v. Chevron Can. Ltd., [1987] B.C.W.L.D. 2677, No. CAV000502, 11th June 1987 (not yet reported));

(d) whether there is some prospect of the appeal succeeding on its merits (Clarke v. Supt. of Brokers (1985), 67 B.C.L.R. 294, 23 D.L.R. (4th) 315 (C.A.), and Re Wasmuth (1984), 58 B.C.L.R. 17 (C.A.)); although there is no need for a justice before whom leave is argued to be convinced of the merits of the appeal, as long as there are substantial questions to be argued;

(e) whether there is any clear benefit to be derived from the appeal (Assessor of Area 09 (Vancouver) v. Trizec Equities Ltd., [1985] B.C.W.L.D. 2096, No. CA003649, 13th May 1985 (not yet reported); and MacMillan Bloedel Ltd. v. Min. of Fin., [1984] B.C.W.L.D. 2535, No. CAV11/84 (not yet reported)); and

(f) whether the issue on appeal has been considered by a number of appellate bodies (Re Commercial App. Commn. Act, B.C.C.A., No. CA004464, 4th October 1985 (not yet reported); and Telep v. Supt. of Ins., Brokers & Real Estate, No. CA004523, 10th October 1985 [now reported 67 B.C.L.R. 242]). Leave to appeal has consistently been denied where the Court is asked to retry a case a third or fourth time on issues involving judgment exercised by tribunals with specialized expertise where no error of principle has been shown.

[10] In Omineca Enterprises Ltd. v. British Columbia (Minister of Forests) (2000), 91 B.C.L.R. (3d) 74, 6 C.P.C. (5th) 91, 2000 BCCA 591 [cited to B.C.L.R.], Southin J.A., for the Court, affirmed that the applicable authority on a leave application from a statutory tribunal is Queens Plate (at para. 9). In Omineca Enterprises, appeals had been brought in the Supreme Court of British Columbia from decisions of appeal boards established under forestry legislation. The appeals had been dismissed and leave to appeal was then sought in this Court on a point of law involving the interpretation of a statutory provision and its application to undisputed facts. A chambers judge dismissed the leave application on the ground that it had “no realistic possibility of success”. In relation to that standard being applied on a leave application, Southin J.A. said at para. 13:

As I understand the learned chambers judge, his conclusion was really founded on the proposition that there was "no realistic possibility of success" which is analogous to the test in Queens Plate Development Ltd. v. Vancouver Assessor, Area 9, "whether there is some prospect of the appeal succeeding on its merits". There is, however, a subtle difference between the test "realistic possibility of success" and "substantial questions to be argued"; so this case resolves itself, in my opinion, to this question: Is there here a "substantial" question of law to be argued?

[Underlining added.]

[11] The reference to “substantial issue to be argued” is, of course, to paragraph (d) of Queens Plate, quoted above. In Omineca Enterprises, the respondent argued before the panel that the applicant’s proposition was “wholly without merit”. Of that argument, Southin J.A. said, at para. 16:

At the end of counsel’s submission, I was not persuaded that that was so. To my mind, if a proposition is not wholly devoid of merit, it raises a substantial question to be argued.

[12] As JIESC has pointed out in its written brief, a leave application is not intended to be a full and final review of the merits of an appeal. Among other things, there are limits on time and materials available for consideration by the Court on a leave application.

[13] While the chambers judge in this case referred to Queens Plate in his reasons, he made no reference to the decision of this Court in Omineca Enterprises which confirmed that Queens Plate was the applicable authority when leave is sought from a statutory tribunal.

[14] As in Omineca Enterprises, the applications before us are to review the order of a chambers judge refusing leave to appeal. The accepted formulation of the test to be applied on a review of an order of a single justice under s. 9(6) of the Court of Appeal Act is that set out in Haldorson v. Coquitlam (City) (2000), 3 C.P.C. (5th) 225, 2000 BCCA 672, at para. 7, per Lambert J.A:

It comes to this: that the review hearing is not a hearing of the original application as if it were a new application brought to a division of the court rather than to a chambers judge, but is instead a review of what the chambers judge did against the test encompassed by asking: was the chambers judge wrong in law, or wrong in principle, or did the chambers judge misconceive the facts. If the chambers judge did not commit any of those errors, then the division of the court in review should not change the order of the chambers judge.

[15] On its application to review the order refusing leave to appeal, JIESC asks whether the chambers judge erred in principle or in law by:

(a) …applying too stringent a test in determining whether leave to appeal should be granted?

(b) …failing to recognize that the Commission breached the rules of natural justice by directing, as a condition of approval of the EPA that BC Hydro enter into a long term firm contract for gas transmission for the Island Cogeneration Plant at Elk Falls, when the possibility of such a requirement was never a part of the Duke Point EPA Approval Proceeding?

(c) …failing to consider whether the Commission should have adopted reasonable alternative means to allow disclosure of critical information behind the determination of the principle issue in the EPA Approval Proceeding, while preserving commercial confidentiality?

(d) …making a determination of the prospects of success on the issue of reasonable apprehension of bias, rather than deciding whether there was a substantial issue to be argued?

[16] GSXCCC argues that the chambers judge erred in dismissing the application for leave to appeal by:

(i) … rejecting the ‘reasonable apprehension of bias’ ground on its merits, rather than examining whether the appeal has some prospect of success; and

(ii) … misconceiv[ing] the facts pertinent to the reasonable apprehension of bias argument.

II. Background

[17] The nature of the statutory and process issues which arose in this matter are more readily understood against the background of an earlier unsuccessful application made by BC Hydro in relation to a proposed electricity generating plant at Duke Point.

[18] According to an Executive Summary contained in a decision of the Commission dated 8 September 2003, BC Hydro had determined in the mid-1990s that the security of Vancouver Island’s electrical supply was becoming critical. Most of the electricity consumed on the Island is generated on the Mainland and delivered across Georgia Strait by three underwater transmission systems. Given the age and deterioration of two of those systems, BC Hydro had concerns about the security of supply and compliance with industry reliability standards, as adopted by BC Hydro. According to the Executive Summary,

The need for a new electricity supply to Vancouver Island is driven by the expected retirement of a significant part of the bulk transmission system from the Mainland to the Island. That retirement will reduce BC Hydro’s ability to meet the Island’s peak demand by 240 megawatts (MW) in 2007. BC Hydro has concluded that it would be imprudent to continue to rely on this aging transmission system even with continued expenditures to maintain and repair it.

[19] BC Hydro’s preferred option for securing a reliable electricity supply for Vancouver Island and the Gulf Islands was a natural gas-fired generation facility on the Island, referred to as the Vancouver Island Generation Project ("VIGP" or the "Project"). The Vancouver Island Energy Corporation ("VIEC"), a wholly owned subsidiary of BC Hydro, was incorporated to carry out the Project. BC Hydro ultimately acquired an industrial site at Duke Point in Nanaimo which was thought to be suited to the Project.

[20] BC Hydro applied to the Commission for a Certificate of Public Convenience and Necessity ("CPCN" or the "Certificate") for the proposed VIGP at Duke Point under s. 45 of the Act. From 16 June to 3 July 2003, the Commission conducted a public hearing to determine whether the Certificate should issue. The two applicants before us as well as other intervenors participated in that hearing process.

[21] BC Hydro proposed to the Commission that if it were to decline to grant a CPCN, it could as an alternative grant a conditional certificate, the condition being that BC Hydro would conduct a call for tenders.

[22] In its decision dated 8 September 2003, the Commission denied the application for a CPCN for the Project on the ground that BC Hydro had “not established that the Project was the most cost-effective means to reliably meet Vancouver Island power needs”. In its decision the Commission urged BC Hydro to proceed with a call for tenders and stated that it was prepared to consider any future application for approval of the VIGP or other cost-effective resources on an expedited basis. In the concluding paragraph of its decision, the Commission stated:

The Commission Panel believes that it is important that the CFT [call for tenders] be perceived as fair and open so that projects other than VIGP with GSX supply compete on a level playing field to meet the load requirements of Vancouver Island. The success of the CFT is also important to the enhancement of goodwill that may benefit future resource calls.

[23] In the material submitted to the Commission in 2003, BC Hydro had used proprietary models containing sensitive commercial information that BC Hydro considered to be confidential. In its decision of 8 September 2003, the Commission noted, under 7.6: "In future applications, the Commission Panel expects BC Hydro to use assessment models which can be made public so that the various components and assumptions can be assessed and tested by intervenors.”

[24] BC Hydro proceeded with a call for tenders and on 3 November 2004, filed with the Commission an EPA and a VIGP Transfer Agreement between BC Hydro and the Duke Point Partnership. The VIGP agreement with Duke Point Partnership was for the construction at Duke Point of a natural gas thermal generating plant capable of generating 252 megawatts of capacity, with a completion date of May 2007. BC Hydro then filed the Agreement as required by s. 71 of the Act.

[25] On 30 November 2004, the Commission determined that there would be an oral hearing under s. 71(2) of the Act. At a pre-hearing procedural conference, the Commission chair stated that the process would be expedited so a decision could be issued by 17 February 2005. That meant the process would occur over 79 days. At that time the Commission identified what it considered to be the principal issue in the matter:

Is Tier 2, Tier 1, or the No Award option the most cost-effective option to meet the capacity deficiency on Vancouver Island commencing in the winter of 2007/08?

[26] On 2 December 2004, the Commission set out the regulatory agenda for the oral hearing and set out the schedule for written information requests from intervenors. On 16 December 2004, JIESC filed an application seeking reconsideration of the Commission’s rulings on scope and confidentiality, arguing that the scope of the issues needed to be broader, and that important information needed to be disclosed.

[27] On 17 and 22 December 2004, pre-hearing conferences were held. GSXCCC brought a motion to have one of the commissioners disqualified by reason of his appointment as interim president of a company with natural gas interests. Other intervenors supported the motion and counsel for BC Hydro and DPP declined to argue to the contrary and the panel member voluntarily recused himself.

[28] There were a number of submissions made regarding the confidentiality of information and what needed to be produced. The portions of the EPA on which attention focused were "Appendix 3" and “Appendix J”. Appendix 3 concerned the pricing terms of the contract. After argument based on the principles discussed in Sierra Club of Canada v. Canada (Minister of Finance), [2002] 2 S.C.R. 522, 2002 SCC 41, Appendix 3 was ordered produced.

[29] On 6 January 2005, the Commission issued reasons for ordering disclosure of Appendix 3 but not Appendix J. In its reasons the Commission noted that BC Hydro wanted to keep confidential all documents that were created for the purpose of selecting the winning bid for the generating plant. Appendix J refers to the detailed assessment and information that supported the conclusions in the cost effectiveness analysis conducted by BC Hydro’s senior management in determining whether to proceed with the Duke Point Partnership EPA. The analysis compared the effectiveness of the DPP plant against two other possible alternatives: (1) a portfolio of two smaller generation projects on Vancouver Island; and (2) accepting no bids at all and using short-term contingency options. As stated earlier, the Commission characterized this analysis as the principal issue in the hearing; that is: “Is Tier 2, Tier 1, or the No Award option the most cost-effective option to meet the capacity deficiency on Vancouver Island commencing in the winter of 2007/08?”

[30] BC Hydro’s conclusions under Appendix J were made public but the detailed figures, assumptions and calculations underlying those conclusions were never disclosed to the public or to the intervenors, even though requests were made by counsel for JIESC that the Commission find alternative ways to restrict the ban while preserving the confidentiality of commercially sensitive information. The problem of withholding the information was that it made it impossible for JIESC and other intervenors to challenge the assumptions and calculations upon which the decision on the principal issue in the hearing was based.

[31] On 14 January 2005, GSXCCC sought reconsideration of the scope of the hearing and the hearing schedule but that was rejected by the Commission.

[32] JIESC continued to seek release of the analysis contained in Appendix J after the order regarding Appendix 3 had been made in an ongoing effort to find reasonable alternatives to restrict the ban while preserving the confidentiality of commercially sensitive information but it was unsuccessful. Non-disclosure agreements to protect confidentiality was one suggestion JIESC put forward.

[33] On 17 January 2005, the oral hearing commenced. "Witness panels" were held in which the interested parties presented their cases. The direct evidence of the parties was submitted in writing before the oral phase of the hearing.

[34] On 19 January 2005, at the end of the cross-examination of some BC Hydro witnesses, the Commission Chairperson asked some questions and then indicated that he had an area of questioning that he believed should be pursued in camera in that it involved the bidding information from an unsuccessful bidder. Only the Commission staff and counsel, BC Hydro counsel and staff, the witnesses to be questioned and the commissioners were to attend. The Chairperson was concerned that the best "portfolio" within the winning bid should proceed, as it appeared to him that this was not what was occurring. He therefore said, "I want to pursue this issue, and I think in order to pursue this issue I need to do it in camera, which I think, unless there are objections to me doing that, I need advice as to how best to do that." Counsel for BC Hydro then made suggestions. Counsel for the GSXCCC made observations and the Chairperson said he would, at the end of the in camera session, "do my best to disclose as much as possible with respect to the line of questioning that I had." No objection was taken.

[35] On 21 January 2005, a redacted transcript of the in camera hearing was released. GSXCCC subsequently brought a motion to have the Commission panel disqualify itself based upon a reasonable apprehension of bias.

[36] On 24 January 2005, a virtually complete version of the transcript was released. The transcript of the in camera hearing contains a discussion as to whether duct firing is better customer value than "pristine without duct firing". The Chairperson said this:

This may be an area where I can add some value to customers. And I thought your answer would be just what it is, that but for the rules of the CFT [Call for Tenders], you would have chosen Pristine with duct firing. It may be – I don’t know enough about this yet, but it may be that the coincidence that both portfolios are the same proponent is helpful in moving us to the outcome that’s in the customers’ best interest.

So you know now what I want to try to do. I need your help in telling me how I can get there.

[37] A BC Hydro witness agreed with the Chairperson that steps should be investigated to be sure the EPA was the one that was in the “customers’ best interests”. The Chairperson then stated:

But you now have DPP [Duke Point Partnership] bound by contract. You have DPP bound by contract ongoing without duct firing. If the Commission issues a decision that approves portfolio three – and this is a legal question I suppose, but is Pristine contractually bound at that stage? Are both bids live, I suppose is the question.

As it appears in the transcript, the Chairperson later suggested that there might be a need for further in camera hearings.

[38] On 26 January 2005, GSXCCC argued its motion for disqualification. The following day the Commission dismissed the application with reasons to follow. In the reasons, styled as L-10-05, the Commission noted that GSXCCC, in arguing that the conduct of the Commission had given rise to a reasonable apprehension of bias, advanced two themes. First, GSXCCC contended that the Commission made up its mind before hearing all of the evidence. Second, it contended that the Commission favoured BC Hydro by providing it with special advantages that were not provided to other parties, and by expressing an intention to help BC Hydro. The Commission rejected the submission that a reasonable apprehension of bias arose from its decision to conduct an in camera session on 19 January 2005. The Commission said that in considering the application, it was guided by Wewaykum Indian Band v. Canada, [2003] 2 S.C.R. 259, 2003 SCC 45. The Commission noted that its objective in holding the in camera session was to avoid the disclosure of confidential information related to non-successful bids and that no improper purpose motivated the holding of the in camera hearing. The Commission further noted that no objections were made by counsel to the in camera hearing. The Commission determined that it had not reached a conclusion on the substantive aspects of the s. 71 filing and that no final decision had been made before all the evidence was heard. Further, the Commission rejected the assertion that it had provided assistance to BC Hydro that was not available to others.

[39] In its decision the Commission stated:

The Commission Panel acknowledges that if certain isolated portions of the transcript are taken alone and not put in their context, there might be a concern as to whether the Commission Panel members had closed their minds to persuasion before all the evidence and argument had been heard.

[40] On 28 January 2005, the evidentiary portion of the EPA hearing was completed. Written arguments were filed in early February and oral argument was held on 10 February 2005.

[41] On 17 February 2005, the Commission issued order E-1-05, which accepted the EPA for filing with some specific conditions and directions. One of the conditions was that BC Hydro purchase firm gas transportation service from Terasen Gas (Vancouver Island) Inc. to serve DPP’s proposed power plant at Duke Point.

[42] On 9 March 2005, the Commission issued its reasons for the decision. The reasons of the Commission deal in detail with greenhouse gas risk, gas price risk, and gas transportation risk. The reasons also set forth the terms and conditions of the Agreement and an analysis of the process by which the EPA came to be accepted. The “Commission Decision” contains the following acknowledgement:

The Commission Panel acknowledges some deficiencies within the CFT process conducted by BC Hydro but finds no compelling evidence that the outcome of the competitive bidding process is not in the public interest and should therefore be overturned, particularly in light of the imminent capacity shortfall on Vancouver Island commencing in the winter of 2007/08 with the zero rating of the HVDC [high voltage direct current] line. The Commission Panel notes that all of the non-winning bidders in the CFT will have an opportunity to participate again in future calls for system energy and capacity. In coming to its determination that electricity supply from the Duke Point Power project is in the public interest, the Commission Panel also considered several natural gas price forecasts and has concluded that it is likely that gas prices will drive market power prices in the Pacific region of North America for most if not all of the term of the contract with DPP.

[43] Under the EPA approved by the Commission, BC Hydro will purchase, for at least 25 years, the output from a gas-fired electricity generation plant that DPP proposes to construct at Duke Point near Nanaimo, British Columbia. Approval of the EPA was in keeping with the provincial government's 2002 energy policy of encouraging private sector development of new electricity generation.

III. The errors in principle or law alleged by the applicants in relation to the decision of the chambers judge on the leave application

(i) Disclosure of confidential commercial information

[44] One of the issues on which leave was sought was whether the Commission had failed to adhere to its statutory obligations and the common law duty of fairness by declining to order disclosure of information said to be essential to the determination of the central issue in the EPA proceeding, while preserving confidentiality in the commercial business information that had come into existence through the call for tenders process.

[45] In dismissing the leave application on this point, the chambers judge said:

[47] The legislative empowerment to govern its procedures and matters of confidentiality are difficult for the applicants to overcome in the circumstances of this case. No breach of the legislation has been revealed, rather simply a submission that the confidentiality orders were too broad considering the importance of the information to the ultimate issue. However, more than this must be established in order to have this matter form the basis for a successful appeal.

[48] This issue does not favour the granting of leave to appeal.

[Underlining added.]

[46] On the issue of receiving and relying on confidential information, the chambers judge said this:

[38] In my opinion there is nothing in the submission of the applicants that would ground a successful appeal of the decision of the Commission on the basis of either unduly limiting the scope of the hearing or of its use of and interpretation of the issue of public interest. As such, this issue does not support the application for leave to appeal.

[Underlining added.]

[47] In taking the approach he did to whether leave to appeal ought to be granted on the process issues surrounding the disclosure of confidential information, it is my respectful view that the chambers judge applied a more stringent test on the leave application than required by Queens Plate, supra; that is, he looked to the question of whether the appeal would succeed rather than whether the proposed points on appeal raised substantial issues to be argued.

[48] JIESC recognizes that the Commission has the right to receive information in confidence pursuant to s. 71(5) of the Act and that s. 42 of the Administrative Tribunals Act, S.B.C. 2004, c. 45, provides that all or part of the evidence of a witness or documentary evidence may be received by a tribunal in confidence to the exclusion of a party or parties or any intervenors, but points out that neither of those sections has been considered by any court.

[49] In its brief, JIESC made the following submissions, with which I agree:

24. The right to hold information confidential is not a matter of unfettered discretion. The right of parties to know the case they have to meet goes to the heart of our judicial and administrative legal system. The restrictions on the powers of Boards and Courts to direct information to be held in confidence are discussed in Dagenais v. Canadian Broadcasting Corp. [1994] 3 S.C.R. 835, 120 D.L.R. (4th) 12 and in Sierra Club of Canada v. Canada (Minister of Finance) (2002), 211 D.L.R. (4th) 193 (S.C.C.). At paragraph 40 in Sierra Club the Court endorses the test from Dagenais that is:

“A publication ban should only be ordered when:

a. Such a ban is necessary in order to prevent a real and substantial risk to the fairness of the trial, because reasonably available alternative measures will not prevent the risk; and

b. The salutary effects of the publication ban outweigh the deleterious effects to the free expression of those affected by the ban [emphasis in the original].”

25. At paragraph 46 of the Sierra Club decision the Court stated:

“The Court emphasized that under the first branch of the test, three important elements were subsumed under the “necessity” branch. First, the risk in question must be a serious risk well grounded in the evidence. Second, the phrase “proper administration of justice” must be carefully interpreted so as not to allow the concealment of an excessive amount of information. Third, the test requires the judge ordering the ban to consider not only whether reasonable alternatives are available, but also to restrict the ban as far as possible without sacrificing the prevention of the risk.”

[Their emphasis.]

[50] During the Commission’s pre-hearing and hearing process to determine whether approval ought to be given to the EPA, the intervenors made repeated submissions to the Commission to the effect that they did not have the benefit of all of the information necessary to prepare an analysis of and present argument on the cost effectiveness of the EPA.

[51] That the applicants did not have all of the information critical to the Commission’s decision is readily apparent from what the Commission said at pp. 92-93 of its reasons in relation to a submission that had been made by JIESC and another intervenor, NorskeCanada:

The JIESC and NorskeCanada argue that Tier 1 is clearly less cost-effective than No Award. Both suggest that the NorskeCanada Demand Management proposal, coupled with other unspecified resources, could offer a lower cost solution. These conclusions are reached without the full benefit of the confidential numbers filed with the Commission, and in both cases the proponents of these analyses made assumptions that the Commission Panel has determined are not appropriate.

[Underlining added.]

[52] Set out below are the submissions of JIESC concerning the significance of the information both disclosed and undisclosed:

28. Appendix 3 concerned the pricing terms of the contract and was ordered produced by the Commission after argument and a discussion of the principles in the Sierra Club decision in Order G–119–04 made December 24, 2004 with Reasons following on January 26, 2005. The prime reason to know about Appendix 3 in this Application is to be able to distinguish it, and arguments about its admission, from Appendix J. It is important to recognize that in its Reasons for Decision for Order G-119–04 the Commission stated, “Although there may be other documents that the intervenors may seek to be produced, the Commission Panel does not expect that the disclosure of documents other than Appendix 3 of the EPA is necessary at this time for the intervenors to fully participate in this proceeding. Therefore, the focus of these reasons will be the release of Appendix 3 of the EPA.”

29. “Appendix J” refers to the detailed assessment and information that supported the conclusions in the Cost Effectiveness Analysis conducted by BC Hydro senior management in determining whether to proceed with the DPP EPA. The purpose of the Cost Effectiveness Analysis was to compare the cost effectiveness of the DPP plant against two other possible alternatives: (1) a portfolio of two smaller generation projects on Vancouver Island; and (2) accepting no bids at all and using short-term contingency options. The Commission characterized this analysis as the “principal issue” in the hearing.

30. The conclusions of BC Hydro under the Appendix J analysis were public, but the detailed figures, assumptions and calculations underlying those conclusions were never disclosed to the public or to intervenors, in spite of requests by counsel for the JIESC that the Commission find reasonable alternative ways to restrict the ban while preserving the confidentiality of commercially sensitive information. This withholding of fundamental information made it impossible for the JIESC to challenge the assumptions and calculations upon which the decision on the principal issue in the hearing were to be based.

31. The JIESC continued to seek release of the analysis contained in Appendix J after Order G-119-04 regarding Appendix 3 was released, in its ongoing efforts to find reasonable alternatives to restrict the ban while preserving the confidentiality of commercially sensitive information, but was not successful in doing so.

32. In a letter to the Commission dated January 3, 2004, after the disclosure of the Appendix 3 information, counsel for the JIESC again requested that the Commission consider releasing all important confidential information:

“The JIESC supports transparency and openness and continues to urge the Commission to make all confidential information in this proceeding publicly available. Even with the information ordered made public on December 24th, confidentiality of some information continues to make this hearing much harder than it needs to be and leaves many unanswered procedural questions.”

33. During the hearing counsel for the JIESC, raised the possibility that more appropriate confidentiality processes could be adopted by the Commission:

“Some tribunals have dealt with this sort of matter. I think the International Trade Tribunal has processes under which information is provided to counsel and consultants cross-examinations do happen in confidence under non-disclosure agreements.”

34. In a letter to the Commission dated January 12, 2005, in response to a letter from BC Hydro, counsel for the JIESC pointed out that:

“Someone must test this confidential material through cross-examination and must present argument on its significance. The Commission must find ways for counsel and consultants on behalf of all parties to examine the material, with meaningful time for review and consideration, as other boards such as the Canadian International Trade Tribunal have done in even more sensitive and difficult cases.”

35. The importance of Appendix J, and the unfairness of being unable to properly challenge its assumptions and calculations, is clearly evident in the Commission Decision when the Commission decides that the DPP is more cost effective that the straw men, “Tier 2” and “No Award”. In making its Decision the Commission dismisses the JIESC arguments that Appendix J, properly adjusted, does not support the selection of the DPP EPA, stating that the JIESC’s submissions were “reached without the full benefit of the confidential numbers filed with the Commission.” This clearly demonstrates the problems the JIESC faced in arguing against the conclusions of Appendix J without access to the confidential material.

36. The Chambers Judge states at paragraph 44 that the Commission was justified in its confidentiality rulings due to the fact that the Commission considered the Sierra Club case and “applied the strictest possible test in making its confidentiality orders”. In coming to this conclusion, the Chambers Judge erred in two ways. First, the Commission only looked at the Sierra Club test in conjunction with the disclosure of Appendix 3, and not with regard to any other important confidential information, including Appendix J. Secondly, the Commission did not consider the second part of the test in Sierra Club, which requires the judge to consider not only whether reasonable alternatives to a confidentiality order are available, but also to restrict the order as much as reasonably possible while preserving the commercial interest in question.

37. Since the Commission did not apply the Sierra Club test correctly, it was an error of law for the Chambers Judge to hold that the requirements in Sierra Club had been met. Further, the Chambers Judge erred in his determination that it was insufficient for the applicant to submit that the confidentiality orders were too broad. By failing to recognize that overbreadth is a ground for overturning a confidentiality order under the second component of the test in Sierra Club, the Chambers Judge failed to apply the principle in Sierra Club and erred in law.

[53] The generally accepted public interest principles of openness and disclosure were recognized by the Commission itself when, in the course of its reasons of 8 September 2003, which led to the call for tenders in the current matter, the Commission stated at p. 71, “In future applications the Commission Panel expects BC Hydro to use assessment models which can be made public so that the various components and assumptions can be assessed and tested by intervenors” (bold in original).

[54] Support for the submission that the process points concerning disclosure raise substantial issues to be argued may be found in the Federal Court of Appeal’s decision in Magnasonic Canada Ltd. v. Canada (Anti-dumping Tribunal), [1972] F.C. 1239, 30 D.L.R. (3d) 118, which discusses the question of how a failure to disclose evidence of a confidential commercial nature may be treated in the context of a regulatory proceeding governed by statute.

[55] In light of the 2002 government energy policy encouraging private sector development of new electricity generation, questions of commercial confidentiality may well continue to arise in EPA approval proceedings and that may be particularly so if a call for tenders is to be used as the means of ascertaining the most cost efficient way of providing a particular energy supply.

[56] Whether the disclosure issue is characterized as a breach of the principles of natural justice or as a failure to adhere to the requirements of the statute in determining whether the EPA was in the public interest is not a matter that needs to be determined on this review application. In the words of Taggart J.A, in Queens Plate, supra, “…there is no need for a justice before whom leave is argued to be convinced of the merits of the appeal, as long as there are substantial questions to be argued.” In view of the public interest requirement of approval by the Commission of an EPA, it seems to me that the disclosure issue constitutes a substantial question to be argued, regardless of which mode of legal analysis properly attaches. Similarly, I am of the view that the confidentiality issue constitutes a substantial question to be argued.

[57] For the reasons stated, I am of the view that the learned chambers judge erred in not granting leave on the disclosure and confidentiality issues.

[58] How the Commission is to treat confidentiality in commercial information in the course of a process that is aimed at having a cost effective and reliable energy supply in the Province is obviously of general importance to the intervenors, BC Hydro, the Commission, and the general public both in this matter and in future applications to approve EPAs.

[59] There is a clear benefit to be derived from an appeal of those issues for, if disclosure is mandated in such a way that business confidentiality is protected, the intervenors will have the ability to ascertain whether the EPA for which approval was sought will provide a cost effective and reliable source of energy.

(ii) The imposition of the conditions concerning the natural gas contracts

[60] In its decision granting approval of the EPA, the Commission imposed the following conditions:

(a) that BC Hydro purchase firm gas transportation service from Terasen Gas (Vancouver Island) Inc. (“TGVI”) to serve Duke Point Power’s proposed power plant at Duke Point near Nanaimo, British Columbia (“Duke Point Power Plant”); and

(b) within 45 days of the date of this Order, that BC Hydro enter into, and facilitate the filing with the Commission of, a long-term firm gas transportation service agreement (“TSA”) with TGVI to serve both the Duke Point Power Plant and the Island Cogeneration Plant at Elk Falls, near Campbell River, British Columbia.

[61] In its order, the Commission directed that acceptance of the EPA is further subject to the following directions:

* * *

(b) within 45 days of the date of this Order, BC Hydro is to notify the Commission if it has been unable to reach an agreement on the terms of a TSA with TGVI; and

(c) in the event of a failure to reach an agreement on the terms of a TSA with TGVI within 45 days of the date of this Order, or in the event a filed TSA is not acceptable to the Commission and the Commission does not approve of the terms of a filed TSA, either wholly or in part, BC Hydro is to apply to the Commission for further directions;

[62] In refusing leave to appeal on this proposed ground of appeal, the chambers judge said, in part:

[61] I fail to understand how this “subject to” provision could be said to undermine the legal correctness of the Committee’s decision, or impugn it procedures.

[63] The intervenors submit there is a substantial question to be argued about whether the Commission breached the rules of natural justice by giving directions as a condition of approval of the EPA that BC Hydro enter into a long term, firm contract for gas transmission for the Island Cogeneration Plant at Elk Falls, when the possibility of such a requirement was never a part of the Duke Point EPA approval proceeding. To support their submissions in that regard, the applicants referred to Penticton v. British Columbia Energy Commission (1979), 10 B.C.L.R. 73, 96 D.L.R. (3d) 345 (C.A.), which is said to have raised an analogous issue.

[64] The transportation contract of the sort contemplated in the Order is significant, in the submission of JIESC, because the costs of firm gas transportation service will have a serious impact on members of the JIESC and on all BC Hydro ratepayers in British Columbia.

[65] JIESC further argues that the chambers judge misconceived the facts when he commented at para. 59 that “it seems clear that this issue was dealt with to some extent at the hearing and that the applicants were aware of the matter.” JIESC submits that, in fact, the matters that were discussed at the hearings included a firm gas transportation agreement with regard to the Duke Point Power Limited Partnership plant. However, an agreement was never contemplated respecting the Island Cogeneration Plant. JIESC points out that when issues related to the Island Cogeneration Plant were raised during the proceeding, counsel for BC Hydro took the position that such issues were outside the scope of the proceeding.

[66] JIESC further submits that the chambers judge accepted BC Hydro’s argument that the applicants would have the opportunity to argue the matter of the requirement of a firm gas transportation agreement for the Island Cogeneration Plant before the Commission when the rate determined by Terasen and BC Hydro is submitted for approval. This characterization of the process, in the submission of JIESC, is incorrect. JIESC argues that when the rate is submitted for approval, the contract will be submitted on the basis that BC Hydro was ordered to enter into it by the Commission, and the issues that will be discussed will pertain to the rate to be charged for firm service. The concern of JIESC is that the question of whether firm service is required will be deemed to have been determined and will therefore not be discussed.

[67] JIECS argues that, in imposing the firm gas transportation agreement condition for the Island Cogeneration Plant, when that issue was not before it, the Commission committed an error in law and exceeded its jurisdiction. None of the parties, JIESC contends, had notice that the Commission would consider gas transportation to the Island Cogeneration Plant as part of the proceedings, and accordingly were not able to argue against the requirement of a firm gas transportation agreement.

[68] In my opinion, the learned chambers judge erred in law when he concluded that no arguable issue had been raised by the condition imposed by the Commission on the approval of the EPA. The issue of the Commission’s jurisdiction to make such an order cannot be ignored simply because ss. 59-61 of the Act require the Commission to ensure that the tolls set out in a firm gas transportation agreement are just and reasonable.

[69] In my view, the chambers judge erred in not granting leave on the proposed ground for it raises a question of jurisdiction. If the submissions of the applicants were to prevail on this point, the order imposing the condition would be void.

(iii) Reasonable apprehension of bias

[70] In dismissing the leave application on the proposed ground of appeal concerning an apprehension of bias, the chambers judge said, in part:

[55] As in Parmar [R. v. Parmar, 2005 BCCA 187], this issue of apprehension of bias can be viewed as well from the perspective of whether the Commission came to a pre-determined conclusion. On either footing it would not be open, in my opinion, for a panel of this Court to conclude that the decision of the Commission should be set aside.

[56] This issue does not support granting leave to appeal.

[71] While this proposed ground of appeal may not be as strong as the others, it nevertheless raises a substantial issue to be argued and leave ought to have been granted.

IV. Conclusion

[72] For the reasons stated, I would set aside the order of the chambers judge dismissing the leave applications and would order that leave be granted to appeal the Commission’s order approving the EPA, limited to the issues canvassed in these reasons.

[73] Since preparing these reasons, I have had the privilege of reading in draft the reasons for judgment of Mr. Justice Hall and Madam Justice Levine. As this is an urgent matter, counsel should promptly be in touch with the Deputy Registrar of the Court of Appeal to secure an expedited appeal date on the issue on which Madam Justice Levine and I concur.

“The Honourable Madam Justice Rowles”

Reasons for Judgment of the Honourable Mr. Justice Hall:

[74] This is an application to review the order of Mr. Justice Thackray of 12 April 2005 denying the applicants leave to appeal an order of the British Columbia Utilities Commission (the "Commission") dated 17 February 2005. That order had approved, on terms, an electricity purchase agreement (the "Agreement" or "EPA") filed as an energy supply contract pursuant to s. 71 of the Utilities Commission Act (the "Act"). The Commission annexed as conditions to the Agreement the following terms:

(a) that BC Hydro purchase firm gas transportation service from Terasen Gas (Vancouver Island) Inc. ("TGVI") to serve Duke Point Power's proposed power plant at Duke Point near Nanaimo, British Columbia ("Duke Point Power Plant"); and

(b) within 45 days of the date of this Order, that BC Hydro enter into, and facilitate the filing with the Commission of, a long-term firm gas transportation service agreement ("TSA") with TGVI to serve both the Duke Point Power Plant and the Island Cogeneration Plant at Elk Falls, near Campbell River, British Columbia.

[75] General background information relating to the intervenors and the mandate of the Commission are conveniently set out in the reasons of Rowles J.A., which I have had an opportunity to peruse in draft. I am in agreement with her conclusion that an appeal to this Court from a decision of the Commission will normally be restricted to questions of law.

[76] The test to be applied on a review by a panel of this Court of an order of a single justice is set out in Haldorson v. Coquitlam (City) (2000), 149 B.C.A.C. 197, 2000 BCCA 672, and also more recently in Chaplin v. Sun Life Assurance Co. of Canada (2004), 206 B.C.A.C. 251, 2004 BCCA 655. A panel reviewing the decision of the chambers judge must ask itself whether the chambers judge erred in law or in principle or misconceived the facts. In Chaplin, supra, Rowles J.A. said this:

[15] It is common ground that the standard of review to be applied on an application brought under s. 9(6) of the Court of Appeal Act is summarized in Haldorson et al. v. Coquitlam (City) (2000), 149 B.C.A.C. 197; 244 W.A.C. 197; 3 C.P.C. (5th) 225; 2000 BCCA 672, at paragraph 7:

"It comes to this: that the review hearing is not a hearing of the original application as if it were a new application brought to a division of the court rather than to a chambers judge, but is instead a review of what the chambers judge did against the test encompassed by asking: was the chambers judge wrong in law, or wrong in principle, or did the chambers judge misconceive the facts. If the chambers judge did not commit any of those errors, then the division of the court in review should not change the order of the chambers judge."

[16] In this case, the Solicitor has not shown that the Chief Justice was wrong in law, wrong in principle or that he had misconceived the facts. Accordingly, I would dismiss the review application.

[77] In the case of Dalhuisen v. Maxim's Bakery Ltd., 2002 BCCA 541, a case referred to by the applicant JIESC, I said this:

[3] As counsel for the respondent has pointed out correctly, an applicant in such a matter bears a significant onus. A review application will only succeed where the order is found to be clearly wrong, or where the discretion of the judge was exercised upon a wrong principle.

* * *

[7] …The learned chambers judge felt that the appeal was unlikely of success. I, myself, have formed no concluded views on the matter, but I would say there exists a serious issue to be argued. I find myself unable to say that the appeal would be bound to fail.

[78] The background facts of the instant case are set out in the reasons for judgment of Thackray J.A.:

[2] Some background is necessary in order to understand the submissions, but in that there is the pressure of time in which to prepare and deliver these reasons I will keep this to a minimum. The need for haste arises out of the expressed concern that whatever project is undertaken to secure a continued adequate supply of electricity to Vancouver Island is now behind schedule. Further, an appeal date of 2 May 2005 has been secured in this Court and, should the applicants seek a review of this order, it must be completed within the next two weeks or the appeal date will be lost.

[3] Hydro’s forecast of electricity demand on Vancouver Island predicts a capacity shortfall commencing in the winter of 2007. Hydro proposed a Vancouver Island Generation Project (the “VIGP” at Duke Point), an industrial park near Nanaimo, British Columbia. Hydro applied to a Commission for a Certificate of Public Convenience and Necessity (CPCN) for the generation project. The decision of that Commission is not under appeal but some of its findings bear upon the matters in the case at bar.

[4] The oral hearing of the VIGP application took place in Nanaimo and Vancouver from 16 June to 3 July 2003. This was followed by written arguments and an additional hearing day on 28 July 2003. Approximately 60 parties took part in the process, with about 20 playing an active role in the oral hearing. Hydro called 19 witnesses and the intervenors produced 22 witnesses. There were 250 written exhibits filed and the oral testimony required 3,000 pages of transcript.

[5] A matter of significance on this application is that Hydro proposed to the Commission in the above noted hearing that if it was to decline to grant a CPCN, a conditional certificate would be acceptable, the condition being that Hydro would conduct a Call for Tenders to determine whether the private sector could offer a more cost-effective solution to the energy supply shortage while meeting the necessary requirement for timing and reliability.

[6] The Commission denied the certificate in a decision dated 8 September 2003. The Commission concluded that Hydro had “not established that VIGP is the most cost-effective means to reliably meet Vancouver Island power needs. Therefore, the Commission Panel denies the Application for a CPCN.” (VIPG Decision, p. 77) It then added:

The Commission Panel encourages BC Hydro to proceed with a CFT... . Based on the results of the CFT, the Commission is prepared to consider any future application for CPCN approval or Electricity Purchase Agreement approval on an expedited basis.

On page 78 of the VIPG decision, the Commission made the following important statement:

The evidence in this hearing suggests that the appropriate next resource addition should be on-Island generation, provided the costs of the proponents’ projects can be confirmed near their expected values.

[7] Hydro thereby proceeded with a call for tenders for the project and advised the Commission on 3 November 2004 that Duke Point Partnership was the successful bidder. The agreement that it entered into with Hydro was for the construction at Duke Point of a natural gas thermal generating plant capable of generating 252 megawatts of capacity.

[79] The filing of the Agreement with the Commission by BC Hydro on 19 November 2004 initiated the proceedings that led to the order of the Commission and the subsequent application for leave to appeal before Thackray J.A., as well as the application for a review of his decision before the panel of this Court.

[80] In order to appreciate the core issues before the Commission, it is necessary to make some reference to its reasons. At section 3.2 of its reasons for decision dated 9 March 2005, the Commission noted that:

BC Hydro forecasts that the capacity deficit on Vancouver Island will rise from 37 MW in F2007 to 280 MW in F2008. This jump of 243 MW is a result of the de-rating of the High Voltage Direct Current ("HVDC") transmission system (240 MW) and an increase in load requirement (4 MW) after taking into account Power Smart and transmission losses. …

After considering various arguments pro and con from the intervenors and from BC Hydro, the Commission concluded as follows at section 3.4:

The Commission Panel concludes that the Load Forecast supports the capacity addition of 150 to 300 MW in F2008 which BC Hydro targeted in the CFT.

[Emphasis in original.]

[81] Various bids were submitted in the tendering process. Some of the bids met the criteria for Tier 1 being for production of power between 150 and 300 MW and some met the criteria for Tier 2 being projects producing less than 150 MW. The previous decision made by the Commission in 2003 was effectively a No Award option as the Commission declined to approve the proposal before it. Something perhaps similar to that in the current proceedings was a proposal by NorskeCanada called the Demand Management Proposal. As outlined in the reasons of the Commission, NorskeCanada filed a proposal that between 30 MW and 210 MW of demand could be dealt with by demand management and load shifting or curtailment to assist in meeting future load factors on Vancouver Island. The Commission concluded that in the presence of a cost-effective outcome to the call for tenders process, the NorskeCanada proposal would not constitute a viable option to accomplish the objectives of the call for tenders. The Commission also considered the Vancouver Island Transmission Reinforcement Project, which envisaged the installation of new circuits between the mainland and Vancouver Island, the first to come into service near the end of 2008 but more likely on any realistic basis sometime around 2009 or 2010. The first circuit would be timed for that period and the other circuit would be constructed at least ten years later. Each of the proposed circuits would have a rating of about 600 MW. All of these various alternatives were before the Commission for a decision as to which was best to meet island power needs at a reasonable cost.

[82] JIESC, a consortium of industry groups, sought generally a low-cost outcome in the interest of its members. GSX Concerned Citizens Coalition, British Columbia Sustainable Energy Association, and the Society Promoting Environmental Conservation (the "GSX Group"), were generally not in favour of any new large gas-fired facility generating power on Vancouver Island. As I read the decision of the Commission, it concluded that the Tier 2 option was not acceptable because such option would not provide sufficient power to meet the anticipated power shortfall facing Vancouver Island residents. Likewise, it did not think that the NorskeCanada Demand Management Proposal had sufficient reliability and capacity to meet the anticipated power needs in the near future. Concerning the Vancouver Island Transmission Reinforcement Project, the Commission expressed concern that because of possible regulatory approval delays and construction delays, any such additional source of power would not be available until a considerable time after the anticipated shortfall of generating capacity. The Commission concluded ultimately that the most acceptable solution was a Tier 1 outcome having regard to cost, timing, and capacity requirements. In the course of its reasons, the Commission said this:

The Commission Panel agrees with BC Hydro that the Tier 1 outcome is robust under the full range of uncertainties. The Commission Panel does not accept that the preferred solution must be the least costly solution under every possible scenario. The Panel has accepted the expected case put forward by BC Hydro and notes that there is an equal, if not higher probability, that events could unfold in ways that favour Tier 1 even more than suggested in the expected value analysis. In particular, the Commission Panel believes that given permitting uncertainties alone, there is an equal, if not higher probability that the in-service date of the 230 kV line could be delayed beyond F2010. There is also evidence that the magnitude of the supply deficit will likely be higher than the base case amount assumed by BC Hydro (280 MW vs. 261 MW), which further increases the cost-effectiveness of Tier 1 relative to the Tier 2 and No Award scenarios. ...

The Commission also said:

The Commission Panel accepts the conclusions of the broader cost-effectiveness evaluation, which confirmed the Tier 1 outcome is preferable to the Tier 2 and No Award alternatives. The Commission Panel acknowledges that there are a small number of scenarios in which Tier 1 is more costly than Tier 2 or No Award but accepts that those scenarios are less likely. These results must also be weighed against qualitative considerations such as the relative reliability of alternatives and certainty over their costs.

[83] Concerning the ability of the tendering process to winnow out more costly bids and to assist in selecting a bid that met criteria for a reasonable cost solution, the Commission said this:

The CFT was designed to find through a competitive bidding process the most cost-effective long-term, on-Island generation project(s) meeting the Mandatory Criteria and with total dependable capacity of between 150 MW and 300 MW. The QEM employed in the CFT selected the project or projects meeting these criteria with the lowest Net Portfolio Cost NPV (i.e., the Tier 1 outcome) (Exhibit B-1, p. 13). A competitive CFT was intended to be the primary demonstration of cost-effectiveness of the Tier 1 outcome. BC Hydro also performed two additional tests to confirm the cost-effectiveness of the Tier 1 outcome in this CFT. First, BC Hydro compared the winning Tier 1 outcome with the QEM results for the VIGP benchmark (Exhibit B-1, pp. 13, 21, 22; Appendix J, p. 1; Appendix L). The VIGP benchmark considered only incremental costs for completing the project, as outlined in the VIGP Decision. Second, BC Hydro compared the Tier 1 outcome with the Tier 2 and No Award alternatives. The Tier 2 alternative involved a package of on-Island generation projects from the CFT aggregating to less than the minimum 150 MW, supplemented with other short-term alternatives not eligible for the CFT such as demand management and temporary generators. The No Award alternative excluded any long-term on-Island generation, relying instead entirely on temporary generators and demand management prior to the in-service date of the next 230 kV cable to the Island. Cost-effectiveness was tested under several scenarios of future load requirement, mainland generation cost, and 230 kV project timing (Exhibit B-1, Appendix J). In addition to costs, this final cost-effectiveness test also examined important qualitative considerations such as reliability and certainty of alternatives to the Tier 1 outcome.

[84] It appears to me that the Commission in the hearing before it was embarked on a process whereby it was seeking to identify the most reliable and cost-effective method to meet the looming power capacity shortfall on Vancouver Island. It is in light of that background that the proposed grounds of appeal advanced on behalf of the applicants must be assessed. JIESC complained on the application before Thackray J.A. that the time set aside for the hearings did not give them adequate time to evaluate competing proposals or cross-examine witnesses, and further they did not have sufficient access to material that was ordered to be kept confidential by the Commission and therefore they could not effectively determine whether or not the winning bid was the most cost-effective. The GSX Group complained particularly of bias on the part of the Commission chair and in this submission they were joined by JIESC.

[85] It appears the provincial government had determined that it is desirable that to the extent possible, future power needs should be met by private providers. One result is that tendering processes will be required in future to determine how power can be acquired by the power provider at the lowest cost and in the most efficient manner. To facilitate the efficacy of the tendering process, it is of course desirable that details of losing bids not be made public. Assurances in that regard had been given by BC Hydro in the call for tenders process. For this reason, the Commission sought to not release into the public domain details of losing bids, the confidentiality of which had been assured to bidders participating in the process. As the chambers judge observed, there was specific provision in the Act as well as in the Administrative Tribunals Act for the preservation of confidentiality in the public interest. Obviously, if assurances of confidentiality were not honoured, then the ability to obtain participants in future tendering processes would be imperilled. This would not be in the public interest.

[86] In its decision on confidentiality of 6 January 2005, after referring to the case of Sierra Club of Canada v. Canada (Minister of Finance), [2002] 2 S.C.R. 522, 2002 SCC 41, the Commission went on to hold that the release of material relating to the successful bid in Appendix 3 of the Agreement posed a threat to the commercial interest of the successful bidder, Duke Point Power Limited Partnership ("Duke Point Partnership") but ordered that, regardless, the material should be released with certain sensitive parts redacted. However, it found that the production of unsuccessful bidder information and certain information about the detailed cost analysis by BC Hydro referred to as Appendix J would be likely to cause deleterious effects to future bid processes. The Commission also said this:

The Commission's practice to date has been to treat as confidential documents that are filed under s. 71 of the Act with a request that the document be kept confidential. To date there has not been a challenge in this regard and public processes have not frequently or typically been invoked to consider s. 71 filings. In these circumstances, however, in view of the unique characteristics of the EPA and the public interest in disclosure of the pricing terms, the Commission Panel accepts that a departure from its previous practice is appropriate.

This by no means is a typical s. 71 filing. Rather, as submitted by parties, the EPA and the process by which it was entered into are unique. All parties to the earlier 'VIGP process', including BC Hydro, clearly contemplated that some form of public process would be required to consider any EPA filed (or Certificate of Public Convenience and Necessity application for that matter) that may result from a CFT conducted by BC Hydro following the Commission's September 2003 VIGP decision.

In the Commission Panel's view, however, this same analysis and logic does not strictly follow for information related to the unsuccessful bids. The Commission Panel accepts that the disclosure of such information would be detrimental to future competitive bidding processes and, in balancing the competing public interests, concludes that such information should not be disclosed. As noted in the November 30 ruling, the Commission Panel considers that it should be up to parties who are unsuccessful bidders to adduce whatever evidence or information they consider necessary to support positions they may take within the scope of this proceeding.

[87] At the hearing, JIESC suggested that it wanted more information disclosed but it never did put forth any detailed proposal as to how confidentiality might be preserved concerning information that had been received in confidence. I am not sure that I perceive what it is that JIESC complains of. As I said, the competing considerations were whether the best solution to meet the anticipated power shortfall would be a Tier 1 solution or a Tier 2 solution or No Award. The latter would presumably include the possible solution of enhanced transmission capacity from the mainland after 2008. The tendering process had resulted in the Duke Point Partnership's tender being identified as the winning bid, it being the lowest cost bid in Tier 1. The Tier 2 and No Award categories were deemed by the Commission to be unsuitable because they did not provide sufficient capacity and reliability within the needed time frame. Before us, JIESC complained that it did not have the appropriate figures to test whether in fact the Duke Point Partnership bid was the lowest cost solution to future power requirements, but that submission is in my view difficult to maintain in view of the tender process itself. JIESC had access to the financial information concerning the winning Duke Point Partnership bid and the evaluation of that bid and JIESC was therefore in a position to test its merits. I am in agreement with the conclusion of Thackray J.A. that this point concerning disclosure of confidential information was not an issue that had a possibility of success and I therefore see no error in the refusal of Thackray J.A. to grant leave to appeal on this matter.

[88] I turn next to the refusal of the chambers judge to grant leave to appeal on the issue of bias. The background circumstances are that the Commission entered into an in camera session on 19 January 2005. At this session, only Commission staff and counsel, BC Hydro counsel and staff, the witnesses to be questioned and the commissioners were present. That in camera session had been requested by the chair because it had emerged in the course of the hearing that there was an unsuccessful Duke Point Partnership bid that was not as low cost as the winning bid but had a duct-firing feature that provided some excess production capacity at a relatively modest cost. In other words, although it might not have produced the lowest absolute cost (and thus be a winning bid) the duct-firing feature might be thought to be useful to add to the winning bid to give optimum value to customers. At this in camera session, a colloquy ensued between members of the Commission and counsel as to how such a feature might be incorporated into the winning bid. It seemed to be the consensus of counsel that this could not be done as a matter of law having regard to the rules of the call for tenders process and the law of contract but that this might be a matter BC Hydro and Duke Point Partnership could later negotiate. It is clear from the discussion that the chair of the Commission was seeking as he said to "add some value to customers". Virtually the whole of the transcript of the in camera session was provided to participants in a timely way after the conclusion of that session. In his decision, Thackray J.A. referred to the test concerning bias set out in the decision of the Committee for Justice and Liberty v. Canada (National Energy Board) (1976), [1978] 1 S.C.R. 369, 68 D.L.R. (3d) 716, and found that in this case there was no possibility of the bias argument succeeding.

[89] I agree with his conclusion that given the facts and the context of the remarks sought to be relied on to demonstrate bias there is no possibility of an argument on bias succeeding before a division of the Court. When the in camera session arose, all of the competing proposals were still before the Commission. All that the Commission was doing at the in camera session was endeavouring to ascertain if the successful Tier 1 bid of Duke Point Partnership provided the best value for BC Hydro customers. The in camera discussion did not address or propose to address the issue that was before the Commission as to whether the winning Tier 1 bid of Duke Point Partnership was the best and most cost-effective option for Vancouver Island power supply. As the cases make plain, allegations of bias must be looked at in context and when one considers the context of the discussion that occurred here, it seems inconceivable that any informed observer could consider that there was any bias demonstrated on the part of the Commission chair. I see no error in the conclusion of the chambers judge that the bias argument sought to be advanced was bound to fail.

[90] I earlier noted that requirements about gas supply were added by the Commission as conditions annexed to the approval of the Agreement. JIESC, in particular, complains that there was a breach of the principles of natural justice because the parties did not have notice prior to or at the hearing of these conditions that were annexed to the approval of the Agreement. Although the chambers judge appears to indicate in his reasons that he considered this matter was an issue before the hearing, I do not consider he was correct in that impression. It seems to me that these conditions were added by the Commission to its approval of the Agreement without notice to the parties. It could often be the case that if a tribunal hearing a matter added a term or condition to a decision that had not previously been on the table for discussion at a hearing, it would amount to a breach of natural justice. Once again, as in considering a bias argument, context is everything. Here the Commission apparently was considering how to best assure a reliable supply of gas to the successful tenderer, Duke Point Partnership, and as well to another plant on the island, known as the Island Cogeneration Plant at Elk Falls (the "Cogeneration Plant"). It is particularly in connection with this latter plant that JIESC complains about the proposed contract for firm supplies of gas. It argues that a contract for firm supply could prove to be more costly than one for an interruptible gas supply. It submits that because the Cogeneration Plant has dual firing capacity, namely gas and distillate, an interruptible gas contract could result in cost savings, which would be beneficial to its members. Thus, it says it was prejudiced as a result of these conditions added by the Commission.

[91] It appears to me, however, that nothing has presently or finally been decided by the Commission concerning the terms or existence of any future gas contract between Duke Point Partnership, the Cogeneration Plant, and any gas suppliers. That all lies to be considered in future by the Commission under ss. 59 and 60 of the Act:

59(1) A public utility must not make, demand or receive

(a) an unjust, unreasonable, unduly discriminatory or unduly preferential rate for a service provided by it in British Columbia…

* * *

(4) It is a question of fact, of which the commission is the sole judge,

(a) whether a rate is unjust or unreasonable,

* * *

(5) In this section, a rate is "unjust" or "unreasonable" if the rate is

(a) more than a fair and reasonable charge for service of the nature and quality provided by the utility,

(b) insufficient to yield a fair and reasonable compensation for the service provided by the utility, or a fair and reasonable return on the appraised value of its property, or

60(1) In setting a rate under this Act or the regulations

(a) the commission must consider all matters that it considers proper and relevant affecting the rate,

(b) the commission must have due regard to the setting of a rate that

(i) is not unjust or unreasonable within the meaning of section 59,

(ii) provides to the public utility for which the rate is set a fair and reasonable return on any expenditure made by it to reduce energy demands, and

(iii) encourages public utilities to increase efficiency, reduce costs and enhance performance,

[92] The order made by the Commission approving the EPA also required BC Hydro to enter into a firm gas transportation agreement with a supplier for service to Duke Point and the Cogeneration Plant. This was subject to a direction that if no agreement was reached within 45 days in an acceptable form to the Commission, BC Hydro would have to apply to the Commission for further directions. It appears that no supply agreement has hitherto been concluded, but of course one may be. When the Commission comes to consider under ss. 59 and 60 of the Act a proposed agreement, it will have available all of the powers under those sections of the Act to ensure that the agreement is acceptable and economic in light of submissions that may be received from interested parties such as JIESC. It may well be that as a result of submissions from parties at a future hearing that will have to take place in connection with approval of contracts for gas supply that the Commission will have to determine whether to approve any contract or to require changes. I believe that the Commission could properly consider a variety of matters at any hearing such as the desirability of requiring an interruptible feature in any contract involving gas supply to the Cogeneration Plant, having regard to the concerns of JIESC. In any event, those are matters that I consider remain to be resolved in future and it would be speculative for this Court to assume what the Commission will or will not decide. I cannot see what possible relief a panel of this Court could give concerning that issue since nothing final has happened involving gas supply contracts. There would simply be no utility in granting leave on that point and I am in agreement with the chambers judge that such argument would have no possibility of success.

[93] It is submitted by the applicants that the chambers judge applied too rigorous a test on the application for leave to appeal from the decision of the Commission. The applicants acknowledge that he referred in his reasons to the case of Queens Plate Dev. Ltd. v. Vancouver Assessor, Area 09 (1987), 16 B.C.L.R. (2d) 104, 22 C.P.C. (2d) 265, but it is argued that the chambers judge did not refer to the later case of Omineca Enterprises Ltd. v. British Columbia (Minister of Forests) (2000), 91 B.C.L.R. (3d) 74, 2000 BCCA 591. The latter judgment expresses the test as whether the grounds sought to be advanced "raise a substantial question to be argued", whereas in Queens Plate the test for granting leave was enunciated as "whether there is some prospect of the appeal succeeding on its merits". In Queens Plate, Taggart J.A. observed that there is "no need for a justice before whom leave is argued to be convinced of the merits of the appeal, as long as there are substantial questions to be argued" (at 110). In the Omineca case, the chambers judge had been referred to the cases concerning leave to appeal from a judicial decision whereas the Queens Plate test focussed on leave to appeal from an administrative tribunal pursuant to a statutory appeal provision. In Omineca, the Court granted a review of the order of the chambers judge. I am not of the opinion that in essence there is any different test enunciated in Queens Plate and Omineca. It seems to me that if "there is a substantial question to be argued", then it could be said that "there is some prospect of the appeal succeeding on its merits". Both tests encapsulate the same idea.

[94] I do not consider that Thackray J.A. demonstrated any error in approach on the test to be applied on a leave application of this sort. He considered the various arguments sought to be advanced by the applicants and he concluded none of them had any possibility of success. To revert to the language employed in Haldorson, supra, I do not consider that Thackray J.A. was wrong in law, or wrong in principle, nor did he misconceive the facts with the sole exception of his impression that the gas transportation contract issue had been raised before the Commission. However, as I have endeavoured to point out above, that misconception has no legal impact in the circumstances of the instant case because the consideration of that matter will at a future time come before the Commission for decision and the parties will then have an opportunity to make such submissions as they think fit about the acceptability of proposed contractual arrangements for gas supply.

[95] Since I conclude that none of the points sought to be raised on the proposed appeal have any possibility of success, I would dismiss this application to vary the order of Thackray J.A.

“The Honourable Mr. Justice Hall”

Reasons for Judgment of the Honourable Madam Justice Levine:

[96] I have had the privilege of reading in draft form the reasons for judgment of my colleagues, Madam Justice Rowles and Mr. Justice Hall. Their reasons describe fully the background and issues of this application to vary the order of Thackray J.A. denying leave to appeal from the order of the B.C. Utilities Commission made February 17, 2005.

[97] There are three substantive grounds of appeal raised by the Joint Industry Electricity Steering Committee (“JIESC”). These are the receipt and disclosure of confidential information; the inclusion in the order of a condition that B.C. Hydro enter into a contract for gas transmission for the Island Cogeneration Plant; and an allegation of a reasonable apprehension of bias on the part of the Commission. The GSX Concerned Citizens Coalition (“GSXCCC”) joined with JIESC on the issue of the allegation of bias on the part of the Commission. JIESC also raised a legal issue common to all three substantive issues: that Thackray J.A. applied the wrong test in determining whether leave should be granted.

[98] I agree with Mr. Justice Hall on three of these four issues. On the substantive issues, I agree with Mr. Justice Hall that leave should not be granted with respect to the inclusion in the order of the condition relating to a contract for gas transmission to the Island Cogeneration Plant and on the allegation of a reasonable apprehension of bias. I also agree with Mr. Justice Hall that Thackray J.A. did not apply the wrong test in determining whether leave should be granted. I agree with Madam Justice Rowles on the fourth issue: leave to appeal should be granted on the issue of the receipt and disclosure of confidential information.

[99] I will deal first with JIESC’s submission that Thackray J.A. applied the wrong test for determining whether leave should be granted. As explained by Mr. Justice Hall in para. 93 of his reasons for judgment, in Omineca Enterprises Ltd. v. British Columbia (Minister of Forests) (2000), 91 B.C.L.R. (3d) 74, 2000 BCCA 591, the Court dealt with an application to vary the order of a chambers judge denying leave to appeal from a statutory tribunal. The chambers judge had applied the tests for granting leave to appeal from a judicial decision, citing Chavez v. Sundance Cruises Corp. (1993), 77 B.C.L.R. (2d) 328, instead of Queens Plate Dev. Ltd. v. Vancouver Assessor, Area 09 (1987), 16 B.C.L.R. (2d) 104 (C.A.). In her reasons for judgment in Omineca, Southin J.A. commented on the “subtle difference” between the test of a “realistic possibility of success” (referred to by the chambers judge in that case) and “substantial questions to be argued” (referred to in Queens Plate). In Queens Plate, however, Taggart J.A. also referred to the test of “some prospect of the appeal succeeding on its merits”. Like Mr. Justice Hall, I do not read Southin J.A.’s reasons in Omineca as excluding reference to the test of “some prospect of success”.

[100] It seems to me that JIESC’s real complaint is that in applying the test of whether the grounds of appeal had any merit, Thackray J.A. concluded that they did not. That, itself, is not an error of law or principle justifying variation of his order on this review.

[101] In denying leave to appeal on the issue of receipt and disclosure of confidential information, Thackray J.A. concluded (at para. 46) that “a submission that the confidentiality orders were too broad considering the importance of the information to the ultimate issue” [emphasis mine] was not a sufficient basis for a successful appeal. In my opinion, that was an error in law. As argued by JIESC and explained by Madam Justice Rowles in her reasons, the fact that the Commission did not consider alternative, less restrictive, means of disclosing the commercially sensitive information in Appendix J while preserving its confidentiality raises “substantial questions to be argued”, taking into account the directions of the Supreme Court of Canada in Sierra Club of Canada v. Canada (Minister of Finance) (2002), 211 D.L.R. (4th) 193 (S.C.C.) (in particular, at para. 46) and the statutory provisions governing the procedures of the Commission in s. 71(5) of the Utilities Commission Act, R.S.B.C. 1996, c. 473 (the “Act”) and s. 42 of the Administrative Tribunals Act, S.B.C. 2004, c. 45. These are issues of importance to the public, the practice and these parties.

[102] I adopt the reasons of Mr. Justice Hall on the issue of the inclusion in the order of the condition that B.C. Hydro enter into a contract for gas transmission to the Island Cogeneration Plant. It seems that Thackray J.A. may have misconceived the evidence on this issue, but there is little benefit to the parties of an appeal at this stage given that there is provision in the Act for a full review of any contract actually entered into.

[103] I also adopt the reasons of Mr. Justice Hall on the issue of reasonable apprehension of bias. Taken in context, there is no “prospect of success” or “substantial question to be argued” that the test for reasonable apprehension of bias would be met in these circumstances.

[104] In my opinion, there is a benefit to the parties in limiting the issues on the appeal because of the urgency to move forward with a decision on a solution to the electricity needs of Vancouver Island.

[105] I would therefore vary the order of Thackray J.A. and grant leave to appeal on the issue of the receipt and disclosure of confidential information, but confirm his order denying leave on the issues of the condition in the order and reasonable apprehension of bias.

“The Honourable Madam Justice Levine”

Citation:	Joint Industry Electricity Steering Committee v. British Columbia Utilities Commission,
	2005 BCCA 330