decision 2014-326 altalink investment management ltd. and snc lavalin … · 2018-02-23 ·...

Decision 2014-326

AltaLink Investment Management Ltd. and SNC Lavalin Transmission Ltd. et al. Proposed Sale of AltaLink, L.P. Transmission Assets and Business to MidAmerican (Alberta) Canada Holdings Corporation November 28, 2014

The Alberta Utilities Commission

Decision 2014-326: AltaLink Investment Management Ltd. and

SNC Lavalin Transmission Ltd. et al.

Proposed Sale of AltaLink, L.P. Transmission Assets and Business to

MidAmerican (Alberta) Canada Holdings Corporation

Application nos. 1610595, 1610596 and 1610597

Proceeding No. 3250

November 28, 2014

Published by


Fifth Avenue Place, Fourth Floor, 425 First Street S.W.

Calgary, Alberta

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Fax: 403-592-4406

Website: www.auc.ab.ca

http://www.auc.ab.ca/

AUC Decision 2014-326 (November 28, 2014) • i

Contents

1 Decision summary ................................................................................................................. 1

2 Introduction ........................................................................................................................... 3

3 Background ........................................................................................................................... 6 3.1 Particulars of the applications ........................................................................................ 6 3.2 Relief requested ............................................................................................................ 12

4 Jurisdiction matters ............................................................................................................ 14 4.1 Scope of the Commission’s public interest mandate ................................................... 14 4.2 Attachment of conditions to application approvals ...................................................... 23

4.3 Impact of ongoing Commission oversight ................................................................... 27

4.4 Disposition of sale proceeds......................................................................................... 28

5 No harm test assessment ..................................................................................................... 30 5.1 No harm test assessment .............................................................................................. 31

5.2 Capability of acquiring entity....................................................................................... 31 5.2.1 Desire to provide regulated utility service ...................................................... 31 5.2.2 Safety and reliability of service ...................................................................... 33

5.2.3 Continuity of management and operational expertise .................................... 35 5.2.4 Sharing of BHE best practices and expertise .................................................. 35

5.3 Impact on financing costs............................................................................................. 38 5.4 Control and governance matters................................................................................... 42

5.4.1 Ring-fencing measures.................................................................................... 42

5.4.2 Independence of AML and ALP ..................................................................... 44

5.4.3 Inter-Affiliate Code of Conduct ...................................................................... 47 5.4.4 Services provided by SNC affiliates ............................................................... 47

5.5 Impact of sale on AltaLink revenue requirement and rate base ................................... 51

5.5.1 Premium on purchase price ............................................................................. 51 5.5.2 Income taxes ................................................................................................... 54

5.5.3 Pension costs ................................................................................................... 58

5.5.4 Treatment of acquisition transaction costs ...................................................... 59 5.6 Industry Canada approval conditions ........................................................................... 62

5.6.1 Effect of commitments to Industry Canada .................................................... 62 5.6.2 Funding of Industry Canada commitments ..................................................... 64 5.6.3 Employment level commitments .................................................................... 66

5.6.4 Contributions for academic, cultural, and community purposes .................... 67

5.6.5 Joint development opportunities ..................................................................... 69

5.7 Other matters ................................................................................................................ 71 5.7.1 Proactive support for SNC .............................................................................. 71 5.7.2 Retention of records ........................................................................................ 73 5.7.3 Retention of key employees ............................................................................ 76 5.7.4 Fort McMurray project costs .......................................................................... 79

6 Designation and implementation matters ......................................................................... 80 6.1 Designation as owner of utility pursuant to Section 101 of the Public Utilities Act ... 80

6.1.1 NewCo ............................................................................................................ 82

6.1.2 T1, T2, and T3 ................................................................................................ 87

ii • AUC Decision 2014-326 (November 28, 2014)

6.1.3 Commission findings ...................................................................................... 88 6.2 Legislative procedures ................................................................................................. 91

7 Order .................................................................................................................................... 93

Appendix 1 – Proceeding participants ...................................................................................... 95

Appendix 2 – Oral hearing – registered appearances ............................................................. 97

Appendix 3 – Summary of Commission directions .................................................................. 98

Appendix 4 – Abbreviations ....................................................................................................... 99

AUC Decision 2014-326 (November 28, 2014) • 1


Calgary, Alberta

AltaLink Investment Management Ltd. and

SNC Lavalin Transmission Ltd. et al. Decision 2014-326

Proposed Sale of AltaLink, L.P. Transmission Assets and Application nos. 1610595,

Business to MidAmerican (Alberta) Canada 1610596 and 1610597

Holdings Corporation Proceeding No. 3250

1 Decision summary

1. The following summary is provided for the convenience of the reader and is not intended

to be comprehensive, nor does it interpret, supplement or substitute for the detailed information

or findings in this decision.

2. On May 23, 2014, three applications were filed with the Alberta Utilities Commission

(Commission):

Application No. 1610595, filed on behalf of MidAmerican (Alberta) Canada Holdings

Corporation (MC Alberta or MAAC).

Application No. 1610596, filed on behalf of AltaLink Investment Management Ltd.

(AIML).

Application No. 1610597, filed on behalf of SNC-Lavalin Transmission Ltd. (T1),

SNC-Lavalin Transmission II Ltd. (T2), SNC-Lavalin Transmission III Ltd. (T3), and

SNC-Lavalin Energy Alberta Ltd. (SNCEAL), (the applications). For ease of reference in

this decision, the entities named above associated with Application No. 1610597 are

generally referenced collectively as “SNC.”

3. The applicants applied pursuant to sections 101 and 102 of the Public Utilities Act, RSA

2000, c. P-45, and Section 1(1) of the Public Utilities Designation Regulation, AR 194/2006, for

approval of a multi-step transaction which would result in MC Alberta replacing SNC as the

current owner of the entities that own and operate AltaLink, L.P.’s (ALP) transmission assets

and business. For reference purposes in this decision, the Commission has used the name,

“AltaLink” when referring to the regulated transmission utility.

4. Approval of the proposed sale of AltaLink to MC Alberta, a unit of Berkshire Hathaway,

is a dual responsibility of both the federal parliament and the Alberta legislature, under separate

mandates, federally though the Competition Bureau of Canada and Industry Canada and

provincially through the Commission. The sale had been found acceptable by the Competition

Bureau of Canada and Industry Canada prior to the release of this decision.

5. The Commission, having considered the scope of its mandate, the application of the no

harm test as it relates to this mandate, the evidence on the record of this proceeding, and the

submissions and arguments of the parties, has approved the sale. The Commission finds that

Proposed Sale of AltaLink, L.P. Transmission Assets and Business to MidAmerican (Alberta) Canada Holdings Corporation AIML and SNC Lavalin Transmission Ltd. et al.

2 • AUC Decision 2014-326 (November 28, 2014)

customers will be at least no worse off after the transaction is completed and that the no harm

test has been satisfied.

6. Factors considered and decided by the Commission include the following:

The scope of the Commission’s public interest mandate when considering applications

pursuant to sections 101 and 102 of the Public Utilities Act is defined by the accepted and

established no harm test as to whether the transactions are likely to result in any harm to

customers in terms of rates paid for service or the reliability of that service.

Concerns expressed by the public in email submissions generally covered three themes:

(1) concerns over the sale to a foreign investor and the loss of control over Alberta

transmission infrastructure; (2) concerns about power being exported to the United

States; and (3) concerns that power prices will rise and quality of service will deteriorate

as a result of a sale to a foreign entity. Issues respecting foreign investment are outside

the scope of the Commission’s mandate to consider and are issues addressed by the

federal government. Exports of electricity are unaffected by the sale of AltaLink.

AltaLink does not buy and sell the electricity that is moved over its infrastructure.

Additionally, the regulation of the export of electricity from Canada is overseen by the

National Energy Board. Power prices in Alberta are generally determined through a

competitive market. The Commission regulates the pricing of transmission services and

the manner in which those services are provided and will continue to have this regulatory

oversight over AltaLink, regardless of who the owner of the entities that own and operate

AltaLink will be.

Regarding the application of the no harm test, the Commission determined that the no

harm test had been satisfied because:

o Its regulatory oversight of AltaLink will remain the same and, as part of its

regulatory oversight, no additional costs will be imposed on ratepayers as a result

of the transaction or as a consequence of commitments made by Berkshire

Hathaway or the applicants to obtain federal approval.

o The change in ownership will not adversely affect the operation or financing of

AltaLink. Both Standard and Poor’s (S&P) and Dominion Bond Rating Services

(DBRS) credit rating analyses consider the transaction to be neutral or beneficial

to the cost of debt required to finance AltaLink transmission assets.

o The existing management expertise and capability will not be changed and may

benefit from the sharing of best practices among the new owners and AltaLink.

o The change in ownership will not affect the financial isolation of AltaLink due to

the ring-fencing measures, as amended to reflect the change in ownership, will

continue in place ensuring the financial, legal and operational separation of

AltaLink.

o The operational independence of AltaLink will remain unchanged.



7. The Commission approved the designations requested in the application and further

directed that MC Alberta, as the applicant in the proceeding who has made representations on

behalf of the new owners, should also act as if it is a designated owner of a public utility

pursuant to the Public Utilities Designation Regulation.

2 Introduction

8. On May 23, 2014, the following applications were filed with the Commission:

Application No. 1610595, filed on behalf of MidAmerican (Alberta) Canada Holdings

Corporation (MC Alberta or MAAC).

Application No. 1610596, filed on behalf of AltaLink Investment Management Ltd.

(AIML).

Application No. 1610597, filed on behalf of SNC-Lavalin Transmission Ltd. (T1),

SNC-Lavalin Transmission II Ltd. (T2), SNC-Lavalin Transmission III Ltd. (T3), and

SNC-Lavalin Energy Alberta Ltd. (SNCEAL), (the applications). For ease of reference in

this decision, the entities named above associated with Application No. 1610597 are

generally referenced collectively as “SNC.”

9. The applicants applied pursuant to sections 101 and 102 of the Public Utilities Act and

Section 1(1) of the Public Utilities Designation Regulation for approval of a multi-step

transaction which would result in MC Alberta replacing SNC as the current owner of the entities

that own and operate ALP’s transmission assets and business. For reference purposes in this

decision, the Commission has used the name, “AltaLink” when referring to the regulated

transmission utility.

10. SNC is currently the sole investor in ALP and wishes to divest itself of 100 per cent of its

indirect investment in ALP. MC Alberta, an Alberta corporation and an indirect wholly-owned

subsidiary of Berkshire Hathaway Energy Company (BHE), wishes to acquire 100 per cent of

SNC’s indirect investment in ALP for an estimated cash purchase price of $3.2 billion.

11. Additionally, the applicants have requested that following approval and the closing of the

transactions, the Commission will request that the lieutenant-governor in council add NewCo1 as

a designated owner of a public utility and remove T1 and T2 as designated owners of a public

utility under the Public Utilities Act and Public Utilities Designation Regulation. The applicants

have also requested that the Commission issue a declaration or order that T3 no longer be

required to conduct itself as an owner of a public utility.

12. The Commission issued notice of the applications (notice) on May 28, 2014. In the

notice, the Commission indicated that, due to their inter-relationship, the applications would be

considered under a single proceeding.

13. Statements of intent to participate (SIPs) were received by the June 20, 2014 deadline

specified in the notice from the following:

1 NewCo will be incorporated under the Business Corporations Act (Alberta) and will be created for the purpose

of the acquisition of the shares of the SNC-Lavalin entities who are currently the designated owners of

AltaLink.



AltaLink Management Ltd. (AML)

Mr. Joseph Anglin

ATCO Electric Ltd. (ATCO)

Benign Energy Canada II Inc. (BECI)

the Consumers’ Coalition of Alberta (CCA)

EPCOR Distribution & Transmission Inc. (EDTI)

Mr. Jim Flatman

the Office of the Utilities Consumer Advocate (UCA)

Mr. Alexander Romanchuk

Mr. Alphons Sadée

14. On July 3 and 4, 2014, newspaper advertisements were placed in various publications

which encouraged Albertans to contact the Commission by email if Albertans had concerns

respecting Proceeding No 3250. By July 7, 2014, the Commission had received 293 email

submissions.2

15. On July 9, 2014, the Commission sent a letter by email to each of the individuals who

had provided views in respect of the proposed sale of ALP to MC Alberta.3 In its letter, the

Commission advised each of the parties submitting emails that their correspondence to the

Commission would be placed on the public record for Proceeding No. 3250, for consideration by

the Commission panel. In addition, parties submitting emails were advised that if they wished to

have a more formal, continuing involvement in Proceeding No. 3250, a SIP should be filed with

the Commission. A deadline of July 23, 2014 was set for the receipt of SIPs arising from the

Commission’s July 9, 2014 letter.

16. Also on July 9, 2014, the Commission set an initial process schedule for Proceeding No.

3250 which provided for information requests to the applicants to be filed on or before July 29,

2014, applicant responses to information requests on August 12, 2014, and submissions on the

need for intervener evidence to be filed on August 15, 2014.4

17. On July 22, 2014, the Commission received a SIP from Mr. Brian Overly.5 No other SIPs

were filed by the July 23, 2014 deadline set out in the Commission’s July 9, 2014 letter.6

18. In accordance with the Commission’s July 9, 2014 initial process schedule, responses to

information requests were filed by each of the applicants on August 12, 2014.

19. On August 13, 2014,7 the Commission granted the request of the CCA8 to extend the

deadline for submissions on the need for intervener evidence to August 18, 2014.

2 Exhibit No. 31.01, paragraph 7.

3 Exhibit No. 32.01.


5 Exhibit No. 62.

6 The Commission received an additional submission on July 22, 2014 from BECI (Exhibit No. 59.01) which

appeared to have been filed in response to the Commission’s July 9, 2014 letter. However, the initial SIP filed

by BECI on June 20, 2014 had already been accepted by that date. 7 Exhibit No. 96.01




20. On August 18, 2014, the CCA filed a letter9 advising that it did not intend to file

intervener evidence. In the same letter, the CCA requested that the Commission authorize a

second round of information requests to the applicants. In response to this request, the

Commission issued a letter requiring the CCA to provide additional explanation as to why it

considered a second round of information requests to be necessary or warranted. The CCA was

directed to respond on or before August 22, 2014.10

21. The CCA responded to the Commission’s request for additional explanation as to the

need for additional IRs to the applicants on August 22, 2014 and, within the same

correspondence, the CCA provided a set of additional IRs to the applicants.11

22. The Commission granted the CCA’s request for an additional round of IRs to the

applicants in a letter dated August 28, 2014.12 The applicants provided responses to the additional

IRs on September 2, 2014 from the CCA and from Mr. Overly, the only interveners to avail

themselves of the opportunity for additional questions.13

23. On September 5, 2014, ATCO filed a letter14 requesting that the Commission schedule

the balance of the proceeding and that it include an oral hearing as part of the remaining process.

24. On September 8, 2014, the Commission received submissions in response to ATCO’s

September 5, 2014 letter from MC Alberta,15 SNC,16 and AIML17 opposing ATCO’s request for

an oral hearing. On the same day, the Commission issued a notice of hearing of a procedural

motion to consider ATCO’s request for an oral hearing.

25. The oral hearing pursuant to the Commission’s September 8, 2014 notice was held in the

Commission’s hearing room in Calgary on September 19, 2014. On that day, the Commission

heard submissions from ATCO, Mr. Anglin, AIML, SNC, MC Alberta, AML, and BECI.18

26. On September 22, 2014, the Commission issued its ruling dismissing ATCO’s request for

an oral hearing and set out a schedule for argument, reply, and rebuttal submissions.

27. On September 25, 2014, written argument submissions were filed by each of the

applicants (AIML, SNC, and MC Alberta) and by AML. In accordance with the process set out

in the Commission’s September 22, 2014 ruling, the Commission issued correspondence19 which





13 Exhibit nos. 108, 109 and 110.





18 In its September 8, 2014 letter, the Commission requested that parties intending participate in the oral hearing to

consider ATCO’s procedural motion advise the Commission of their intention to participate in writing by

September 12, 2014. In addition to the identified participants, the Commission received submissions from

IPCAA (Exhibit No. 117.01) and from the CCA (Exhibit No. 120.01). IPCAA indicated that it did not expect to

participate, but would monitor the proceeding. The CCA similarly indicated that it did not expect to participate,

but provided written responses to questions posed by the Commission in its September 8, 2014 notice of hearing

in respect to the ATCO procedural motion. 19

Exhibit No. 132.01.

https://www.auc.ab.ca/eub/dds/EPS_Query/TransferAttachmentWS.aspx?DOCNUM=354576&SIZE=89746



confirmed that the deadline for reply argument submissions would be on October 16, 2014, and

that the deadline for rebuttal argument submissions would be one week after that.

28. The Commission received reply argument submissions from Mr. Overly, ATCO, the

CAA, and the UCA on or before October 16, 2014.

29. The Commission received rebuttal argument submissions from AIML, SNC, and MC

Alberta on October 20, 2014.

30. The Commission considers the record for Proceeding No. 3250 to have closed on

October 20, 2014.

31. In reaching the determinations set out within this decision, the Commission has

considered all relevant materials comprising the record of this proceeding, including the

evidence and argument provided by each party. Accordingly, references in this decision to

specific parts of the record are intended to assist the reader in understanding the Commission’s

reasoning relating to a particular matter and should not be taken as an indication that the

Commission did not consider all relevant portions of the record with respect to that matter.

3 Background

3.1 Particulars of the applications

32. As stated above, AltaLink, L.P. owns and operates certain electric transmission assets and

business in Alberta. SNC-Lavalin Group Inc. is currently the sole investor in AltaLink, L.P. and

wishes to divest itself of 100 per cent of its indirect investment in ALP.

33. The applicants applied pursuant to Section 101 and 102 of the Public Utilities Act and

Section 1(1) of the Public Utilities Designation Regulation, for approval of a multi-step

transaction (transaction) whereby:

(1) T1, T2 and T3 will each transfer the limited partnership units they hold in AltaLink

Holdings, L.P. (AHLP) to a newly incorporated Alberta corporation (NewCo) in

consideration for NewCo issuing common shares of the capital of NewCo to each of

T1, T2 and T3.

(2) 942064 Alberta Ltd. (942064) will transfer all of the shares in the capital of SNCEAL

to NewCo in consideration for NewCo issuing to 942064 common shares of the capital

of NewCo.

(3) 942064 will transfer all of the common shares in NewCo’s capital to T1 in

consideration for T1 issuing shares of its capital to 942064.

(4) T1, T2 and T3 will each transfer all of the shares they respectively hold in the capital of

NewCo to MC Alberta.



Steps (1) to (3) are the pre-closing reorganization, and step (4) is the acquisition.20

34. The current, pre-closing reorganization and post-acquisition ownership structures are

illustrated in appendices 3, 4 and 5 to the MC Alberta application and are reproduced below:21

20

Exhibit No. 3, SNC application, PDF page 1. 21

Exhibit nos. 13, 14, 15, MC Alberta application, appendices 3, 4 and 5.



35. The transaction would result in MC Alberta replacing SNC as the current owner of the

entities that own and operate ALP’s transmission assets and business.



36. Each of the applications included sections that outlined the basis for the relief sought by

the applicants, and the grounds provided in support of the applications.22 The applicants included

the following in the applications:

Attachment A – a list of acronyms used in the applications. For ease of reference, the

following list of abbreviations of entities referenced in the applications is reproduced:

Acronym Description

942064 942064 Alberta Ltd.

AHLP AltaLink Holdings, L.P.

AILP AILP AltaLink Investments, L.P.

AIML AltaLink Investment Management Ltd.

ALP AltaLink, L.P.

AML AltaLink Management Ltd.

BHE Berhkshire Hathway Energy Company

MC Alberta MidAmerican (Alberta) Canada Holdings Corporation

SNCEAL SNC-Lavalin Energy Alberta Ltd.

SNCGPHL SNC-Lavalin G.P. Holdings Ltd.

SNC-Lavalin SNC-Lavalin Group Inc.

T1 SNC-Lavalin Transmission Ltd.

T2 SNC-Lavalin Transmission II Ltd.

T3 SNC-Lavalin Transmission III Ltd.

Attachment B - evidence in support of the applications organized under the following

main topics:

o BHE company background

o overview of the pre-closing reorganization

o description of the acquisition

o demonstration of no harm to customers

Appendix 3 – diagram illustrating current ownership structure23

Appendix 4 – diagram illustrating pre-closing reorganization – creation of NewCo24

Appendix 5 – diagram illustrating post-acquisition ownership structure25

Appendix 1 – United States Securities and Exchange Commission Form 10-K26

Appendix 2 – share purchase agreement (SPA) dated May 1, 2014 between MC Alberta

(purchaser) and T1, T2, and T3 (collectively, sellers), among others27

22

AIML, Exhibit No. 1, PDF pages 5-8. 23

Exhibit No. 13, MC Alberta application, Appendix 3. 24




Exhibit No. 12, MC Alberta application, Appendix 2.



Appendix 6 – a credit rating report by Standard & Poor’s (S&P) titled “Research Update:

AltaLink Investments L.P. Outlook Revised To Positive On Announced Sale To

Berkshire Hathaway Energy Co.”28

3.2 Relief requested

37. The applicants requested the following relief:

(a) T1, T2, and T3 each applied to the Commission for an order or orders pursuant to

Section 101(2)(d) of the Public Utilities Act authorizing the sale and transfer of all of

the LP Units in AHLP to NewCo in consideration for NewCo issuing to each of T1, T2

and T3 common shares in the capital of NewCo.

(b) SNCEAL applied to the Commission for an order or orders pursuant to Section 102(1)

of the Public Utilities Act authorizing it to make on its books a transfer of all of the

shares in its capital to NewCo in consideration of NewCo issuing common shares in its

capital to 942064.

(c) T1 applied to the Commission for an order or orders pursuant to Section 101(2)(a) of

the Public Utilities Act authorizing it to issue shares in its capital to 942064.

(d) In order to provide regulatory certainty, T1, T2, T3 and SNCEAL requested that, as

part of the order or orders requested above, the Commission confirm that it will,

following the completion of the pre-closing reorganization, request the lieutenant

governor in council to add NewCo to the Public Utilities Designation Regulation as an

owner of a public utility to which sections 101, 102 and 109 of the Public Utilities Act

apply and effective from the time of completion of the pre-closing reorganization until

the time of designation, as a condition of granting the Applications, the Commission

will require NewCo to conduct itself as if it has been so designated.

(e) T1, T2, T3 and SNCEAL requested that, as part of the order or orders requested above,

the Commission will, following the completion of the acquisition, request the lieutenant

governor in council to remove T1 and T2 from the Public Utilities Designation

Regulation as owners of a public utility to which sections 101, 102 and 109 of the

Public Utilities Act apply.

(f) T1, T2, T3 and SNCEAL requested that, as part of the order or orders requested above,

that the Commission issue a declaration or order that, following the completion of the

acquisition, T3 no longer be required to conduct itself as an owner of a public utility to

which sections 101, 102 and 109 of the Public Utilities Act

(g) T1, T2, T3 and SNCEAL applied to the Commission for a declaration that an order is

not required pursuant to Section 101(2)(a)(i) of the Public Utilities Act authorizing

NewCo to issue common shares of its capital to each of T1, T2, T3 and 942064, or in

the alternative and to the extent required, an order or orders pursuant to Section

101(2)(a)(i) of the Public Utilities Act authorizing NewCo to issue common shares in

its capital to each of T1, T2, T3 and 942064.

28

Exhibit No. 16, MC Alberta application, Appendix 6.



(h) T1, T2, T3 and SNCEAL applied to the Commission for a declaration that an order is

not required pursuant to Section 102(1) of the Public Utilities Act authorizing NewCo

to make on its books a transfer of all of the shares in its capital to T1 in consideration of

T1 issuing shares in T1’s capital to 942064, or in the alternative and to the extent

required, an order or orders pursuant to Section 102(1) of the Public Utilities Act

authorizing NewCo to make on its books a transfer of all of the shares in its capital to

T1 in consideration of T1 issuing shares in T1's capital to 942064.

(i) T1, T2, T3 and SNCEAL applied to the Commission for an order pursuant to Section

102(1) of the Public Utilities Act authorizing T1, T2 and T3 to sell and transfer all

issued and outstanding shares in the share capital of NewCo to MC Alberta.

(j) T1, T2, T3 and SNCEAL applied to the Commission for a declaration that an order is

not required pursuant to sections 101(2)(d) and 102(1) of the Public Utilities Act

authorizing NewCo to sell and to make on its books a transfer of all of the shares in its

capital from T1, T2 and T3 to MC Alberta, or in the alternative and to the extent

required, an order or orders pursuant to sections 101(2)(d) and 102(1) of the Public

Utilities Act authorizing NewCo to sell and make on its books a transfer of all of the

shares in its capital from T1, T2 and T3 to MC Alberta.

(k) AIML applied to the Commission for an order pursuant to Section 102(1) of the Public

Utilities Act, authorizing the transfer on AHLP’s books of 99.99 per cent of the

outstanding LP Units of AHLP from T1, T2 and T3 to NewCo, resulting in the vesting

in NewCo of more than 50 per cent of the outstanding LP Units of AHLP.

(l) MC Alberta requested that as part of the order or orders that the Commission issues in

respect of the applications, the Commission:

(i) Confirm that it will, following the closing of the acquisition, request the

lieutenant governor in council to add NewCo to the Public Utilities

Designation Regulation as a designated owner of a public utility to which

sections 101, 102 and 109 of the Public Utilities Act apply.

(ii) Effective from the time of completion of the acquisition until the time of

designation, as a condition of granting the applications, require NewCo to

conduct itself as if it had been so designated.

(m) The applicants applied to the Commission for such further and other orders, exemptions

or declarations of the Commission that are within its jurisdiction and necessary to

permit and facilitate the pre-closing reorganization and acquisition, as more particularly

described in the applications and in Attachment B.

38. AIML requested that the applications be considered by the Commission together and

in toto. Furthermore, AIML submitted that prompt consideration of the applications would be in

the public interest to permit the proposed transaction to proceed on a timely basis and requested



that the Commission approve the applications as expeditiously as possible with a view to

releasing a decision no later than December 1, 2014.29

39. The Commission has considered the applications in toto, and for the purposes of this

decision, the Commission will periodically refer to the series of applications and transactions as

“the application” and “the transaction” or “the proposed transaction.”

4 Jurisdiction matters

4.1 Scope of the Commission’s public interest mandate

40. In argument, AIML submitted that the proposed transaction for which approvals were

sought was not a sale of utility assets but rather was an upstream change of share ownership at

the holding company level in the AltaLink ownership structure. As such, AIML submitted that

the proposed transaction would not affect the management or day-to-day operations of AltaLink.

In addition, post-transaction, AltaLink would remain subject to the Commission's ongoing

regulatory oversight, ring-fencing provisions and the Inter-Affiliate Code of Conduct for

AltaLink.30 Ring-fencing measures are put in place to solidify the credit quality of the regulated

utility by isolating the financial risks of the owners of the utility from the utility itself. Inter-

affiliate codes of conduct are adopted to ensure that the cost of services provided to a regulated

utility by the owner entity or an affiliate entity are provided at no more than the fair market value

for providing those services. In its argument, MC Alberta also stated that the proposed

transaction was a share transfer transaction at the holding company level. As such, no new utility

operator was being introduced to Alberta, no assets were proposed to be transferred, and no

approvals were necessary pursuant to the Hydro and Electric Energy Act for the transfer of

permits and licences. If approved, SNC would be replaced by MC Alberta as the owner of the

entities that in turn own and operate AltaLink.31

41. Concurrent with its requests for approvals from the Commission, MC Alberta had also

sought independent approvals under the Competition Act, RSC 1985, c. C-34 and Investment

Canada Act, RSC 1985, c.28 (1st Supp). The Competition Act requires a review of the

competitive impacts of an acquisition and the Investment Canada Act requires a review by the

Minister of Industry. The Minister of Industry granted approval for the acquisition on July 25,

2014, and concluded that the acquisition was “likely to be a net benefit to Canada.”32 In addition,

the Commissioner of Competition provided clearance for the proposed transaction through the

issuance of an Advance Ruling Certificate (ARC) in which the Commissioner of Competition

stated that he is “satisfied, on the basis of that information, that he does not have sufficient

grounds on which to apply to the Competition Tribunal… [a]accordingly the enclosed ARC has

been issued.”33 The ARC was received by MC Alberta on June 4, 2014.34

42. MC Alberta further explained that as part of the process to receive Investment Canada

Act approval, MC Alberta’s owner, BHE, made commitments related to both the future operation

29

AIML argument, paragraphs 5 and 6. 30

AIML argument, paragraph 4. 31

MC Alberta argument, paragraphs 2 and 3. 32

Exhibit No. 86.02, UCA-MAAC-6(a) attachment. 33

Exhibit No. 86.02, UCA-MAAC-6(d) attachment. 34

Exhibit No. 86.02, UCA-MAAC-6(d) attachment.



of AltaLink and BHE’s activities in Alberta and Canada generally.35 It submitted that many of

these commitments will benefit customers and confirmed that no additional costs will be paid by

utility customers in Alberta as a result of these commitments.36

43. In its reply argument, ATCO submitted that as the proposed transaction involves the

disposition of key transmission infrastructure that is relied upon by Alberta residents and

business, and, in particular, the critical oil and gas sector, the applications raise numerous public

interest issues. Additionally, ATCO noted that the treatment of the applications will create a

strong precedent for the manner in which the Commission interprets and applies its public

interest mandate in the context of sections 101 and 102 of the Public Utilities Act.

44. In his reply argument, Mr. Overly submitted that it was unclear who would make

decisions in the event that local management of AltaLink disagreed with resulting, post-

transaction U.S.-based directors. In particular, Mr. Overly expressed concern that, in the event of

disagreements, the interests of U.S.-based shareholders may prevail over interests identified by

local management. Mr. Overly also expressed concern that U.S. laws or requirements may be in

conflict with Alberta and Canadian laws.

45. In rebuttal argument, AIML restated that the evidence was clear that the application

before the Commission pertained to the sale of shares by the ultimate owner of AltaLink and

does not touch the regulated entity or involve the sale of utility assets or a merger of utility

businesses.

46. AIML argued that AltaLink has a history of providing safe and reliable service to

Albertans, which will continue. Further, AltaLink will remain subject to the same regulatory

oversight of the Commission and under the management of the same core management team. As

well, it will continue to be subject to a board comprised of a majority of independent directors;

and existing measures to ring-fence AltaLink from its upstream owners will be unaltered.

Consequently, AltaLink will remain a separate legal entity regardless of whether the ultimate

owner of AltaLink was foreign-based.37

47. In its rebuttal, MC Alberta also submitted that the concerns raised by Mr. Overly have

either been fully addressed within the filed evidence or go beyond the scope of the

Commission’s public interest mandate for the current proceeding. MC Alberta submitted that the

Commission addressed foreign ownership generally in its September 22, 2014 ruling38 and

concluded that the issue of foreign ownership was outside its jurisdiction in the context of this

proceeding. MC Alberta submitted that any suggestion by Mr. Overly that customers may be

harmed by the acquisition of AltaLink should be discounted given the clear and uncontroverted

evidence in this proceeding that mechanisms such as ring-fencing measures and AltaLink’s Inter-

Affiliate Code of the Conduct will remain and continue to function effectively after the

acquisition.

48. In respect of Mr. Overly’s concerns regarding potential conflicts between Alberta and

Canadian laws and U.S. laws and regulatory requirements, MC Alberta submitted that the

acquisition will not have any effect on AltaLink’s obligations to comply with Canadian and

35

MC Alberta argument, paragraph 11. 36

Exhibit No. 86.02, UCA-MAAC-6(b). 37

AIML rebuttal, paragraph 11. 38

Exhibit No. 127.01, paragraph 57.



Alberta laws, or on any decisions, directions, or orders of the Commission and any other

Canadian regulator with jurisdiction over AltaLink and its utility operations. In particular, as

indicated in an AIML response to an information request from Mr. Overly, it is clear that

following the close of the proposed share purchase transaction, AltaLink will remain an Alberta

corporation, fully subject to all applicable Canadian and Alberta laws, and subject to the

Commission’s regulatory powers and oversight. Conversely, U.S. government laws and

requirements are not applicable to AltaLink’s regulated transmission business.39

49. In response to ATCO, MC Alberta submitted that ATCO had failed to support its

suggestion that that there was an insufficient evidentiary basis on which the Commission could

render a reasoned decision and that ATCO had failed to provide any reasonable basis for

asserting that the applications should not be approved.

Commission findings

50. The jurisdiction of the Commission to authorize share transactions is set out in

Section 102(1) of the Public Utilities Act, which states:

(1) Unless authorized to do so by an order of the Commission, the owner of a public

utility designated under section 101(1) shall not sell or make or permit to be made on its

books a transfer of any share of its capital stock to a corporation, however incorporated,

if the sale or transfer, in itself or in connection with previous sales or transfers, would

result in the vesting in that corporation of more than 50% of the outstanding capital stock

of the owner of the public utility.

51. Furthermore, Section 101(2)(a)(ii) of the Public Utilities Act provides:

(2) No owner of a public utility designated under subsection (1) shall

(a) issue any

(i) of its shares or stock, or

(ii) bonds or other evidences of indebtedness, payable in more than one

year from the date of them,

unless it has first satisfied the Commission that the proposed issue is to be

made in accordance with law and has obtained the approval of the

Commission for the purposes of the issue and an order of the Commission.

52. A clear understanding of the Commission’s public interest mandate when considering an

application for approval of the purchase and sale of a designated public utility under sections 101

and 102 of the Public Utilities Act is necessary. The scope of the Commission’s public interest

mandate was discussed by the Commission in its ruling on the need for an oral hearing in this

proceeding dated September 22, 2014 when it stated:

28. …the scope of the AUC’s public interest mandate when considering applications

pursuant to sections 101 and 102 of the Public Utilities Act is defined by the accepted and

established no harm test as to whether transactions for which approval is sought are likely

39

Exhibit No. 109.02, Overly-AIML-02 and Overly-AIML-01.



to result in any harm to customers in terms of the rates paid for service or the reliability

of that service.40

53. As a statute-created, independent, quasi-judicial tribunal of the province of Alberta, the

Commission must ground its jurisdiction and define the scope of its mandate with reference to its

enabling legislation. The Supreme Court of Canada in ATCO Gas and Pipelines Ltd. v. Alberta

(Energy and Utilities Board)41 (Stores Block) succinctly confirmed this point when it stated:

Administrative tribunals or agencies are statutory creations: they cannot exceed the

powers that were granted to them by their enabling statute; they [page164] must “adhere

to the confines of their statutory authority or 'jurisdiction'[; and t]hey cannot trespass in

areas where the legislature has not assigned them authority”: Mullan, at pp. 9-10 (see also

S. Blake, Administrative Law in Canada (3rd ed. 2001), at pp. 183-84).42

54. The court also recognized the role of the Commission as an expert43 tribunal established

by statute to represent the public interest in the regulation of public utilities in the context of an

asset disposition by a utility. The court provided the following guidance on the scope of the

Commission’s specific public interest mandate:

The Board’s seemingly broad powers to make any order and to impose any additional

conditions that are necessary in the public interest has to be interpreted within the entire

context of the statutes which are meant to balance the need to protect consumers as well

as the property rights retained by owners, as recognized in a free market economy. The

limits of the powers of the Board are grounded in its main function of fixing just and

reasonable rates (“rate setting”) and in protecting the integrity and dependability of the

supply system.44

55. The Supreme Court of Canada in Bell Canada v. Canada (Canadian Radio-Television

and Telecommunications Commission),45 highlighted that defining the extent of an administrative

tribunal’s powers requires a balance between ensuring that the tribunal is able to carry out its

legislative mandate while restricting those powers within the confines of that mandate. The court

stated:

The powers of any administrative tribunal must of course be stated in its enabling statute

but they may also exist by necessary implication from the wording of the act, its structure

and its purpose. Although courts must refrain from unduly broadening the powers of such

regulatory authorities through judicial law-making, they must also avoid sterilizing these

powers through overly technical interpretations of enabling statutes.46

56. The Public Utilities Act does not specify the factors that the Commission is to consider

when deciding applications under sections 101 and 102. General guidance, however, on how

40

Exhibit No. 127.01, paragraph 28. 41

ATCO Gas and Pipelines Ltd. V. Alberta (Energy and Utilities Board) [2006] 1 S.C.R. 140, [2006] S.C.J. No.4,

2006 SCC 4. 42

Stores Block, paragraph 35. 43



Bell Canada v. Canada (Canadian Radio-Television and Telecommunications Commission), [1989] 1 S.C.R.

1722. 46

Bell Canada v. Canada (Canadian Radio-Television and Telecommunications Commission), [1989] 1 S.C.R.

1722, at page 1756.



Commission members are to exercise the Commission’s statutory mandate is provided in

Section 6(1) of the Alberta Utilities Act, SA 2007, C. A-37.2, which states:

6(1) Every member, in exercising powers and in discharging functions and duties,

(a) shall act honestly, in good faith and in the public interest,

57. This is in contrast to the duties of directors of a company incorporated under the Business

Corporations Act. In that act, directors must act honestly, in good faith and in the best interests

of the company.47

58. Public interest is a multi-faceted concept that will necessarily mean different things in

different contexts. Responsibility for determining the overall public interest of Canadians is

divided between the Parliament of Canada and the provincial legislatures. The provincial

legislatures or Parliament may then delegate responsibility for certain public interest

determinations to the lieutenant-governor in council, ministers or various agencies of the

province. For example, the public interest mandate of an administrative body charged by statute

with overseeing public education in Alberta would be different from one charged with

overseeing the delivery of public health care in Alberta and different again from an

administrative or quasi-judicial tribunal like the Commission, which is charged with regulating

certain public utility matters in Alberta.48

59. The Supreme Court of Canada has indicated that the scope of an administrative tribunal’s

public interest mandate must be derived from a review of the context of its enabling legislation.

In Memorial Gardens Association (Canada) Limited v. Colwood Cemetery Company49 the court

stated “[t]he meaning in a given case must be ascertained by the reference to the context and to

the object and purposes of the statute in which it is found.”

60. It is clear from the above that the Commission does not have authority over all matters

related to regulated utilities in Alberta. For example, in this case the applicants also sought

approvals from Industry Canada and the Competition Tribunal.50 The responsibilities of the

Commission are limited to its central rate-setting and utility system integrity functions set out in

its enabling legislation.

61. It is also clear that the role of the Commission in carrying out its public interest mandate

is different from that of a court. Unlike a court, proceedings before the Commission are not held

to resolve private disputes. The Commission has the responsibility to arrive at an outcome in the

public interest in a particular proceeding, not to make a determination in favour of one or another

of the private interests of the parties participating in the proceeding. As the Commission stated in

Decision 2011-436:51

47

Business Corporations Act (Alberta), Section 122. 48

This theme was reflected in an exchange which occurred at the oral argument on the procedural motion to hold

an oral hearing on September 19, 2014 between the Commission Chair and Mr. Anglin in discussing the federal

jurisdictional and provincial jurisdictional boundaries at Transcript, pages 37-38, beginning at line 17. 49

Memorial Gardens Association (Canada) Limited v. Colwood Cemetery Company [1958] SCR 353. 50

Exhibit No. 10, page 2. 51

Decision 2011-436: AltaLink Management Ltd. and EPCOR Distribution & Transmission Inc., Heartland

Transmission Project, Application No. 1606609, Proceeding ID No. 457, November 1, 2011.

http://www.auc.ab.ca/applications/decisions/Decisions/2011/2011-436.pdf



73. … However, the Commission is not a court. It has no inherent powers. Its powers

are set out in legislation. It is sometimes referred to as an expert tribunal because it deals

frequently with specialized subject matter required to balance the public interest

considerations it must address. Unlike a court proceeding, the Commission’s proceedings

are not matters between two or more competing parties to determine who wins and loses.

In other words, the Commission’s proceedings are not in the nature of a lis inter partes (a

dispute between parties).

74. The Commission’s proceedings are conducted to determine an outcome that

meets the public interest mandate set out in the legislation. …

77. Just as the Commission is not a court, it is not a political body and does not make

its decisions based upon the views or opinions of the majority of participants. …

95. In summary, it is the Commission’s duty to use its expertise to test the

application placed before it to ensure that it has the information necessary to make a

public interest determination and that all parties to the proceeding have the same

information as the Commission before them so that they can explain how their private

interests can best be balanced in the public interest determination.52

62. As noted in the Commission’s ruling of September 22, 2014, advertisements were placed

in respect of this proceeding in various publications on July 3 and 4, 2014. The advertisements

encouraged Albertans to contact the Commission by email if Albertans had concerns about the

proposed sale and purchase of ALP. Emails both in support of the proposed transaction and

opposing it were received.

63. With respect to the emails opposing the transaction, as can be seen from the following

extracts, several public interest themes emerged relating to concerns over foreign ownership and

the loss of control over Alberta transmission infrastructure, potential exports of electricity to the

United States and the potential for higher power prices or deteriorating service as a result of the

sale. Examples of email received in respect of each of these themes are provided below.

Concerns over sale to a foreign investor and the loss of control over Alberta transmission

infrastructure

…it is my personal belief though that our critical infrastructure; from the St. Lawrence

Seaway, to our electricity grid, should be owned and controlled by Canadians. Will

foreign interests always be aligned with the interests of Canada in delivering electricity to

our industries, our hospitals, schools, military and our homes?

I stand strongly opposed to the sale of AltaLink to foreign interests.

Jacqueline L. Wyness” (July 28, 2014)

I believe that it is contrary to Alberta’s basic economic interests to sell critical, public

infrastructure to private interests abroad whose main goals are the maximization of profit,

and not the provision of secure electricity supplies to Alberta businesses like mine, that

form part of the economic engine of this province. I also believe that there are real issues

and concerns around governance and regulation of this critical infrastructure, and that by

selling it we lose a key tool in our collective arsenal for protecting, maintaining, and

52

Decision 2011-436, paragraphs 73, 74, 77 and 95.



enhancing this critical infrastructure, and thus Alberta’s economic performance and

security.

I respectfully suggest that this planned sale should, at minimum, be reconsidered while a

full, public airing and review of this policy is conducted.

Regards,

Norman Hanson, P.Eng.” (July 2, 2014)

This is to express my very serious concern on this pending sale. There is something

fundamentally wrong with this sale that needs to be addressed by the Provincial and

Federal governments. By example the sale of the Potash resources in Saskatchewan were

stopped as it was deemed to not be in our long term interest to lose this resource.

I submit that there is a similar concern in selling this critical resource to a non-Canadian

ownership. We will lose control of all the elements of this resource, from availability to

pricing. I see no benefit in this sale. If there is, then this needs to be communicated -

which it has not.”

Yours truly,

Jim Luelo” (July 2, 2014)

I am writing to voice my concern over the pending sale of Altatlink to Berkshire

Hathaway. After the last election one of the items that was considered was whether or not

to go ahead with the three massive transmission lines. The residents of Alberta were

against building them. There was an investigation and the results were somewhat

inconclusive, two we could manage without, one was vital. The decision was made to go

ahead in the face of great opposition. You built them, we paid for them. Now you are

considering selling what is partly owned by Albertans.

Regards,

Ruth Kereliuk (July 4, 2014)

Concerns about power being exported to the United States

Dear Sir or Madam,

I feel if the grid is owned by a company outside our own province or country we will see

prices even higher and possible power interruptions if this company favours selling our

power outside of Alberta.

Patrick Artibise” (July 3, 2014)

Please ensure that the Province of Alberta and the Federal Government conduct a policy

review to determine who should own the infrastructure at the heart of Alberta’s

prosperity. It has come to my attention that an American company (Berkshire Hathaway)

has made a bid to purchase AltaLink. If successful, we lose control of critical

infrastructure, regulation oversight stops at the border and potential for more power

exports increases.

Priscilla Spratt

Carvel, Alberta



Concerns that power prices will rise and quality of service will deteriorate as a result of the

sale to a foreign entity

Minister and Commission:

I am opposed to the sale. This sale will undoubtedly mean higher electricity transmission

costs to us the Alberta consumer. We will pay to subsidize lines into the U.S.

Our electrical line priorities will not be Berkshire Hathaway’s priorities.

It is not in our interest to relinquish 100% control to a U.S. corporation.

Charles Ray” (July 3, 2014)

It is not that I feel we cannot share electricity with USA but when an out of country

company owns it, what regulations for price control, distribution, and quantity of use will

be in place to protect the interest of Albertans where this energy is generated, etc.?…And

once it is out of Alberta's jurisdiction, I fear for what could happen. Please use extreme

caution when making this decision.

Yours sincerely,

Wilma Busaan” (July 12, 2014)

I am totally opposed to the sale of AltaLink to Berkshire Hathaway. There is NO benefit

in this takeover to the people of Alberta and every likely there will be problems from it to

Albertans in the form of higher electricity cost which are already going out of control .

Derek Hoyle (July 3, 2014)

64. The Commission is understanding of the need of Albertans to have their concerns

addressed. However, most of the matters raised are outside the portion of the public interest

mandate entrusted to the Commission and fall to other bodies charged with safeguarding other

aspects of the overall public interest. The Commission has addressed each of the email themes in

turn.

Concerns over sale to a foreign investor and the loss of control over Alberta transmission

infrastructure

65. As described above, the public interest mandate of the Commission is grounded in its

central rate-setting and protecting utility system integrity functions. The approval of certain types

of investment in a Canadian enterprise by a foreign entity lies within the purview of the federal

government and is governed by the provisions of the Investment Canada Act. In exercising his

responsibilities over this element of the public interest, the federal industry minister approved the

application of BHE to acquire control of AltaLink subject to certain commitments. In a letter

dated July 25, 2014 approving the investment, the industry minister stated: “I am satisfied that

your investment is likely to be of net benefit to Canada.”53

66. Public interest issues related to the impact on competition in Canada as the result of an

acquisition or merger have been assigned to the federal Competition Bureau. On June 4, 2014,

the Associate Deputy Commissioner of Competition, Mergers Branch issued an Advanced

Ruling Certificate certifying that there were not sufficient grounds to apply to the Competition

Tribunal to oppose the transaction.54

53

Exhibit No. 86.02, UCA-MAAC-6(a) attachment. 54

Exhibit No. 86.02, UCA-MAAC-6(d) attachment.



67. The Commission does have the authority to approve or deny the AltaLink sale transaction

but must do so in the context of its rate-setting and protection of utility system integrity

functions. These functions have historically been exercised through the application of the no

harm test which considers the impact to customers of the transaction with respect to the rates

they pay and the services they receive. These impacts fall within the public interest mandate of

the Commission and are the focus of the present proceeding. The no harm test, its constituent

elements and historical development is discussed in Section 5 below.

68. It is clear that in applying the no harm test, it is not open to the Commission to deny the

transaction simply because the purchaser is controlled by a foreign entity. Denying the

transaction is warranted when the transaction does not satisfy the requirements of the no harm

test and cannot be satisfied by the attachment of conditions to an approval.

Concerns about power being exported to the United States

69. The export of electricity from Alberta to the United States is unaffected by the sale of

transmission infrastructure. AltaLink does not buy and sell the electricity that is moved through

its transmission system. It is merely a conduit through which market participants purchase and

sell electric energy. The planning and development of new transmission infrastructure, whether

intended to serve interprovincial, intraprovincial or export markets, is not within the control of

the electric transmission utilities in Alberta. The statutory responsibility for the planning,

expansion and enhancement of the electric transmission system in Alberta falls to the

Independent System Operator (ISO) pursuant to the Electric Utilities Act.55 The ISO must

“forecast the needs of Alberta and develop plans for the transmission system.”56 In carrying out

its powers and responsibilities the ISO must “provide for the safe, reliable and economic

operation of the interconnected electric system and to promote a fair, efficient and openly

competitive market for electricity.”57 Nowhere in the operational process of a transmission utility

receiving energy for transport and delivering it to its destination, is there an opportunity for a

transmission utility to divert energy for export or hinder its delivery.

70. Regulation of the export of electricity from Canada is outside of the jurisdiction of the

Commission. Electricity exports are regulated by the National Energy Board (a federal

regulatory agency) and require a permit or a licence under Sections 119.02 to 119.08 of the

National Energy Board Act, RSC 1985, c N-7. In the case of an export license, the National

Energy Board under Section 119.08(2)(b) must have regard to whether an applicant has:

(i) informed those who have declared an interest in buying electricity for consumption in

Canada of the quantities and classes of service available for sale, and

(ii) given an opportunity to purchase electricity on terms and conditions as favourable as

the terms and conditions specified in the application to those who, within a

reasonable time after being so informed, demonstrate an intention to buy electricity

for consumption in Canada.

55

Electric Utilities Act, sections 17, 20 and 33. 56

Electric Utilities Act, Section 33(1). 57

Electric Utilities Act, Section 16.



Concerns that power prices will rise and quality of service will deteriorate as a result of the

sale to a foreign entity

71. Power prices are not determined by a regulatory authority in Alberta and are accordingly

outside of the public interest mandate of the Commission. Electric energy commodity prices are

determined pursuant to approved power purchase arrangements, by private contract subject to the

provisions of the Electric Utilities Act and the rules established by the ISO. Accordingly, they

are determined in the competitive marketplace driven by economic principles of supply and

demand, subject to the rules established by the ISO governing the operation of the Alberta power

pool through which the exchange of electric energy and financial settlement occurs.58

72. Although the Commission does not have jurisdiction over electric energy commodity

pricing, it does have jurisdiction over pricing of transmission services and the manner in which

those services are provided pursuant to its core statutory functions of rate setting and the

protection of the integrity and dependability of utility infrastructure. The Commission must

approve the costs passed on to ratepayers by AltaLink through the rates charged under its

regulated tariff. This tariff represents the approved costs incurred by AltaLink in constructing

and operating its transmission system, including a return on investment. The Commission also

has jurisdiction to approve or deny construction of new AltaLink facilities so as to maintain

service quality and the integrity of the AltaLink transmission system. The Commission carries

out these public interest responsibilities through its processes to consider facility and tariff

applications, and through establishing rules on service quality and by monitoring service quality

results. Additionally, as discussed above, the Commission applies the no harm test to a proposed

acquisition of a utility to assess the rate and service quality impacts of the proposed transaction.

73. The above review has highlighted the importance of understanding that the “public

interest” is a broad societal concept and that different public authorities may have allocated to

them the responsibility to consider a specific segment of the broader public interest relevant to a

consideration of a particular issue or transaction. In the present proceeding, the portion of the

public interest delegated to the Commission (its public interest mandate), is limited to a

consideration of the rate and service impacts of the proposed sale. The Commission will assess

these elements of the transaction through the application of its no harm test within the remaining

sections of this decision.

4.2 Attachment of conditions to application approvals

74. In its argument, AIML requested that the Commission approve the applications and

provide the additional authorizations required for the consummation of the proposed transaction,

without applying conditions beyond those directed by the Commission in Decision 2011-374.59 60

75. In reply argument, the UCA submitted that, based on the evidence on the record of the

current proceeding, it did not appear that the proposed sale would have any material, adverse

58

Electric Utilities Act, Section 18. 59

Decision 2011-374 (Errata): AltaLink Investment Management Ltd. et al., Application Related to Change in

Ownership, Application No. 1607248 and 1607249, Proceeding ID No. 1197, September 26, 2011. 60

At paragraph 28 of its argument, AIML noted that in Decision 2011-374, the conditions established were to

prepare an updated affidavit on the revised ring-fencing measures, and to provide, if necessary, any changes to

its Inter-Affiliate Code of Conduct to reflect the new ownership structure. See Decision 2011-374,

paragraph 59.

http://www.auc.ab.ca/applications/decisions/Decisions/2011/2011-374_Errata.pdf



impact on the cost of service to customers or on the utility’s ability to deliver safe and reliable

transmission services. However, in order to ensure that the proposed sale did not, in fact, result in

any harm to customers, several conditions should be imposed by the Commission in the event the

Commission determined that approving the sale was in the public interest. In accordance with

previous decisions of the Commission and its predecessor, the UCA restricted the conditions it

recommended to reflect the principle that customers should not gain a greater level of regulatory

certainty than would otherwise be obtained in the absence of a sale.61

76. In its reply, the CCA similarly submitted that while it did not oppose change in the

designated owners of AltaLink, it remained concerned that there could be potential for customers

to be harmed. Accordingly, the CCA submitted that certain conditions should be included with

the Commission’s approval of the applications.62

77. The CCA submitted that the primary issue is whether commitments made by the

applicants need to be clearly identified and specifically included as conditions on approval of the

application. Additionally, the CCA noted that if the proposed transaction proceeds, a further

complication arises from the fact that SNC entities will no longer be linked by ownership to

those present in proceedings before the Commission to address any shortcomings in their

representations within the current proceeding.63

78. The CCA submitted that cataloguing the commitments of immediate concern and

including them as approval conditions would provide a useful checklist in future GTA and

deferral account applications, and would provide the weight of a Commission decision in support

of their future execution. Further, since the applicants have already made these commitments in

writing, they should not have any material objections to the inclusion of conditions as a condition

of the sale.64 In the CCA’s view, the Commission can protect customers by making it a condition

or confirmation in its decision that, if required, AltaLink or the purchasers can be required to

explain the failure or breach of any of the representations given by any applicant in this

proceeding that these proposed transactions will not harm customers. Further, if the Commission

determines it appropriate, AltaLink could be held responsible by the Commission to rectify such

harm at its own expense, thus ensuring that customers will not sustain harm. Further, the CCA

submitted that it is appropriate that the purchasers stand behind the representations of the SNC

entities as they take over from them.

79. In rebuttal argument, AIML submitted that apart from requirements consistent with prior

decisions to file an updated ownership structure flowchart, an updated affidavit on the revised

ring-fencing measures, and any changes to AltaLink’s Inter-Affiliate Code of Conduct to reflect

the new ownership structure, the Commission should reject all the conditions sought by the UCA

and CCA because:

they are not necessary, appropriate, warranted or supported by the evidence

they would constitute an improper and unnecessary intrusion into management’s

responsibility to manage the business and affairs of AltaLink

they are inconsistent with prior decisions of the Commission’s predecessor, and

61

UCA reply argument, paragraph 16. 62

CCA reply argument, paragraph 5. 63

CCA argument, paragraph 6. 64

CCA argument, paragraph 7.



they are beyond the scope of the Commission’s public interest mandate and jurisdiction

on these Applications, as determined by the Commission in its September 22, 2014

ruling.65

80. AIML also opposed the establishment of conditions beyond those stipulated in similar

prior decisions because it was concerned that AltaLink will be required to deal with claims and

misinterpretations arising from “conditions” in future proceedings.66

81. AIML submitted that the commitments made by the applicants are public and well known

to the Commission. Further, as demonstrated during the oral proceeding held on September 19,

2014, the institutional memory of the Commission is strong, and, as such, inconsistent positions

are readily exposed. AIML submitted that the applicants in the current proceeding fully

appreciate the right of the public and the Commission to expect that commitments will be

adhered to. Accordingly, AIML submitted that the Commission’s current practice of expecting

full compliance with commitments is sound. Conversely the establishment of conditions to

protect the public interest would be wholly unnecessary.

82. In its rebuttal argument, MC Alberta responded to the requests of the CCA and the UCA

that the Commission attach conditions to its approval of the proposed transaction.

83. With respect to the UCA, MC Alberta submitted that while it did not oppose certain

standard conditions recommended by the UCA, some conditions recommended by interveners

were either beyond the scope of the Commission’s jurisdiction, or unnecessary.

84. MC Alberta recognized that the Commission’s mandate in the current proceeding is

fulfilled through the application of the no harm test, and if the Commission determined that

customers would be harmed by a transaction, the Commission would consider whether the

identified harm could be mitigated by attaching conditions to its approval.67

85. In the Commission’s two most recent decisions involving reorganizations of the

ownership structure of AltaLink, the Commission limited its approval of conditions to:

filing updated ownership structure flowcharts

filing an updated affidavit regarding the commitment of Commission-approved ring-

fencing measures

providing updates to the AltaLink Inter-Affiliate Code of Conduct

86. Having regard to the above, MC Alberta submitted that it supported the UCA’s request

that it file an updated ownership structure flowchart identifying the new legal names of entities

following the closing of the application. However, MC Alberta agreed with the submissions of

AIML and SNC, which rejected the UCA’s proposed conditions in respect of Investment Canada

Act commitments and with respect to the retention of records.

65

AIML rebuttal argument, paragraph 17. 66


Decision 2005-118 , page 6 and Decision 2004-035, page 8, referenced at paragraph 8 of MC Alberta rebuttal

argument.



87. In response to the CCA-recommended conditions, MC Alberta submitted that the

majority of these conditions simply mirrored commitments made by MC Alberta on the record of

the current proceeding or commitments made by BHE to Industry Canada under the Investment

Canada Act. MC Alberta submitted that the CCA conditions should be denied as each CCA

justification for the imposition of a specific condition fell into one of following three categories:

conditions that are beyond the scope of the Commission’s jurisdiction

conditions that are unnecessary and inappropriate given the Commission’s ongoing

regulatory authority and oversight of AltaLink

conditions that are unnecessary given the clear and unequivocal commitments and related

evidence in this proceeding

88. In its rebuttal argument, SNC submitted that as the proceeding record clearly established

that the pre-closing reorganization and acquisition would not result in harm to customers, only

conditions similar to those found in Decision 2006-056 and 2011-37468 were required in the

circumstances of the proposed share sale transaction.

Commission findings

89. The CCA and the UCA have both made submissions to the effect that they do not

consider the proposed sale of the AltaLink transmission business and assets will cause material,

adverse impact on the cost of service to customers, or on the utility’s ability to deliver safe and

reliable transmission services, so long as the Commission attaches certain specified conditions to

its approval of the applications.

90. The Commission notes that, for both the CCA and the UCA, the requests for conditions

to the Commission’s approval focus on obtaining assurance in the future, that certain

undertakings given by one or more of the applicants in the current proceeding in evidence,

argument, or both will be honoured.

91. Just as the scope of the Commission’s jurisdiction to consider the sale transaction must be

related to matters concerned with its core rate-setting function and dependability of the

infrastructure or assets necessary to deliver the regulated service, the scope of the Commission’s

jurisdiction to impose conditions on the sale transactions is similarly circumscribed. The

Commission is not charged with the responsibility of enforcing or policing the commitments

made by the applicants to other government entities and will not do so under the auspices of its

no harm test.

92. The Commission recognizes that attaching conditions to the approval of an application

restricts the flexibility of an applicant to respond quickly to changing circumstances. In some

circumstances the restriction of the company’s flexibility is warranted by the harm that could be

incurred absent the conditions. Examples of conditions that have been considered necessary

include the ring- fencing measures and the inter-affiliate codes of conduct that the Commission

has required be implemented as part of a sale transaction. Accordingly, while the Commission

expects that the applicants will honour their commitments to other government agencies,

expectations of fulfillment of these undertakings are not to be taken as “conditions” of the

Commission’s approval. To the extent the Commission finds it necessary to direct an applicant to

68

Exhibit No. 139.02, SNC reply argument citing Decision 2006-056 and Decision 2011-374.



take a specific action in its findings, the Commission has clearly indicated whether such

direction is a condition of those findings.

4.3 Impact of ongoing Commission oversight

93. In argument, AIML noted that the Commission’s September 22, 2014 ruling observed

that the Commission and its predecessor have taken into account whether the Commission will

maintain sufficient regulatory oversight of the utility69 in their application of the no harm test.70

In this regard, AIML submitted that the evidence in the current proceeding is that the pre-closing

reorganization and acquisition will not substantively change the Commission's regulatory

authority over the AltaLink transmission business and over the entities involved in carrying out

the business. SNC made a similar statement in its argument.71

94. In its argument, MC Alberta noted that the Commission’s predecessor addressed the

scope of its inquiry in relation to a similar share transfer transaction in Decision 2004-035 in

respect of FortisAlberta Inc.’s (FortisAlberta) acquisition of Aquila’s distribution business.

Specifically, in that decision, the Commission’s predecessor only addressed those issues that

“bear directly on the disposition of the Applications,” and deferred those issues that could be

dealt with in future tariff proceedings:

The Board recognizes that all of the issues raised by the interveners are important to

them. However, the Board considers that the detailed resolution of the majority of the

issues can most appropriately be handled in future proceedings with the assistance of

more timely and specific evidence. As the Board has previously held, in asset or share

disposition applications, customers are not entitled to a level of post-transaction

regulatory certainty they would not have realized if the transaction had not been

approved. Therefore, the Board does not consider it appropriate or in the public interest to

endeavor at this stage to address matters of ongoing tariff regulation. In keeping with its

past practices and to promote regulatory consistency, the Board will only deal with the

issues raised by the interveners that bear directly on the disposition of the Applications

before the Board in this proceeding.72

95. MC Alberta proposed that the same level of ownership be designated pursuant to the

Public Utilities Designation Regulation and accordingly, customers would not be harmed by the

transaction because all of the pre-closing regulatory protections and Commission requirements

will continue post-closing.73

96. In reply argument, ATCO posited that although the applicants wanted to convey the

impression that they were willing to subject the applications to the Commission's previously

established no harm test, they appear to want to avoid anything beyond a superficial

consideration of both “the potential positive and negative impacts of the transaction.”74 ATCO

further submitted that the submissions of the applicants demonstrate that they do not want to

have potential impacts tested at all in the context of the current proceeding. In this regard, ATCO

noted that the applicants hastily dismissed ATCO inquiries as either being speculative or capable

69

Decisions 2004-35, pages 16-17 and 2011-374, paragraph 51. 70

AIML argument, paragraph 21, part (e). 71

SNC argument, paragraph 10, part (i). 72

Decision 2004-035, page 12. 73

Exhibit No. 85.02, AUC-MAAC-2(b), cited at paragraph 39 of MC Alberta argument. 74

ATCO argument, paragraph 4.



of being addressed in some future proceeding. However, consideration of potential impacts, both

positive or negative, is a key part of the no harm test and these issues should not be avoided by

simply referencing Commission statements made in other proceedings as a basis to by-pass a

consideration of these matters in the current proceeding.

Commission findings

97. While ATCO has pointed to the potential for AltaLink ratepayers to be harmed in the

future if the applicants fail to take certain steps identified as being required to mitigate such

harm, these concerns are generally speculative and premised on the applicants not meeting their

commitments.

98. The Commission will continue to assess the reasonableness and prudence of AltaLink’s

actions as part of its ongoing regulatory oversight of this utility. Further, the Commission agrees

with the findings of its predecessor in Decision 2004-035 that it is premature to try to address in

this proceeding, matters that, if they arise, can be addressed in future regulatory proceedings

before the Commission.

4.4 Disposition of sale proceeds

99. In his reply argument, Mr. Overly submitted that in a transfer of ownership case, the

proposed transfer could be subject either to a no harm test or a more stringent test that balances

the positive and negative impacts. Referencing Decision 2000-41,75 and the fact that the

proceeding is dealing with the potential sale of critical Alberta infrastructure to a foreign

company, Mr. Overly submitted the Commission should apply a stringent test in its assessment

of positive and negative impacts from the sale. Further, in consideration of this test, Mr. Overly

submitted that the Commission could attempt to mitigate the potential risks by apportioning a

percentage of the gain that will be made on the sale.

100. In rebuttal, MC Alberta submitted that Mr. Overly did not identify which potential risks

he was referring to in support of his suggestion that AltaLink and BHE should rebate a portion of

what he describes as the “gain of the sale” to the Alberta customer as a means of mitigating or

offsetting potential risks.

101. MC Alberta submitted that as the acquisition satisfies the well-established no harm test,

even if AltaLink or BHE realizes some gain from the sale, which it stated it had not, and even if

the Commission had the authority to allocate some portion of a gain on sale in these

circumstances to utility customers, which it stated that the Commission did not have, there was

no evidence of any potential harm that would require any “compensation.”

102. MC Alberta noted that the Commission’s predecessor made the following finding in

Decision 2000-41 in the face of similar arguments:

… the Board considers that, as long as customers are, on balance, no worse off and the

assets involved are remaining in regulated service, then the sale of a utility can be treated

(as suggested by TransAlta) as a transaction by shareholders that does not affect

customers. The Board considers that in this instance, the Board has ensured that

customers will be protected so that customers experience no disadvantage as a result of

75

Decision 2000-41: TransAlta Utilities Corporation, Sale of Distribution Business, Application No. 2000051,

File No. 6404-3, July 5, 2000.




the sale. As well, customers have the potential to benefit from the introduction of

Utilicorp to the market. Therefore, the Board finds that the gain or premium on the sale

should be allocated to shareholders.76

103. In its argument, SNC also referenced the same passage from Decision 2000-41 and SNC

submitted that the allocation of sale proceeds only becomes relevant in the event that the

Commission determines that the proposed acquisition would result in harm to customers.

However, SNC submitted that the no harm test has been met and that there is therefore no need

for the Commission to consider the allocation of sale proceeds.

Commission findings

104. Decision 2000-41 was issued prior to the release of the Supreme Court of Canada’s

Stores Block decision. Pursuant to the Stores Block decision, although customers have paid for

electric transmission services, that does not mean that they have acquired a property interest in

the AltaLink assets, and, accordingly, the Commission has no authority to apportion a percentage

of the gain that will be made on the sale for the purposes of mitigating risk, as proposed by

Mr. Overly. The Supreme Court of Canada in Stores Block clearly settled the law on this issue.

The Supreme Court stated:

Thus can it be said, as alleged by the City, that the customers have a property interest in

the utility? Absolutely not: that cannot be so, as it would mean that fundamental

principles of corporate laws would be distorted. Through the rates, the customers pay an

amount for the regulated service that equals the costs of the service and the necessary

resources. They do not by their payment implicitly purchase the asset from the utility’s

investors. The payment does not incorporate acquiring ownership or control of the

utility’s assets.77

105. In Stores Block, the court determined that the Commission’s predecessor did not have the

jurisdiction to allocate to ratepayers any portion of the sale proceeds arising from the sale of an

asset outside the ordinary course of business of a designated gas utility.78 The court also found

that the ability to allocate sale proceeds could not be implied from the statutory regime as

necessarily incidental to the explicit powers granted the board.79

106. The court went on to acknowledge the no harm test employed by the board when

considering applications under Section 26(2) of the Gas Utilities Act, a provision similar to

sections 101 and 102 of the Public Utilities Act, and commented that the board was able to carry

out its statutory responsibilities without allocating the proceeds of disposition to customers. The

court stated:

In fact, it is not necessary for the Board in carrying out its mandate to order the utility to

surrender the bulk of the proceeds from a sale of its property in order for that utility to

obtain approval for a sale. The Board has other options within its jurisdiction which do

not involve the appropriation of the sale proceeds, the most obvious one being to refuse

76

Decision 2000-41 at page 30. 77



Stores Block, paragraphs 39, 52, 75 and 77.



to approve a sale that will, in the Board's view, affect the quality and/or quantity of the

service offered by the utility or create additional operating costs for the future.80

5 No harm test assessment

107. In fulfilling its public interest mandate when considering applications pursuant to

sections 101 and 102 of the Public Utilities Act, the Commission has traditionally applied a no

harm test, a test which parties have identified in their submissions in this proceedings.

108. The no harm test and the factors considered by the Commission has evolved from past

decisions of the Commission and its predecessors. In its September 22, 2014 ruling, the

Commission referenced the overview presented by the submissions of MC Alberta. These factors

have been reproduced as follows:

The first is whether there will be any impact to the rates and charges passed on to

customers, and that you'll find in Decision 2005-118,[81] Decision 2004-35[82] and

Decision 2011-374.

… second, whether any operational benefit or risk arises related to the acquiring party's

utility experience. That's in Decision 2005-118, 2004-35, Decision 2006-38. …

Third, whether the financial profile of the utility will be impacted for the purposes of

attracting capital. That's in Decision 2006-56, Decision 2006-38 and Decision 2011-374.

Fourth, in the case of AltaLink, whether the utility will remain sufficiently legally,

financially and operationally separate from the acquiring party, which is, of course, the

ring-fencing provisions, code of conduct, et cetera, and that's in Decision 2006-56 and

2011-374.

Fifth, whether the Commission will maintain sufficient regulatory oversight of the utility;

Decision 2004-35, Decision 2011-374.

Sixth, whether the management and operational expertise will remain in place post

transaction; Decision 2006-38, Decision 2011-374.

Seventh, whether the transmission [sic] [transaction] will result in any cost impacts for

customers relating to such things as tax and pension funds. And that's Decision 2000-41.

And eight, that the acquiring party wishes to be in the utility business in Alberta whereas

the divesting party does not. That's in Decision 2005-118, Decision 2004-5

and Decision 2006-38.83

80


Decision 2005-118: Upper Lakes Group Inc., Sale of Shares in Thornmark Utilities Corporation and Thornmark

Waste Management Corporation, Application No. 1398651, November 2, 2005. 82

Decision 2004-035: ANCL/ANCA and Fortis Alberta Share Transfer and Financing Applications, Application

Nos. 1318425 and 1317233, April 29, 2004. 83

Transcript, pages 81-82, beginning at line 10.





109. In addition to the factors summarized by MC Alberta from past Commission and Board

decisions, the no harm test must also reflects that:

customers are, to the maximum extent possible, to be protected against any negative

ramifications arising from the transactions (Decision 2006-056)84

customers are not entitled to a level of post-transaction regulatory certainty they would

not have realized if the transaction had not been approved. (Decision 2006-056)85

customers are at least no worse off after the transaction is completed after consideration

of the potential positive and negative impacts of the proposed share transactions

(Decision 2011-374)86

110. The application of the no harm test is conducted in two stages. First, the Commission

must assess whether the transaction results in harm to customers. If the Commission concludes

that customers may be harmed, the Commission proceeds to the second stage of its determination

and considers whether any identified harms can be mitigated through approval conditions.87

5.1 No harm test assessment

111. The Commission finds that customers will be at least no worse off after the transaction is

completed, and that the proposed transaction satisfies the no harm test without the need to

impose any additional specific conditions on the sale, apart from changes to the ring-fencing

measures and Inter-Affiliate Code of Conduct to reflect the new ownership structure.

Accordingly, as noted in the sections that follow, the Commission has directed AIML/AML to

file an updated affidavit on the revised ring-fencing measures, and to provide, if necessary, any

changes to its Inter-Affiliate Code of Conduct to reflect the new ownership structure.

112. In the following sections, the Commission has provided its findings regarding the various

factors of the no harm test as applied to the evidence on the record of this proceeding.

5.2 Capability of acquiring entity

5.2.1 Desire to provide regulated utility service

113. In argument, SNC submitted that the fact is clear from the application that the SNC-

Lavalin Group Inc. wishes to divest itself of its indirect investment in ALP.88

114. In its argument, AIML noted that in its September 22, 2014 ruling, as part of its

discussion of factors the Commission and its predecessors have considered in the application of

the no harm test, the Commission discussed the relevance of the fact that the acquiring party

wishes to be in the utility business in Alberta whereas the divesting party does not.89

115. MC Alberta similarly noted that the Commission’s predecessor has ascribed benefit to

share transfer transactions on the basis that an owner who wishes to participate in the utility

business is able to do so, as indicated in the passage reproduced below:

84

Decision 2011-374, paragraph 49; Decision 2006-056, Application for a change in ownership, page 5. 85

Decision 2006-056, Application for a change in ownership, pages 5-6. 86

Decision 2011-374, paragraph 50; Decision 2006-056, Application for a change in ownership, pages 5-6. 87

Decision 2006-056, Application for a change in ownership, pages 5-6. 88

SNC argument, paragraph 3. 89

Decision 2005-118, page 15; Decision 2004-035, page 21 and Decision 2006-38, page 14.



The Board notes that, with respect to these types of applications, any potential benefits

are generally intangible and harder to quantify. The Board notes that one persuasive

factor in any sale is that a company that wants to be in the business is replacing one that

wishes to exit the business.90

116. In addition, MC Alberta noted that in its credit rating analysis, S&P took specific note of

the fact that utility ownership is a core business of BHE, and also suggested that the fact that

AILP would be of more strategic importance to BHE, as compared to the nonstrategic status of

ALP to SNC-Lavalin could affect credit ratings after the close of the proposed transaction.91

117. MC Alberta further noted that the Commission’s predecessor had ascribed a benefit to

customers from the acquisition of a utility by an owner with “access to extensive experience …

through its affiliated companies”92 and argued that the fact that BHE affiliated companies have

extensive experience in the electric utility industry is a relevant consideration for the

Commission.

Commission findings

118. The record is clear that “SNC wishes to divest itself of its indirect investment in ALP,”93

and that MC Alberta and its parent corporation, BHE, wants to become the owner of ALP.

119. It is difficult to quantify the potential positive and negative benefits attributable to an

owner who wishes to participate in the utility business, as opposed to one who does not, as they

tend to be intangible in nature. The supportiveness of an owner is a positive attribute however, a

financially constrained owner, no matter how well-intentioned, would not be of benefit to the

utility.

120. The Commission, in assessing this factor has considered the financial strength of the

entity seeking to replace the current owner and that entity’s willingness to participate in the

utility business. The Commission has weighed these factors against the status quo, which would

leave AltaLink in control of an entity that does not want to be in the business and has recently

been the subject of some controversy.

121. As set out in the evidence on the record of the proceeding, BHE has extensive experience

in the utility industry outside Canada. As described in Attachment B:

As of December 31, 2013, BHE's energy utility subsidiaries served approximately 8.4

million electric and natural gas customers and end-users in 11 states in the United States

and England. As of that date, BHE subsidiaries owned approximately 38,900 kilometers

of electric transmission line and 28,500 megawatts of generation in operation or under

construction. Also as of that date, BHE subsidiaries owned approximately 26,400

kilometers of interstate natural gas pipeline, with a design capacity of approximately 7.7

billion cubic feet of natural gas per day, and transported approximately 8 percent of the

total natural gas consumed in the United States during 2013. BHE’s United States electric

power generating, transmission and distribution, and natural gas transmission assets are

owned directly or indirectly by the following entities: PacifiCorp, MidAmerican Energy

90

Decision 2003-098, page 42; Decision 2005-118, page 15 and Decision 2006-038, page 22. 91

Exhibit No. 10, MC Alberta application, Appendix 6, page 2, cited at paragraph 36 of MC Alberta argument. 92

Decision 2005-118, page 9. 93

Exhibit No. 3, SNC application, paragraph 3.



Company, NV Energy, Inc., Northern Natural Gas Company, Kern River Gas

Transmission Company, MidAmerican Transmission, LLC, and MidAmerican

Renewables, LLC.

BHE’s assets in England are owned directly or indirectly by Northern Powergrid

Holdings Company, which indirectly serves approximately 3.9 million end-users in

northern England. BHE also has interests in the Philippines, where its activities are

focused on the Casecnan hydroelectric project owned and operated by a BHE

subsidiary.94

122. In addition, the S&P credit rating analysis suggests that AILP would be of more strategic

importance to BHE, as compared to the nonstrategic status of ALP to SNC-Lavalin, which could

affect ALP’s credit rating post-acquisition.95

123. AltaLink is currently engaged in the large transmission build that is ongoing in the

province. As it raises funds in the financial markets on its own behalf, impacts to its credit rating

may have a corresponding impact on rates.

124. The Commission finds that the willingness, experience and financial strength of the

proposed owner of AltaLink to be a positive factor and the proposed sale transaction does not fail

the no harm test on this basis.

5.2.2 Safety and reliability of service

125. AIML noted in argument that the Commission’s September 22, 2014 ruling included

consideration of whether any operational benefit or risk arises related to the acquiring party's

utility experience96 in its list of no harm test considerations applied by the Commission or its

predecessor.97

126. AIML submitted that the evidence in the current proceeding is that the continuity of safe

and reliable service to customers will not be impacted by the proposed transaction. AIML noted

that the proposed sale will not result in the introduction of a new operator of the transmission

business, and that no change in the management and operation of AltaLink has been proposed.

Also, because there will be no change in its day-to-day control98 following the proposed sale,

AltaLink will continue to provide safe and reliable service to Albertans.

127. MC Alberta also submitted that as the acquisition is a share transfer transaction, there

will be no change to the operation of the utility, and no change in the safety and reliability of the

service of the AltaLink transmission system. MC Alberta noted that AltaLink will remain locally

operated and managed indefinitely and has confirmed that operational continuity will persist.99

Also, MC Alberta explained in an information request that staffing and management decisions

will remain with AltaLink.100

94

Exhibit No. 10, MC Alberta application, Attachment B, page 1-2, paragraphs 3-4, PDF pages 9-10. 95

Exhibit No. 16, PDF page 3 and PDF page 4. 96

Decision 2005-118, page 9; Decision 2004-35, page 17 and Decision 2006-38, page 11. 97

AIML argument, paragraph 21, part (b). 98

Exhibit No. 95.02, response to AE.AIML-003. 99

Exhibit No. 10, paragraph 10, cited at paragraph 27 of MC Alberta argument. 100

Exhibit No. 90.02, AE-MC-5(a), cited at paragraph 28 of MC Alberta argument.



128. In reply, ATCO submitted that it is unclear whether the new owner would seek to reduce

the quality of service provided to Alberta customers in an effort to recoup the substantial losses

that would otherwise be experienced in light of the purchase price for AltaLink’s transmission

business. ATCO submitted that it is difficult to believe that sophisticated business people would

simply agree to absorb such a material loss. As such ATCO submitted that the potential impacts

of the proposed transaction on the future performance of AltaLink cannot be fully understood or

assessed based on the current record to this proceeding. Accordingly, ATCO submitted such

matters should properly be considered in the current proceeding rather than being deferred until

some unknown time.

129. In rebuttal, MC Alberta submitted that ATCO’s suggestion that the new owner would

seek to reduce the quality of service in an effort to recoup the purchase premium is

unsubstantiated and is based solely on the supposition that “… it is difficult to believe that

sophisticated business people would simply agree to absorb such a material loss.”101

130. MC Alberta further submitted that ATCO’s suggestion that the record is not sufficiently

complete to understand the impact of the proposed transaction on the future performance of

AltaLink is entirely refuted by the record. In particular, MC Alberta noted that it confirmed in its

response to CCA-MC Alberta-12 that it does not expect any decline in safety or reliability and

that benchmarking, performance and reliability measures will continue to be established

independently by AltaLink, subject to oversight by the Commission and the AESO.102

Commission findings

131. The price paid for the AltaLink transmission assets and business represents the market

price negotiated among the parties for this enterprise. As such, the Commission does not accept

the premise advanced by ATCO that any “premium” paid over net book value for AltaLink

assets would, of necessity, require the purchaser of these assets to recover any such premium

through attempts to include imprudent costs in AltaLink’s regulated revenue requirement,

reductions in service quality, or both.

132. Regardless, the safety and reliability of AltaLink’s transmission service will continue to

be subject to the AESO’s direction and oversight through ISO reliability standards, operating

policies and other ISO rules and the ability to recover imprudent costs would be mitigated

through the AESO’s exclusive jurisdiction to determine the need for new facilities that provide

additional capacity to AltaLink’s transmission system and the Commission’s regulatory

oversight of the AESO’s applications for approval of the need for new facilities.

133. Additionally, AltaLink remains subject to Commission oversight with respect to

reliability and service quality matters through its duty to adhere to the terms and conditions of

service attached to its tariff, and through the Commission’s ongoing regulatory oversight of the

prudency of AltaLink’s costs and the justness and reasonableness of the rates approved in

AltaLink’s tariff.

134. Given the foregoing, the Commission considers that the proposed transaction does not

fail the no harm test on the basis of concerns about the safety, reliability and quality of

AltaLink’s transmission service.

101

Quoted from ATCO reply argument, paragraph 10, cited at paragraph 82 of MC Alberta rebuttal. 102

Exhibit No. 89.02, CCA-MC Alberta-12(b), cited at MC Alberta rebuttal argument, paragraph 83.



5.2.3 Continuity of management and operational expertise

135. AIML noted that the September 22, 2014 ruling considered whether management and

operational expertise will remain in place post-transaction in the Commission’s application of the

no harm test.103

136. In this regard, AIML submitted that the evidence reveals that, once consummated, the

pre-closing reorganization and acquisition that gave rise to the applications will not result in the

introduction of a new operator of the transmission business or of the assets that comprise that

business, and that since there is no change in the day-to-day control of AltaLink, no change in

the management and operation of AltaLink has been proposed.

137. Additionally, AIML submitted that MC Alberta has no plan to merge either AML or ALP

into, or otherwise make any of those entities part of another BHE operating company.104

Commission findings

138. The Commission accepts the evidence of the applicants that the proposed transaction

does not result in the introduction of a new operator of the transmission business.

139. The Commission regulates the quality and cost of the utility service provided by AltaLink

but it does not exercise jurisdiction over the operational management decisions of the utility,

except to the extent it must consider whether those decisions have resulted in prudently incurred

costs. If the continuity of management and operational expertise of AltaLink is not maintained,

the Commission will examine whether there is a cost to rate-payers that has resulted from this

failure and whether this cost should be borne by the owners of AltaLink. Changes in the internal

operation and management of AltaLink could be of benefit to customers if the changes result in

increased efficiency of its operations.

140. Accordingly, the Commission considers that the proposed sale transaction does not fail

the no harm test on the basis of continuity of management and operational expertise.

5.2.4 Sharing of BHE best practices and expertise

141. In its application, MC Alberta noted that BHE and its subsidiaries share, at no cost, best

practices and expertise to improve safety, service reliability and efficiency. In addition,

following the acquisition, AltaLink and BHE’s other transmission owning companies will have

the opportunity to learn from one another and improve their respective businesses to the benefit

of customers.105

142. In argument, AIML submitted that the evidence on the record is that a number of benefits

would result from the indirect acquisition of AltaLink by BHE. These include the fact that BHE,

the proposed ultimate owner of ALP, has subsidiaries possessing significant experience in the

energy utility sector,106 that are willing to share best practices at no cost to AltaLink.107

103

Decision 2006-38, page 11 and Decision 2011-374, paragraph 51, cited at paragraph 21, part (f) of AIML

argument. 104

Exhibit No. 1, AIML application, Attachment B, paragraph 22, cited at paragraph 23 of AMIL argument. 105

Exhibit No. 10, Attachment B, paragraph 25. 106

Exhibit No. 10, Attachment B, paragraphs 3 and 4; Exhibit No. 89.02, response to CCA-MC Alberta 17(a).



143. In its argument, MC Alberta confirmed that the best practices of BHE and its subsidiaries

in improving safety, service reliability and efficiency will be shared with AltaLink at no cost.108

However, while this experience and these best practices will be made available to AltaLink, it

will be at AltaLink’s sole discretion to determine whether it adopts any or all of these

practices.109

144. MC Alberta indicated it expected the sharing of best practices would be of value to

Alberta customers.110 However, while there are likely to be operational benefits related to the

sharing of best practices amongst BHE subsidiaries, MC Alberta noted that these benefits are not

quantifiable at this time.111

145. In reply argument, the CCA submitted that as virtually all utility activity incurs costs,

MC Alberta’s position that best practices can be shared at no cost is surprising. The CCA noted

that in information requests responses, MC Alberta explained that financial resources for sharing

best practices across BHE operating companies are expected to be limited to employee expenses

related to travel.112 However, to the extent that MC Alberta is asserting “that the sharing of best

practices is provided at no cost across each of the BHE operating companies,”113 the CCA

suggested that MC Alberta’s position was that the costs of employee expenses related to travel to

share these best practices would be borne by AltaLink, but other BHE operating companies will

not charge AltaLink for this knowledge of best practices.

146. The CCA further noted that in another information request response, MC Alberta

indicated that it “… believes there will be benefits to AltaLink and its customers from the

sharing of best practices” and that “AltaLink employee time spent discussing best practices with

other BHE affiliates does not constitute an incremental cost.”114 The CCA submitted that

MC Alberta’s statements suggest that either (1) employee costs can be considered fixed and time

devoted to sharing best practices is therefore not an incremental cost or (2) the benefits from

sharing best practices more than offsets the costs. However, the CCA submitted that if employee

costs are fixed, the incremental cost of sharing best practices also includes an opportunity cost

for the employee time involved, which could be larger than the incremental cost. If MC Alberta

is suggesting the benefits exceed the costs, such a statement is inconsistent with MC Alberta’s

claim noted above that the benefits of best practice sharing “are not quantifiable at this time.”

147. The CCA also submitted that responses to further questions on this matter in the second

round of information requests suggested that BHE operating companies are effectively cross-

subsidizing one or more other BHE operating companies. So, AltaLink could be on both the

receiving and providing end of a process of sharing best practices along with the consequent

costs and benefits. MC Alberta acknowledged in a response to a second round information

request response that AltaLink “will not be charged for access to the best practices of any

affiliates, AltaLink may incur limited costs associated with participation in activities to facilitate

107

Exhibit No. 86.02, responses to UCA-MAAC-7(a) and (b); Exhibit No. 89.02, responses to CCA-MC Alberta-

11(a) to (d). 108

Exhibit No. 86.02, UCA-MAAC-7(a), cited at MC Alberta argument, paragraph 26. 109

Exhibit No. 86.02, UCA-MAAC-7(b), cited at MC Alberta argument, paragraph 26. 110

Exhibit No. 89.02, CCA-MC Alberta-11(c), cited at MC Alberta argument, paragraph 26. 111

Exhibit No. 89.02, CCA-MC Alberta-11(c), cited at MC Alberta argument, paragraph 30. 112

Exhibit No. 89.02, CCA-MC Alberta-11(a) v. 113

Exhibit No. 89.02, CCA-MC Alberta-11(a) vi). 114

Exhibit No. 108.02, CCA-MC Alberta-20 c).



the sharing of best practices.”115 [underling added by the CCA] As well, MC Alberta was asked

for an annual estimate of the costs involved in this practice but did not provide an estimate and

indicated it would depend on whether travel was involved and if so, to what locations.116

148. The CCA did not object to the sharing of best practices in principle. However, an

ongoing understanding of the extent of this proposed arrangement in terms of employees’ time

and costs and further clarity on who pays for these costs in cases where the benefits do not

exceed the costs is necessary. Given its concerns, the CCA submitted that the Commission’s

approval of the application should include the following conditions:

the sharing of best practices will not involve the transfer of staff between affiliates.

that AML should be required to track the costs and benefits of the sharing of best

practices for revenue requirement purposes117

149. In rebuttal argument, MC Alberta responded that its evidence was clear that the sharing

of best practices will not involve any employee transfers and will not involve any significant cost

to AltaLink, as set out in its response to CCA-MC Alberta-20, parts (a) and (b).118 Further, even

if employee transfers were to occur, any associated cost impacts would be subject to review and

approval by the Commission in future tariff proceedings. In such event, the Commission can

determine in the context of such future proceedings what the specific evidentiary requirements

will be.119 Given this, MC Alberta submitted that the CCA’s proposed condition in respect of best

practices sharing was unnecessary.

Commission findings

150. The evidence suggests that corporate entities may have experience in utility operations

that may be of benefit to AltaLink customers and ratepayers if shared following the

consummation of the proposed transaction described in the applications. The Commission

considers the value of the sharing of such experience to be positive, but unquantifiable at this

time.

151. The Commission considers that it is unnecessary to direct the tracking of staff transfers

related to the sharing of experience and best practices, or related to any other matter, because

AltaLink is bound by its Inter-Affiliate Code of Conduct, which is intended to monitor and

regulate such transactions. In any event, the Commission considers that any cost to AltaLink

arising from any such transactions can be assessed in a GTA, and if necessary, those costs can be

disallowed in setting the company’s revenue requirement.

152. Given the above, for the purposes of this proceeding, the Commission finds that the

proposed transaction does not fail the no harm test on the basis of the sharing of best practices

between AltaLink and other BHE entities.

115

Exhibit No. 108.02, CCA-MC Alberta-20(d)(i), cited at CCA reply argument, paragraph 48. 116

Exhibit No. 108.02, CCA-MC Alberta-20(e), cited at CCA reply argument, paragraph 48. 117

CCA argument, paragraph 50. 118

Exhibit No. 89.02. 119

Exhibit No. 127.01, paragraph 43, cited at paragraph 54 of MC Alberta rebuttal argument.



5.3 Impact on financing costs

153. In argument, AML noted that the May 5, 2014 S&P credit rating report included with the

applications affirmed a corporate credit rating of “A-/Stable/--” for AltaLink as a result of the

pre-closing reorganization and acquisition proposed in the applications. As such, AML indicated

that it does not expect there would be any impact on AltaLink’s credit standing if the

applications are approved as filed, since AltaLink’s credit rating will remain the same.120 In its

argument, AIML echoed AltaLink’s position.121

154. AIML noted that the evidence on the record demonstrates that a number of benefits

would result from the indirect acquisition of AltaLink by BHE, including the following:

the DBRS Press Release dated May 2, 2014, which states “DBRS acknowledges that

AltaLink will benefit from being part of the BHE family, which has strong financial

flexibility to contribute necessary equity injections in a timely manner during this period

of heavy capital requirements”122

the S&P Rating Report dated May 5, 2014, which states “We believe that AILP will be of

more strategic importance to BHE than its non-strategic status to SNC-Lavalin and that

this could affect the ratings after the close”123

certain investment related conditions included in the statement of the federal industry

minister, dated July 25, 2014124

the fact that BHE has a buy-and-hold investment philosophy, does not pay dividends, and

has a history of reinvesting its earnings back into its businesses125

155. MC Alberta submitted that evidence in the current proceeding confirmed the potential for

benefits to customers to occur as a result of the acquisition related to BHE’s expertise, stability,

financial strength and its commitment to long-term ownership. In this regard, MC Alberta

submitted that BHE’s investment philosophy will benefit AltaLink insofar as it will not be

required to pay dividends to its shareholders, as further explained in MC Alberta’s response to

UCA-MAAC-2(a):

BHE has a buy-and-hold investment philosophy. It invests for the long-term in quality

infrastructure assets. Unlike many other energy companies, BHE does not pay a dividend

to its shareholders, and, therefore, its subsidiaries are not under financial pressure to pay

dividends. In fact, BHE has a history of reinvesting its earnings back into its businesses

(see UCA-MAAC-6 Attachment 1). This financial flexibility will allow AltaLink to

retain its capital and strengthen its balance sheet when it is investing in Alberta as

deemed necessary by the Alberta Electric System Operator (AESO) and the Commission.

BHE recognizes that most of its regulated businesses go through normal cycles of capital

need, and BHE’s approach is beneficial to its regulated subsidiaries, in that it facilitates

more stable and predictable access to capital consistent with regulatory requirements and

financial prudence.126

120

AML argument, paragraph 8. 121

AIML argument, paragraph 22, part (c). 122

Exhibit No. 93.02, responses to UCA.AIML-004(a) and (b). 123

Exhibit No. 89.02, response to CCA-MC Alberta-17. 124

Exhibit No. 89.02, response to CCA-MC Alberta-05(a). 125

Exhibit No. 86.02.MAC-3250, response to UCA-MAAC-2(a). See also Exhibit No. 86.02.MAAC-3250,

response to UCA-MAAC-6(c). 126

Exhibit No. 86.02, UCA-MAAC-2(a).



156. SNC submitted that evidence on the record of the current proceeding shows that:

the pre-closing reorganization and acquisition will not jeopardize the financial integrity

of ALP127

the change in ownership which would result from the Commission's granting of these

Applications will not affect ALP’s credit rating128

the subsequent closing of the pre-closing reorganization and acquisition will not

adversely affect the operations or financing capacity of the regulated utility129

the financing of regulated utility operations at the ALP level will be unaffected by the

pre-closing reorganization and acquisition130

157. SNC further submitted that the ability to purchase and sell interests in regulated utility

assets, subject to the reasonable regulatory oversight by the Commission in accordance with the

Public Utilities Act, is necessary to ensure continued investment in energy transmission, to

enable the timely upgrade and enhancement of expansion facilities in Alberta and to foster a

stable investment climate and continued stream of capital investment for Alberta's transmission

system.131

158. In reply argument, the CCA noted the commitment made by BHE to Industry Canada that

100 per cent of AltaLink’s earnings will be reinvested in AltaLink, elsewhere in Alberta or in

other regions of Canada for at least five years, and identified this as one of the representations

made by the applicants to support the contention of no harm to rate payers if the acquisition is

approved.132

159. The CCA referenced MC Alberta’s claim that AltaLink will benefit from the fact that it

will not be required to pay dividends to its shareholders under BHE’s investment philosophy133

and MC Alberta’s claim that a determination of no harm is supported by the fact that the

acquisition will not result in any adverse effects on the financing capability of ALP and ALP’s

credit ratings are not expected to change as a result of the acquisition.134 The CCA also submitted

that the S&P rating report is key to the applicants’ assurances that no harm will arise from the

approval of the proposed transaction. In particular, the CCA took note that:

the S&P rating report reflects in part S&P’s assessment that “AILP will be of more

strategic importance to BHE than its nonstrategic status to SNC-Lavalin”135

MC Alberta claims “MC Alberta and its parent corporation, BHE, are financially capable

entities, and will provide ALP long-term financial stability”

127

Exhibit No. 3, Attachment B, paragraphs 22 to 24. 128

Exhibit No. 3, Attachment B at paragraph 23. 129

Exhibit No. 3, Attachment B at paragraph 23. 130

Exhibit No. 86.02, response to UCA-MAAC-1(b) and (c). 131

SNC argument, paragraph 14. 132

Exhibit No. 89.02, CCA-MC Alberta-05(a), (b) and Exhibit No. 129.02, paragraph 11 (third bullet), cited at

paragraph 29 of CCA reply argument. 133

Exhibit No. 89.02, CCA-MC Alberta-05(a), (b) and Exhibit No. 129.02, paragraph 11 (third bullet), cited at

paragraph 30 of CCA reply argument. 134

Exhibit No. 10, PDF page 15, cited at paragraph 31 of CCA reply argument. 135

Exhibit No. 16, MC Alberta application, Appendix 6, page 2.



MC Alberta’s claims regarding the capability and financial stability of itself and its

parent BHE is, in turn, supported by a press release from the Dominion Bond Rating

Service (DBRS), which states that: “DBRS acknowledges that AltaLink will benefit from

being a part of the BHE family, which has a strong financial flexibility to contribute

necessary equity injections in a timely manner during this period of heavy capital

requirements.”136

160. The CCA submitted that while the Commission and interveners can take some comfort

from the above noted claims and the role BHE can potentially play in support of the financing

requirements of AltaLink, such claims could be altered in the event that BHE faces some other

pressing financial priority in its diverse operations in other countries. The CCA submitted that a

guarantee that AltaLink earnings will be reinvested in Canada would provide some assurances

that reinvestment of AltaLink earnings as required to support the substantial capital expenditures

demands expected of AML in the next five years.

161. Based on its concerns, the CCA recommended that the Commission’s approval of the

applications include a condition that 100 per cent of AltaLink's earnings will be reinvested in

AltaLink, elsewhere in Alberta or in other regions of Canada for at least five years.

162. In his reply argument, Mr. Overly submitted that it is unclear why a five-year limitation

has been placed on the duty of the prospective new owner to reinvest profits in Alberta and

Canada. To the extent that the applicants have suggested in argument that investments in Alberta

and Canada will continue beyond a five-year limit, this commitment should be increased to

30 years, and should be set out in the sale contract.

163. In its rebuttal, MC Alberta submitted that the evidence on the record of the current

proceeding is that BHE’s commitment to reinvest 100 per cent of AltaLink’s earnings into

AltaLink, elsewhere in Alberta, or other regions of Canada, will be met. Further, the record

shows that BHE’s commitment will extend into the foreseeable future.137

164. In addition, MC Alberta noted that the applicants’ evidence:

confirmed that reinvesting in its acquired businesses is consistent with BHE’s buy-and-

hold investment philosophy,138 and

indicated that BHE and MC Alberta intend to reinvest AltaLink’s earnings into AltaLink

to fund capital plans consistent with directives from the AESO and to maintain the capital

structure consistent with relevant tariff approvals139

showed that BHE and MC Alberta do not currently have any additional specific plans in

terms of reinvestment of AltaLink’s earnings to the extent AltaLink generates earnings in

excess of its needs other than to pay interest and principal of AILP and AHLP debt140

165. Given the above, MC Alberta submitted that imposing a condition as suggested by the

CCA is unnecessary. More fundamentally, however, MC Alberta noted that the commitment to

136

Exhibit No. 10, page 1, paragraph 3 and footnote 3. 137

MC Alberta rebuttal argument, paragraph 41. 138

Exhibit No. 86.02, UCA-MAAC-02(a), cited at MC Alberta rebuttal argument paragraph 42. 139

Exhibit No. 86.02, UCA-MAAC-06(c). 140

Exhibit No. 86.02, UCA-MAAC-06(c).



reinvest was made to Industry Canada under its legislated mandate and approval process, and

BHE’s compliance with that commitment falls within the scope of Industry Canada’s

jurisdiction. Accordingly, MC Alberta submitted that imposing the condition sought by the CCA

would be outside of the scope of the Commission’s jurisdiction and public interest mandate in

this proceeding.141

166. MC Alberta further submitted that Mr. Overly’s suggestions with respect to the

reinvestment of earnings from the ongoing operation of AltaLink is also beyond the scope of the

Commission’s public interest mandate in this proceeding.

Commission findings

167. The Commission agrees with the submission of SNC that the ability to purchase and sell

interests in regulated utility assets, subject to reasonable regulatory oversight, is necessary to

ensure continued investment in energy transmission, to enable the timely upgrade and

enhancement of expansion facilities in Alberta and to foster a stable investment climate and

continued stream of capital investment for Alberta’s transmission system. As well, Alberta

ratepayers may achieve tangible benefits in the form of a reduced cost of capital from the

maintenance of an environment where sales of regulated utilities that do not give rise to harm can

take place.

168. In the current proceeding, the evidence on record reveals that rating agencies believe that

the consummation of the proposed transaction would be neutral or beneficial to the cost of debt

required to finance required AltaLink investments.

169. The indicative rating in consideration of the proposed transaction prepared by S&P places

significant emphasis on an assumption that the AltaLink transmission assets and business would

be of greater strategic value to MC Alberta in the context of its corporate ownership structure

than AltaLink is to SNC. However, the Commission is not persuaded that this perception of a

greater strategic value means that rate payers could not be impacted by potential adverse

financing implications that could arise after the completion of the proposed transaction.

170. MC Alberta’s reference to the reputation of its parent for not requiring dividends and for

reinvesting in its subsidiaries, does not equate to a stated commitment that it would not require a

dividend from AltaLink or that it would reinvest in AltaLink. Recognizing AltaLink’s large

capital build requirements, which are ongoing, the Commission is concerned that the nature of

the commitment stated by MC Alberta is less direct than the clear commitments that

representatives of AltaLink had recently made to the Commission that SNC entities have

undertaken to provide during the current intensive capital build period.142

171. It is the Commission’s understanding that it was SNC’s intention to actively support

AltaLink with equity injections as necessary during the large capital build period. This is

reflected in the testimony provided by AltaLink’s chief financial officer in AltaLink’s last GTA

proceeding, which is reproduced below from Decision 2013-407:

141

MC Alberta rebuttal, paragraph 45. 142

See Decision 2013-407: AltaLink Management Ltd., 2013-2014 General Tariff Application, Application

No. 1608711, Proceeding ID No. 2044, November 12, 2013, paragraphs 1029 and 1031.




1036. …

Q. So you certainly had no sense from SNC itself that there was any risk of, you know,

guys, we may not be able to fulfil our equity commitment?

A. MR. BRONNEBERG: No. Absolutely not. No. And certainly I've never had anybody

at SNC signal to me that they would have problems making those obligations. mean, this

is one of their most critical or most strategic investments. They've said that in their

shareholder address at the annual general meeting, and this and Highway 407. And if they

have -- you know, if there's one investment that would be in the best interest to finance,

my belief, this is what I tell investors, AltaLink would be the one.143

172. The Commission recognizes that it does not have the authority to compel the designated

parents of AltaLink to provide equity injections as needed to maintain a deemed capital structure

to support the company’s credit rating, and, therefore, could not compel MC Alberta to make

such injections if the proposed transaction is completed. However, the Commission has made it

clear in prior AltaLink GTA decisions that AltaLink’s ability to maintain its credit rating must be

independent of the credit rating of its owners.144 Accordingly, in the event that the parent did not

provide equity injections at the levels represented to the Commission by AltaLink management

and if, as a result, increases in the cost of debt occurred, any such increase in the cost of debt

would be borne by AltaLink’s shareholder because the Commission would only approve a

revenue requirement based on a deemed capital structure and deemed cost of debt assuming the

equity injection had been made. This expectation would also apply to MC Alberta in the event

that the proposed transaction is completed.

173. With the above noted clarification, the Commission finds that the purchase of the

AltaLink transmission assets and business from SNC should be a net benefit to ratepayers from a

financing perspective because of the financing capacity of the new proposed owner of AltaLink.

Accordingly, the Commission considers that the proposed transaction does not fail the no harm

test on this basis.

5.4 Control and governance matters

5.4.1 Ring-fencing measures

174. The applicants submitted that the ring-fencing measures currently in place for the

AltaLink entities were adopted to: (i) solidify the ongoing credit quality of the operating entity,

ALP; (ii) isolate the financial risks of AHLP and AILP from those of ALP; (iii) preserve the

independence of ALP in regulation; and (iv) ensure proper governance.145 The applicants

summarized the current ring-fencing measures as follows:146

Legal

Shared voting control for certain material actions: AML’s board will continue

with the independent director requirements in place and the unanimous consent

of all directors, including the consent of the independent directors, will be

required for ALP to:

143

Decision 2014-407, paragraph 1036. 144

Decision 2011-453, paragraph 794, and Decision 2013-407, paragraph 1035. 145

Exhibit No. 3, SNC application, Attachment B, paragraph 27. 146

Exhibit No. 3, SNC application, Attachment B, paragraph 27.



(i) commence proceedings for its protection under the Companies’ Creditors

Arrangement Act or similar legislation or make any proposal or commence

proceedings with respect to a proposal under the Bankruptcy and Insolvency

Act or seek or take any proceeding or be the subject of any proceeding

relating to a compromise or arrangement with creditors or claimants

generally;

(ii) consent to the appointment of a receiver, receiver-manager or similar

officer of ALP, its business or its property (whether pursuant to an

instrument appointment with or without court confirmation or an order of the

court, or any other process); or

(iii) institute proceedings to be adjudicated bankrupt or insolvent or to be

wound-up, or consent to the institution of bankruptcy, insolvency or

winding-up proceedings against it, or file a petition, answer or consent

seeking a dissolution or winding-up under any bankruptcy, insolvency or

analogous laws.

The obligations of ALP are separate and distinct from those of AILP and AHLP.

Governance

There are no common directors on the boards of AML and AIML.

AML’s board currently consists of a majority of “outside directors” that are

determined to be independent from AML and any of its affiliates.

There are no common officers between AML and AIML.

Financial

No cross default between ALP debt and AILP debt, and a default on AHLP debt

will not create a default on the respective debt of AILP or ALP. This means that

any debt raised at AILP or AHLP is raised at no risk to ALP. An event of default

at AILP or AHLP will not trigger ALP default.

Subordinated debt from AILP to ALP is deeply subordinated and bears equity

risk.

Restrictions on distributions to equity: These distributions are limited by ALP’s

Master Trust Indenture. No distribution can be paid out unless all operating and

debt service requirements have been satisfied. Furthermore, ALP needs to

maintain the regulated capital structure.

Regulatory

Issuance of all debt by ALP with a term greater than one year must be approved

by the Commission.

ALP is restricted to a single line of business: to own and operate regulated

transmission assets in the province of Alberta that are regulated by the

Commission. This single focus isolates the risks of ALP to those associated with

regulated transmission assets.



175. The applicants submitted that except for some housekeeping measures to update the

Inter-Affiliate Code of Conduct for AltaLink and a compliance plan to reflect the post-

acquisition affiliates, the ring-fencing measures and AltaLink Code of Conduct will remain

unchanged following the acquisition. AML argued that the ring fencing measures result in ALP

being financially, legally and operationally separated from AILP and AHLP, with the risks of

ALP being separate and distinct from those of AILP and AHLP.

176. MC Alberta added that the current ring-fencing measures “isolate the creditworthiness of

the operating subsidiary from that of its parent entity” and “result in ALP, AILP and AHLP

being financially, legally and operationally separated from each other.”147

Commission findings

177. Ring-fencing measures are concerned with isolating the creditworthiness of the operating

subsidiary, AltaLink, from that of its parent entity.148 The underlying purpose of the ring-fencing

measures is to shelter the utility and its customers from any negative ramifications arising from

the activities of affiliated entities within the AltaLink ownership structure.149

178. The proposed change in ownership does not impact the purpose or effectiveness of the

ring-fencing measures, as modified by these applications, thus preserving the financial isolation

of ALP from the other entities in the ownership structure. The Commission also notes that S&P

viewed the ring-fencing measures as “sufficient” in its credit rating report.150

179. The ring-fencing measures that are in place, subject to the proposed changes in the

applications, will continue, which results in ALP, AILP and AHLP being financially, legally and

operationally separated from each other, with the risks of the regulated entity, ALP, being

separate and distinct from those of AILP and AHLP.

180. Accordingly, the Commission considers that the proposed transactions do not fail the no

harm test on the basis that the transactions may adversely affect the credit worthiness of

AltaLink. Nonetheless, to ensure that the ring-fencing measures remain in place and are

adequate, following consummation of the transaction, the Commission directs AIML/AML to

file an updated affidavit on the revised ring-fencing measures upon closing of the transactions

proposed in the applications.

5.4.2 Independence of AML and ALP

181. AIML argued that the pre-closing reorganization and acquisition that gives rise to these

applications, when consummated, will not result in the introduction of a new operator of the

transmission business or of the assets that comprise that business, and do not propose a change in

the management and operation of ALP.151 AIML submitted that the only change that will occur is

that the three SNC corporations that currently hold an interest in ALP will be replaced by one

entity, NewCo, a taxable Canadian corporation.152

147

Exhibit No. 129.02, MC Alberta argument, paragraph 33 citing Decision 2011-374, paragraph 55. 148

Decision 2006-056 at page 12. 149


Exhibit No. 16, page 5, PDF page 6. 151

Exhibit No. 131, AIML argument, paragraphs 4 and 22(a). 152

Exhibit No. 131, AIML argument, paragraph 23.



182. Specifically, AIML submitted:

Any management decisions for AML will be made by either the management or board of

directors of AML (the independence of the latter being ensured under the AltaLink ring-

fencing measures approved by the Commission), each of whom have a duty to act in the

best interest of AML.153

Any management decisions for AIML will be made by the board of directors or

management of AIML, each of whom have a duty to act in the best interest of AIML.154

Day-to-day operation of the utility business will continue to be managed on a stand-alone

basis, with AML management making all day-to-day decisions.155

Any interactions between MAAC and the utility will be subject to AltaLink’s Inter-

Affiliate Code of Conduct and the ring-fencing provisions will continue to apply.156

The business and affairs of AltaLink and AIML will continue to be controlled and

directed by the officers and directors of each.157

AltaLink will continue to be managed on a stand-alone basis in the best interests of its

stakeholders collectively.158

183. The applicants further submitted that:

AML and ALP will continue to maintain their own books and records.159

The headquarters of the AltaLink transmission business will remain in Calgary, Alberta,

and management and operating activities will be maintained locally.160

AML will continue to develop its own business plans and budgets, and operate within

them.161

184. In addition, MC Alberta submitted that:

It will not be able to influence, directly or indirectly the actions or managerial, financial

and operational decisions made by the general partners, AML and AIML.162

It will not interfere with AML’s independent determinations regarding the staff and

management required to manage and operate the transmission assets and business of

ALP.163

AltaLink will remain locally operated and managed “indefinitely” and that operational

continuity will persist.164

185. In its reply argument, ATCO submitted that both the board of directors and management

of AltaLink must answer to a new parent that owns 100 per cent of the subject entity.165 ATCO

153

Exhibit No. 131, AIML argument, paragraph 24. 154




Exhibit No. 140, AIML reply, paragraph 42. 158

Exhibit No. 140, AIML reply, paragraph 42. 159

Exhibit No. 3, MC application, Attachment B, paragraph 22. 160



Exhibit No. 90.02, AE-MC-2(c). 163

Exhibit No. 129.02, MC Alberta argument, paragraph 28. 164

Exhibit No. 129.02, MC Alberta argument, paragraph 27.



submitted that this new parent company will have ultimate authority regarding the appointment

of board of directors and management and, de facto, will exercise total control over AltaLink's

transmission business.166 ATCO noted that statutes, such as the Alberta Business Corporations

Act, Section 2(2), clearly define control in terms of the ownership interest in a company and the

votes attached to securities of the entity and not just the board of directors itself.167

186. The CCA submitted that the applicants’ representations on this matter reduced the

likelihood of harm to taxpayers; however, the CCA considered these representations meaningless

unless supported by the following condition:

MC Alberta will abide by the following commitments for a minimum of five years,

unless granted relief by approval of an Application to the Commission:

a. The Acquisition does not provide for and MC Alberta has no plan to merge either

AML or ALP into, or otherwise make any of those entities part of, another BHE

operating company.

b. AML and ALP will continue to maintain their own books and records.

c. The headquarters of the AltaLink transmission business will remain in Calgary,

Alberta, and management and operating activities will be maintained locally.

d. AML will continue to develop its own business plans and budgets, and operate within

them.168

187. MC Alberta opposed the CCA’s conditions. It submitted that the requirement to maintain

separate books and records is embedded in Section 3.2.1 of the AltaLink Inter-Affiliate Code of

Conduct.169 Therefore, there is no justification for conditioning the Commission’s approval to

incorporate the CCA’s recommended conditions.170

188. In reply argument, AIML also argued that the request for conditions on books and

records was unwarranted stating that:

AltaLink is the regulated utility. It is untouched and remains subject to the ongoing

regulatory oversight of this Commission. The officers and directors of AltaLink have and

continue to have the obligation to manage the business and affairs of AltaLink.

Maintaining books and records relating to the business is only one of the many

obligations that management of any enterprise must undertake. This obligation exists

regardless of the sale by an upstream owner and is unaffected by a sale.171

Commission findings

189. The measures proposed to be put in place to ensure the independence of AML and ALP,

as set out in the applications, satisfy the no harm test.

165

Exhibit No. 136.01, ATCO reply, paragraph 15. 166



Exhibit No. 127, CCA reply, paragraph 19. 169

Exhibit No. 138.02, MC Alberta rebuttal, paragraph 29. 170

Exhibit No. 138.02, MC Alberta rebuttal, paragraph 30. 171

Exhibit No. 140.01, AIML rebuttal, paragraph 26.



190. Although BHE will be the 100 per cent shareholder in NewCo, the Commission accepts

the evidence of the applicants that:

Management decisions for AML and for AIML will be made by either management or

board of directors of the respective entities, each of whom has a duty to act in the best

interest of the utility.

Day-to-day operation of the utility business will continue to be managed on a stand-alone

basis, with AML management making all day-to-day decisions.

191. With respect to the conditions proposed by the CCA, the Commission does not consider

it necessary to impose such conditions as part of this transaction. While operating and

maintenance expenses are examined by the Commission in the general tariff applications of

AltaLink, it is the utility that is responsible for managing its day to day business. Although the

entities at this time have made commitments regarding their operational and organizational

intentions, circumstances can change such that it may be beneficial to rate-payers for the

organizational structure to further change. If and when such an event occurs, the Commission

will examine this matter at that time.

5.4.3 Inter-Affiliate Code of Conduct

192. SNC submitted that the Inter-Affiliate Code of Conduct, approved by the Commission's

predecessor and currently in effect, will remain in effect following the proposed pre-closing

reorganization and acquisition.172 MC Alberta confirmed this view.173

193. A black line version of the Inter-Affiliate Code of Conduct and the AIML Compliance

Plan indicating the housekeeping revisions that are planned to be made to each was provided by

AIML.174

Commission findings

194. The Commission acknowledges the applicants’ submission that the Inter-Affiliate Code

of Conduct will continue to apply and remain unchanged except for necessary changes to reflect

the new ownership structure.

195. The Commission directs AIML/AML to provide any changes to its Inter-Affiliate Code

of Conduct to reflect the new ownership structure upon closing of the transactions.

5.4.4 Services provided by SNC affiliates

196. In its reply argument, ATCO submitted that affiliate relationships between AltaLink and

SNC-Lavalin have been the source of ongoing concern for the Commission and ratepayers. It

added that such concern has continued up to and including Decision 2014-258175 dated

September 8, 2014 in respect of AML’s general tariff application (GTA) refiling, in which the

Commission made the following comments in respect of payments made by AML under

engineering procurement and construction management (EPCM) agreements with SNC-Lavalin:

172

Exhibit No. 128.01, SNC argument, paragraph 10(h). 173

Exhibit No. 129.02, MC Alberta argument, paragraph 34. 174

Exhibit No. 93.01, AIML information request responses to UCA, UCA-AIML-005(a). 175

Decision 2014-258: AltaLink Management Ltd., Refiling Pursuant to Decision 2013-407 and Decision

2013 459, Application No. 1610245, Proceeding No. 3024, September 8, 2014.




Although the Commission will not direct AltaLink to make a second refilling to comply

with the Commission's Direction and thereby account for the excess EPCM payments in

question, the Commission wishes to make it clear that its Decision not to order a second

refilling should not be taken as approval of these payments nor as a finding that AltaLink

has complied with Direction 27. The Commission will address AltaLink's non-

compliance as part of its review of Capital Project costs in future DACDA proceedings.

In anticipation of this review, the Commission further directs AltaLink to keep, as a

separate reconciliation, a record for each Capital Project in which EPCM costs are

governed by the Relationship Agreements, the amount of EPCM costs that are paid and

the amount that would have been paid under the old Master Service Agreements pricing

for the same EPCM services. This information must be provided as part of the filing for

any Capital Project for which an Application has been made for final approval of that

Project’s costs (emphasis added by ATCO).”176

197. ATCO submitted that if the proposed transaction is approved, the affiliate relationship

between AltaLink and SNC-Lavalin, including specifically the EPCM agreements existing

thereunder, will be handled in a scenario where the proposed purchaser of the AltaLink

transmission controlling the counterparty to the existing arrangements with SNC-Lavalin is not

known.

198. ATCO submitted that while the applicants have suggested that the Commission can take

comfort in respect of affiliate agreements on the basis of AltaLink’s Inter-Affiliate Code of

Conduct, the applicants have not addressed how specific EPCM Agreements will be handled in

the future, particularly in light of ongoing controversy and continuous disallowances that have

been applied since their inception. ATCO noted in particular that in its response to AE-MC-

14(b), MC Alberta indicated that following the proposed acquisition, SNC-Lavalin will no longer

be an affiliate of AltaLink. As such, existing commercial arrangements between SNC-Lavalin

and AML will not be subject to the Inter-Affiliate Code of Conduct.

199. ATCO noted that the effect that the new relationship between the new owner of AltaLink

and SNC will have on Alberta customers is unknown, and submitted that the manner in which

these SNC/AltaLink agreements are handled on a go-forward basis can and will have direct

impacts on customer rates and service. As such, ATCO submitted that these agreements should

not be excluded from consideration under the no harm test as applied in the current proceeding.

200. ATCO submitted that while suggestions by the applicants that the Commission retains

jurisdiction to consider cost recovery issues in future AltaLink GTA, this does not relieve the

Commission from its public interest duty to consider whether there are rate and service

implications arising from the proposed sale transaction in the context of the current proceeding.

However, ATCO submitted that while it attempted to get direct answers to questions through the

information request process, the applicants did not provide forthcoming responses to ATCO’s

questions.

201. In rebuttal argument, AIML submitted that ATCO’s statement that “[w]e simply do not

know” how the relationship between the new owner of AltaLink and SNC will impact Alberta

customers is not a reasoned argument from an established evidentiary record. In this regard,

AIML noted that the Commission’s predecessor has previously held that in determining whether

the no harm test is met, it is not prepared to consider speculative issues related to potential future

176

Decision 2014-258, paragraph 76, cited at paragraph 11 of ATCO reply argument.



impacts where the existing regulatory framework will provide recourse if and when those

potential impacts materialize.177

202. AIML submitted that there is no credible basis to speculate that, in the event the

requested approvals are granted and the proposed transaction closes, customers will be harmed as

a result of the existence of “past affiliate agreements.” AIML noted that AltaLink management

will continue to prudently manage regulated utility business and AltaLink will remain subject to

Commission oversight. As such, speculation that customers will be harmed by future affiliate

transactions is offensive to AltaLink and AIML and trivializes the Commission’s ongoing

regulatory oversight, including oversight within future AltaLink GTAs.178

203. Contrary to ATCO’s suggestion that it is not known how the relationship between

AltaLink and SNC-Lavalin will be handled in the future, MC Alberta submitted that the record is

clear that the acquisition will not affect the EPCM relationship in a way that harms customers or

which derogates from the Commission’s authority to approve AltaLink costs arising from the

relationship. In addition, as discussed in its response to AE-MC-14, the record also demonstrates

that MC Alberta and its affiliates will not be in a position to exercise influence over

AltaLink/SNC-Lavalin relationships.179

204. MC Alberta noted in particular the following response to ATCO in AE-MC-02(c):

MidAmerican (Alberta) Canada Holdings Corporation (MAAC) will not be able to

influence, directly or indirectly the actions or managerial, financial and operational

decisions made by the general partners, AML and AIML. Any management decisions for

AML will be made by either the management or board of directors of AML (the

independence of the latter being ensured under the AltaLink ring-fencing measures

approved by the Alberta Utilities Commission(Commission)) each of whom have a duty

to act in the best interest of AML, the utility. Any management decisions for AIML will

be made by the board of directors or management of AIML, each of whom have a duty to

act in the best interest of AIML. Day-to-day operation of the utility business will

continue to be managed on a stand-alone basis, with AML management making all day-

to-day decisions. Further, any interactions between MAAC and the utility will be subject

to the Inter-Affiliate Code of Conduct.180

205. MC Alberta submitted that the evidence is clear and unequivocal that:

SNC will cease to have any ownership interest in AltaLink.

AltaLink will continue to manage any ongoing commercial relationships with SNC,

under the ongoing regulatory authority and oversight of the Commission.

Neither MC Alberta nor any of its parent corporations or other affiliates will exercise

any influence over these relationships.181

206. SNC stated that the relationship agreement between SNC-ATP and AltaLink will

continue beyond the closing of the acquisition, and the AUC will retain the jurisdiction and

177

Decision 2000-41, Appendix 1, page 2, paragraph 1. 178


Exhibit No. 90.02, AE-MC-14(b)(d)(i). 180

Exhibit No. 90.02, AE-MC-2(c). 181

MC Alberta rebuttal argument, paragraph 91.



authority to review SNC-ATP contracts in the context of future regulatory proceedings.182

Accordingly, SNC submitted that any issues relating to SNC-ATP do not need to be examined in

the current proceeding and should be left for other regulatory proceedings where all relevant

facts are available to the Commission rather than having to rely upon mere speculation. SNC

added that this same approach was followed in Decision 2000-41.183

Commission findings

207. The existing long-term EPCM agreements between AltaLink entities and SNC-ATP have

a significant impact on the costs of direct assign and other capital projects expected to be added

to AltaLink’s rate base after the proposed transaction is closed.

208. Concerns related to AltaLink’s ongoing EPCM arrangements with SNC-ATP have been

raised in multiple AltaLink GTAs including the Commission’s finding in Decision 2014-258 that

AltaLink must maintain a reconciliation between the pricing of EPCM services paid under new

and old EPCM service agreements entered into with SNC-ATP, and provide these reconciliations

within future proceedings.

209. The Commission also takes note of the following provisions found in Article 9.3 of the

share purchase agreement (SPA) filed on the record of this proceeding:

9.3 Allocation of Responsibility Resulting From AUC Disallowances

(a) The Parties agree as follows with respect to AUC Disallowances:

(i) the Sellers and 942064 Alberta Ltd. shall pay to the Purchaser, on a dollar for

dollar basis, the first AUC Disallowances to occur up to an amount of twenty

five million dollars ($25,000,000);

(ii) if the AUC Disallowances exceed twenty-five million dollars ($25,000,000),

but are less than or equal to fifty million dollars ($50,000,000), none of the

Sellers or 942064 Alberta Ltd. shall have any liability with respect to any such

portion of AUC Disallowances which exceed twenty-five million dollars

($25,000,000) but are less than or equal to fifty million dollars ($50,000,000);

and

(iii) if the AUC Disallowances exceed fifty million dollars ($50,000,000), the

Sellers shall pay to the Purchaser, on a dollar for dollar basis, an amount equal

to fifty percent (50%) of any such AUC Disallowances in excess of fifty

million dollars ($50,000,000); provided that the maximum amount the Sellers

and 942064Alberta Ltd. shall be required to pay to the Purchaser in respect of

AUC Disallowances shall not exceed fifty million dollars ($50,000,000) in the

aggregate.

(b) All amounts that the Sellers and 942064 Alberta Ltd. become liable to pay to the

Purchaser pursuant to Section 9.3(a) shall be paid by wire transfer or other immediately

available funds within ten (10) Business Days of the applicable AUC Disallowance

becoming final without an appeal being made thereon by the applicable Operating

Entities, taking into consideration the rights and obligations under Section 9.3(c)(iv). The

182

Exhibit No. 110.02, response to CCA-SNCEAL-03; Exhibit No. 84.02, response to AE-SNC-1(a) to (g). 183

Decision 2000-41, Appendix 1, page 2 of 3.



Sellers and 942064 Alberta Ltd. shall have no liability under this Section 9.3 for any

AUC Disallowance which is solely the result of the imprudent conduct of the Purchaser

or of any of the Operating Entities following the Closing Date.

210. Under the current SNC-ownership of AltaLink’s regulated transmission business and

assets, SNC shareholders bear 100 per cent of the cost of any disallowance that may be applied

in respect of costs arising from EPCM services provided for AltaLink projects to be added to

AltaLink’s regulated rate base. If the sale transaction proceeds, the operation of Article 9.3 of the

SPA eliminates or limits financial risk that SNC shareholders would otherwise bear under the

continuation of SNC ownership of the regulated AltaLink transmission assets and business.

211. Given this arrangement, the Commission will exercise a more particular kind of oversight

in future AltaLink tariff and deferral account proceedings when it tests and examines the services

provided by SNC entities to AltaLink.

212. With regard to the concern expressed by ATCO that, as stated by MC Alberta in AE-MC-

14(b), the AltaLink Inter-Affiliate Code of Conduct would not apply to services provided by

SNC affiliates including SNC-ATP, the Commission does not consider this change in

circumstance to be a significant consideration for the purposes of the Commission’s assessment

of the no harm test.

213. The inter-affiliate codes of conduct were established to ensure that rate-payers were not

subsidizing, through the rates paid to regulated entities, the operational costs of non-regulated

affiliates. Therefore, the code requires that services provided by an affiliate to a utility be

provided at no more than fair market value.

214. In the absence of an affiliate transaction, the Commission would still review the

reasonableness of the costs paid to a third party supplier. In the case of AltaLink, EPCM services

are also provided by Burns MacDonald, which is not an affiliate of AltaLink. The Commission

examines those costs in both tariff and deferral account applications. Subject to the additional

scrutiny that the Commission will be applying to the SNC-ATP transactions as explained in the

preceding paragraph, the Commission considers that the applications should not fail the no harm

test solely on the basis of issues related to services provided by SNC or its affiliates.

5.5 Impact of sale on AltaLink revenue requirement and rate base

5.5.1 Premium on purchase price

215. A number of parties provided submissions in consideration of the purchase price to be

paid for the transmission assets and business of AltaLink and the relationship of this price to the

regulated net book value of AltaLink’s assets.

216. In argument, AIML noted that the Commission’s September 22, 2014 ruling took note of

the fact that the Commission or its predecessor have considered whether there will be any impact

to the rates and charges passed on to customers.184 In this regard, AIML submitted that the

evidence in the current proceeding is that ratepayers will be no worse off after the proposed pre-

184

Decision 2005-118, page 12; Decision 2004-35, page 16; Decision 2011-374, paragraph 51, cited at part (a) of

paragraph 21 of AIML argument.



closing reorganization and acquisition,185and that there will be no impact on the rates and charges

passed on to customers as a result of the proposed transaction.186

217. MC Alberta also submitted that, as a share transfer transaction, the acquisition will have

no impact on ALP’s rate base or operating costs.187 Further, MC Alberta noted that it confirmed

that none of the costs related to the acquisition will be directly or indirectly borne by

customers,188 and will not result in any cost impacts on customer rates relating to such things as

tax and pension funds. In any event, MC Alberta submitted that these matters pertain to ongoing

tariff regulation and, as such, are irrelevant to the current proceeding.189

218. SNC submitted that the evidence in this proceeding established that the proposed pre-

closing reorganization and acquisition will meet the no harm test, insofar as it would not impose

additional costs on ratepayers or increase the regulated rate base.190

219. In reply argument, ATCO submitted that the Commission should be aware that the

proposed purchaser has paid a significant premium over net book value in order to acquire the

subject transmission business from AltaLink. ATCO submitted that while the applicants have

made unsupported statements that ratepayers will not be harmed as a result of the proposed

transaction, the fact that a significant premium over net book value is to be paid, combined with

the inability to directly include the premium in rate base leaves open the serious question of how

the purchaser will seek to recoup the substantial monies that it has expended. In this regard,

ATCO submitted that it is totally unclear at the present time whether the purchaser will seek to

recoup this substantial investment in an indirect manner, that would have a direct impact on the

future costs included in utility revenue requirement and hence the rates charged to customers.

ATCO submitted that the issue of the premium over book value clearly raises a potential

negative impact on customer rates or service that remains unanswered.

220. In its argument, the UCA submitted that despite the assertion of MC Alberta that the

acquisition will have no impact on ALP’s rate base or operating costs and that the purchase will

not result, directly or indirectly, in any cost increases to customers,191 it remained concerned that

the estimated purchase price, which is significantly greater than book value,192 may result in

increased costs to customers.

221. The UCA noted that the Commission’s predecessor dealt with a similar issue in Decision

2004-035, in respect of an associated share transfer and financing application related to the sale

of the Aquila Networks Canada Ltd. distribution utility to FortisAlberta as set out below:

One of the potential negative impacts for customers arises from the possibility that the

purchaser may seek to recover any premium paid for the business over its book value.

Customers are “harmed” in the relevant sense by recovery of the premium since they

would not have faced this potentially significant impact in the absence of the sale. In

185

Exhibit No. 1, AIML application, paragraph 20(e). 186

Exhibit No. 86.02, UCA-MAAC-7(a); Exhibit No. 87.02, AUC-SNC-3; Exhibit No. 89.02, CCA-MC Alberta-

07; Exhibit No. 89.02, CCA-MC Alberta-11(a)(vi); Exhibit No. 93.02, UCA.AIML-003(a). 187

Exhibit No. 10, Attachment B, paragraph 21, cited at MC Alberta argument, paragraph 23. 188

Exhibit No. 89.02, CCA-MC Alberta-7(a), cited at MC Alberta argument, paragraph 23. 189

Decision 2004-035, page.12, cited at MC Alberta argument, paragraph 23. 190

Exhibit No. 86.02, UCA-MAAC-1(b) and (c), cited at paragraph 10, part (f) of SNC’s argument. 191

Exhibit No. 129.02, MC Alberta argument at paragraph 23; Exhibit 86.02, responses to UCA-MAAC-1(a)-(c). 192

Exhibit No. 86.02, UCA-MAAC-1.



previous Decisions, the Board has held that recovery of any of the premium associated

with sale of assets and sale of shares transactions through customer rates would not be

appropriate...

…Nevertheless, the Board considers it in the public interest, as it has found in previous

Decisions, to formalize Fortis Alberta’s commitment not to seek recovery of the premium

from customers. Therefore, the Board will condition any approval of the Share Transfer

Application so that the premium cannot be recovered from customers.193

222. Given the above, the UCA submitted that the Commission should impose a similar

condition on any approval in the present case. Specifically, the UCA proposed that the wording

of the condition the Commission should apply should be as follows:

None of the Applicants, nor any related entity nor successor of them, shall seek to

recover from customers the premium over net book value paid for the shares of NewCo

pursuant to the Share Purchase Agreement.

223. In rebuttal argument, MC Alberta noted that in response to several questions related to

the purchase premium to be paid in accordance with the SPA posed in UCA-MAAC-01, it

confirmed that the rate base of the entities acquired will not change as a result of the acquisition,

and that the acquisition will not result, directly or indirectly, in any increase to the costs paid by

customers for utility service.194 MC Alberta’s evidence is both unequivocal and uncontroverted

that the purchase “premium” at the holding company level will have absolutely no effect on

AltaLink’s rate base or rates.

224. Responding to the UCA’s proposed condition in respect of the recovery of the purchase

premium, MC Alberta noted that, as the UCA has acknowledged, it has made a clear an

unequivocal commitment on the record of the current proceeding that the purchase premium will

not be recovered from customers. Furthermore, while MC Alberta acknowledged that there is

limited precedent195 for a condition similar to that proposed by the UCA, the Commission’s

predecessor explicitly determined that such a condition was not necessary when it considered the

initial sale of the TransAlta transmission assets and business to AltaLink in Decision

2002-038.196 In addition, MC Alberta noted that a condition of this sort has not been imposed in

recent decisions.

225. MC Alberta submitted that ATCO’s claims that the applicants have failed to provide

sufficient evidence to address service reliability issues and potential impacts on customer rates

represent nothing more than unsubstantiated innuendo, which ATCO does not support with

evidence.

226. MC Alberta submitted that these allegations have been completely refuted by MC

Alberta’s evidence that, under the SPA, the purchase price will have no direct or indirect impact

on AltaLink’s rates or reliability of service.197 In particular, MC Alberta submitted that its

193

Decision 2004-035, page 18. 194

Exhibit No. 86.02, UCA-MAAC-1(b-e). 195

Decision 2002-038: TransAlta Utilities Corporation, TransAlta Energy Corporation, and AltaLink Management

Ltd., Sale of TransAlta Transmission Assets and Business to AltaLink, Application No. 1242519, 1242725, File

No. 6404-4, 6404-4-1, March 28, 2002, page 31. 196

Decision 2002-038, page 31. 197

Exhibit No. 86.02, UCA-MAAC-1(b).




evidence is clear and unequivocal that the purchaser will not seek to recover the purchase

premium in any manner that would have a direct impact on the future costs included in utility

revenue requirement and hence the rates charged to customers.198 As such, the purchase

“premium” at the holding company level will have absolutely no effect on AltaLink’s rate base

or rates.

Commission findings

227. The request for the imposition of a condition is premised on an assumption that that the

difference between the reported purchase price of $3.2 billion and an approximate net book value

of about $800 million reflects a “significant premium.”

228. The Commission considers MC Alberta and its corporate parents to be sophisticated

business owners and the reported purchase price to be a reflection of the market price for the

AltaLink transmission business and assets at the time of the conclusion of the purchase price

negotiations.

229. The Commission considers the suggestions of certain parties that MC Alberta or its

owners will seek to recoup the purported “significant” premium over net book value through

requests for higher than necessary capital additions to AltaLink’s rate base, attempts to increase

AltaLink’s regulated revenue requirement, or by reducing the quality of service to be provided,

to be speculative and unsupported by any evidence in the current proceeding.

230. The need for all transmission capital additions proposed for the purposes of adding

capacity to AltaLink’s transmission system is subject to the control and direction of the ISO.

Additionally, AltaLink’s rate base and revenue requirement remain subject to Commission

oversight and regulation.

231. In consideration of the above, the Commission does not consider it to be necessary to

impose the condition recommended by the UCA that none of the applicants should seek to

recover the premium over book value paid. Further, the Commission finds that the proposed

transaction does not fail the no harm test because a premium over book value has been offered

for the transmission assets and business of AltaLink.

5.5.2 Income taxes

232. In argument, AIML noted that for its September 22, 2014 ruling, the Commission

addressed whether the proposed transaction will result in any cost impacts for customers arising

from matters such as taxes and pension funds within its assessment of factors to be considered in

the no harm test.199

233. AIML submitted that the proposed transaction will not result in any tax related cost

impacts on customers because:

there will be no changes in ALP’s status for income tax purposes following the proposed

acquisition, and there will be no difference between the tax treatment of ALP, AILP and

198

ATCO reply, paragraph 9. 199

AIML argument, paragraph 21, part (g).



AHLP pursuant to the current ownership structure as compared to the treatment they will

receive following the proposed transaction200

there will be no impact on the methodology by which income tax expense will be

calculated by ALP as a result of the proposed transaction201

the proposed acquisition will not result, directly or indirectly, in any change to the tax

rate or increase to the costs paid by customers for utility service202

the proposed transaction and/or financing structure does not give rise to “double dip

taxation” benefits or any other particular tax advantage or tax savings203

234. In reply, ATCO submitted that the applicants take the view that the proposed transaction

and associated financing structure does not give rise to “double dip taxation” benefits or any

other particular tax advantage or saving. ATCO suggested that this interpretation is in evidence

in MC Alberta’s response to AE-MC-7(b).204 However, ATCO submitted that these assertions

have not been tested to gain a comprehensive understanding of why such benefits will not be

achieved under foreign ownership and control.

235. In this regard, ATCO submitted that the Commission has previously examined whether

an owner of AltaLink was actually liable to pay monies that would otherwise be collected in the

utility revenue requirement for tax purposes, and that this investigation led to a disallowance of

costs that were requested for inclusion in revenue requirement. However, ATCO submitted in

this proceeding, the potential tax implications of the proposed transaction, and how such

implications may or may not impact customer rates, is not completely understood.

236. In his reply argument submission, Mr. Overly submitted that tax revenues paid to the

Government of Alberta and Canada should increase to reflect the implied increase in the value of

the AltaLink transmission assets and business. Further, Mr. Overly submitted that any suggestion

that the increase in the capital cost of AltaLink from $800 million to $3.2 billion will not,

directly or indirectly, result in changes to tax rates or increases to costs paid by customers should

be viewed with suspicion.

237. In its rebuttal argument, AIML submitted that there are no potential income tax issues

that are relevant to the Commission’s determination of the no harm test in this proceeding,205 and

submitted that allegations made by ATCO in respect of the tax related implications of the

proposed transaction in its reply argument are “wrong” and appeared to have been provided for

“no other purpose than mischief.”206

238. AIML submitted that information request responses207 show that ATCO’s suggestions

regarding “double dip taxation” benefits or any other tax advantage or saving in its reply

argument are patently incorrect. AIML further submitted that ATCO misstates the current

200

Exhibit No. 93.02, responses to UCA.AIML-006(a) and (b); Exhibit No. 86.02, responses to UCA.MAAC-5(a)

and (b); Exhibit No. 94.02, responses to CCA.AML-01(a), (b) and (d). 201

Exhibit No. 90.02, response to AE-MC-7(a); Exhibit No. 94.02, responses to CCA.AML-01(a), (b) and (d). 202

Exhibit No. 109.02, response to OVERLY.AIML-005. 203

Exhibit No. 90.02, response to AE-MC-7(b). 204


Exhibit No. 140.02, AIML rebuttal argument, paragraph 49. 206

Exhibit No. 140.02, AIML rebuttal argument, paragraph 49. 207

Exhibit No. 88.02, response to CCA-SNCEAL-01; Exhibit No. 89.02, response to CCA-MC Alberta-19;

Exhibit No. 90.02, response to AE-MC-7; Exhibit No. 93.02, response to UCA-AIML-6.



situation with respect to tax issues by reaching back to a historical decision made at a time when

the Ontario Teachers’ Pension Plan was an owner of AltaLink. The Commission’s predecessor

disallowed a portion of the deemed taxes claimed by AltaLink in its revenue requirement that

related to the Ontario Teachers’ Pension Plan (Teachers) investment in AltaLink on the basis

that, as a pension plan, Teachers, the ultimate parent, did not pay taxes. However, AIML

submitted that AltaLink’s current shareholders are taxable corporations and, if the applications

are approved, its new ultimate shareholders will be taxable corporations. Consequently, the

circumstances that arose in the Ontario Teachers’ Pension Plan situation are completely

irrelevant to the issues before the Commission in the present proceeding.

239. In its rebuttal argument, MC Alberta submitted that ATCO’s assertion that there has been

no testing of potential tax benefits related to foreign ownership and control of AltaLink is

without substance. MC Alberta fully responded to information requests posed in relation to tax,

and its responses refuted any assertion that there will be any tax consequences at the utility level.

240. In this regard, MC Alberta stated in AE-MC-7(a):

… as a result of the proposed transaction, there will be no impact on the methodology by

which income tax expense will be calculated by ALP. AML has further advised that it is

not aware of any impact on the amount of the annual income tax expense that will be

requested within future AltaLink general tariff applications to the AUC.208

241. In addition, although MC Alberta also stated unequivocally that the acquisition does not

give rise to “double-dip taxation” benefits or any other particular tax advantage or tax savings,209

ATCO failed to provide evidence to indicate what the tax benefits might be, how they might be

applied, or how they might affect customers. Accordingly, there was no evidence contrary to that

provided by MC Alberta to suggest that there are, or even might be, the kind of tax-related

benefits or savings suggested by ATCO.

242. MC Alberta asserted that while ATCO may not like the tax-related evidence on the

record, it cannot argue that the available evidence is unclear or that the issue has not been tested.

This is particularly true given ATCO’s unwillingness to file its own evidence, or to follow up on

the responses cited above with a second round of information requests when given the

opportunity.

243. MC Alberta submitted that there is no basis in the current proceeding evidence or at law

for the suspicion expressed in Mr. Overly’s reply argument that that acquisition will (directly or

indirectly) result in a change to the tax rate or cost paid by customers or his request that a

guarantee with respect to tax related effects should be included in the share purchase agreement

for the proposed transaction.

244. In particular, MC Alberta noted in its response to CCA-MC-19(b):210

The assumption of tax integration in Canada is still valid. Under Canadian tax law, a

corporation directly owning an interest in a limited partnership is fully responsible for

payment of its share of income tax liabilities arising from the partnership operations. The

208


Exhibit No. 90.02, AE-MC-7(b). 210

Exhibit No. 89.02.



corporate taxpayer responsible for income taxes arising from AltaLink will be NewCo.

All Canadian income taxes due from AltaLink operations will be paid by NewCo, the

direct corporate parent of the entities comprising AltaLink. Ultimate ownership by a non-

Canadian entity will not impact that tax liability.

245. Further, MC Alberta referenced that in its response to CCA-MC-19(f), it stated:

there will be no change to the anticipated method of calculating and accounting for

deemed taxes for regulatory purposes

NewCo will file a Canadian income tax return

all Canadian income taxes due from AltaLink operations will be paid by NewCo, and

ultimate ownership by a non-Canadian entity does not impact that tax liability

MEHC Canada, LLC and BHE will continue to be included in the consolidated United

States federal income tax return filed by BHE and subsidiaries

regulated income tax expense calculated for AltaLink operations will not be impacted by

this consolidated filing in the United States, and

the need to produce income tax returns will be determined in future regulatory

proceedings211

246. MC Alberta further explained that any modifications to AltaLink’s rates or reliability of

service resulting from any change in tax requirements would be subject to the broad regulatory

authority of the Commission, and as such could be adequately addressed by the Commission in

future regulatory proceedings.

Commission findings

247. The Commission’s primary role in respect of income tax matters in the context of the

regulation of AltaLink’s tariff is to determine the allowance that should be made for income tax

expense necessary to provide a reasonable after tax return to AltaLink’s owners. These matters

are evaluated in the context of AltaLink GTA proceedings or in conjunction with the assessment

of fair return that presently occurs in the context of generic cost of capital proceedings.

248. Mr. Overly’s submission that tax revenues paid to the governments of Alberta and

Canada should increase to reflect the implied increase in the value of the AltaLink transmission

assets and business is unfounded. The Commission agrees with the submissions of MC Alberta

and AIML that the transaction will not result in any tax related cost impacts on customers. The

total amount of deemed taxes may vary in proportion to the scale of AltaLink’s revenue

requirement, but there will be no change to the anticipated method of calculating and accounting

for deemed taxes for regulatory purposes, as a result of the transaction.

249. Although ATCO expresses concerns that the proposed transaction may give rise to

“double dip taxation” benefits or may provide other tax advantages or savings, the Commission

agrees with the submissions of MC Alberta that ATCO failed to provide evidence to describe

what kind of tax-related benefits might arise from the approval and consummation of the

proposed transaction, or how such benefits would be likely to affect customers.

250. In accordance with the above, the Commission finds that income tax considerations do

not cause the proposed transaction to fail the no harm test.

211

Exhibit No. 89.02, CCA-MC Alberta-19(e).



5.5.3 Pension costs

251. In argument, AIML noted that while the Commission’s September 22, 2014 ruling

referenced pension funds within its list of factors that the Commission or its predecessor has

considered in relation to the no harm test,212 the evidence is clear that the proposed transaction

will not result in cost impacts for customers in relation to pension fund matters. In this regard,

AIML noted that neither AML nor MC Alberta are aware of any changes contemplated with

respect to ALP’s pension plan following the proposed acquisition.213

252. In his reply argument, Mr. Overly submitted that as it is unclear that existing employee

pensions will not be altered, or that all pension money will stay in Canada, the sale contract

should include a paragraph stating that pension funding and reserves will not be degraded or

moved to fund other operations.

253. In reply, MC Alberta responded to Mr. Overly’s submissions by referring to AIML’s

response to CCA-AIML-01(f):

… AML … has advised that it is not aware of any changes contemplated with respect to

ALP's pension plan following the proposed acquisition. Under the current ring-fencing

measures, such decisions are within the mandate of AML's Board, and not BHE.214

and to its own response to CCA-MC Alberta-19(f):

The proposed acquisition is a share purchase transaction. After the closing of the

proposed acquisition, ALP will continue to operate on an independent, stand-alone basis.

As such, MAAC has not contemplated any changes to the AltaLink pension plan.215

254. MC Alberta further submitted that any modifications to AltaLink’s rates or reliability of

service resulting from any change to the AltaLink pension plan would be subject to the broad

regulatory authority of the Commission and can be adequately addressed by the Commission in

future regulatory proceedings relating to AltaLink.

Commission findings

255. The pension obligations of AltaLink to its employees are subject to legislative protections

and the cost of funding pension obligations is subject to Commission scrutiny within the context

of GTA proceedings. As well, no evidence has been presented in the current proceeding to

suggest that either the pension benefits available to AltaLink employees or the funding of such

benefits is subject to change as a consequence of the completion of the proposed transaction.

256. Given the foregoing, the Commission finds that the proposed sale transaction does not

fail the no harm test on the basis of pension-related concerns.

212

Decision 2000-41, pages 19-20, cited in part (g) of paragraph 21 of AIML argument. 213

Exhibit No. 94.02, responses to CCA.AML-01(f); Exhibit No. 109.02, response to OVERLY.AIML-004;

Exhibit No. 89.02, response to CCA-MC Alberta-19(f), cited in part (e) of paragraph 26 of AIML argument. 214


Exhibit No. 89.02.



5.5.4 Treatment of acquisition transaction costs

257. In argument, MC Alberta noted that it has confirmed that none of the costs related to the

acquisition will be directly or indirectly borne by customers.216

258. In reply argument, the CCA submitted that as the applicants have provided various

assurances that the costs of the acquisition transaction will not be passed on to customers, these

transaction costs should be addressed in the current proceeding by applying two primary

conditions.

259. First, the CCA sought a condition requiring that transaction costs not be passed on to

customers. Second, the CCA sought a condition setting out the evidence AML will be required to

provide in order to substantiate full compliance with the requirement not to pass along

acquisition transaction costs to customers. The CCA submitted that it is preferable to set out

these requirements now, thereby making expectations clear at the outset so that necessary

evidence can be effectively captured and preserved.

260. The CCA submitted that AltaLink should be required to identify the nature and extent of

the legal, regulatory, engineering, financial, accounting, administrative and other costs relating to

the acquisition transactions. In addition, the CCA submitted that it will require careful

documentation, explanation and verification of these costs to ensure that they are differentiated

from costs that could legitimately be included in a GTA.

261. The CCA submitted that it is not sufficient for AltaLink to affirm in future GTAs or

deferral account applications that costs related to the acquisition transaction have not been

passed on. Instead, the CCA submitted that acquisition transaction costs must be fully

documented so that the Commission and interveners will be able to reconcile these costs with

costs claimed in future applications for the purposes of ensuring no acquisition costs have been

inadvertently been included. The CCA submitted that information related to externally billed

acquisition related costs should already be readily available.

262. As well, the CCA expressed concern that a transaction of the magnitude of the AltaLink

purchases would likely involve considerable internal resources with SNC Lavalin, AML, MC

Alberta, and their respective affiliates. The CCA suggested that staff time and other potential

internal resources in the areas of legal, regulatory, engineering, financial, account, and

administrative time should be recorded to an identifiable account that can be examined in future

applications. Further, costs of this nature should be removed from any direct costs or allocations

of indirect costs, including any costs arising from allocations of indirect costs from parent

corporations or subsidiaries.

263. The CCA submitted executive bonuses should be included as part of the examination of

costs related to the transaction considered in the current proceeding. In this regard, the CCA

noted that MC Alberta did not respond to a CCA request to identify the entity responsible to pay

bonus plan amounts for the key executives of the operating entities in relation to the closing of

the proposed transaction, but did state an intention that none of the bonus plan amounts would be

216

Exhibit No. 89.02, CCA-MC Alberta-07(c).



charged to customers.217 The CCA submitted that its concern on behalf of ratepayers is to obtain

independent verification of this claim.

264. Given its above described concerns, the CCA made two recommendations. First, the

CCA recommended that the Commission set out the mechanisms, including potentially the

creation and retention of records, as necessary to demonstrate that no costs related to the

proposed transaction incurred either external to or internal to the applicants are included in future

GTA or deferral account applications.

265. Second, the CCA recommended that the Commission condition its approval on a

requirement to disclose both the entity paying bonuses to AltaLink operating entity key

executives and the amount of such bonuses.

266. Finally, the CCA asserted that both the costs associated with this proceeding and

Proceeding No. 2983218 should not be passed on to rate-payers.

267. In rebuttal argument, MC Alberta submitted that the CCA’s request that the Commission

attach conditions regarding the costs associated with the current proceeding, as well as

Proceeding No. 2983, are unnecessary and unwarranted.

268. MC Alberta noted that it has confirmed on the record that no costs of the transaction will

be passed on to customers, as set out below:

No additional costs will be imposed upon ALP, AML or customers as a result of the

creation of NewCo.219

269. In addition, MC Alberta also noted the following confirmation:

… no costs, including but not limited to legal costs, costs for retaining S&P and other

expenses incurred in relation to the present proceeding and the execution of the

transactions contemplated therein or as amended in the course of the proceedings will be

passed on to customers directly or indirectly by any Operating Entity, at any time.220

270. MC Alberta submitted that in response to similar comments respecting similar costs in

the proceeding leading to Decision 2011-374, the Commission did not impose a condition.221 In

particular, MC Alberta noted that the Commission took account in Decision 2011-374 that future

tariff proceedings would provide the opportunity to review costs and confirm costs reflecting

commitments. MC Alberta submitted that there is no basis for deviating from this precedent in

the current proceeding.

271. MC Alberta submitted that the CCA’s request for the disclosure of the entity paying

bonuses to key executives, and the amount and method of payment of such bonuses is also

unnecessary, since MC Alberta has expressly confirmed that these costs will not be charged to

217

Exhibit No. 89.02, CCA-MC Alberta-07(d). 218

Proceeding No. 2983 is the prior application seeking to issue an initial public offering for the sale of a portion

of its ownership interest in AltaLink. This proceeding is currently suspended. 219

Exhibit No. 90.02, AE-MC-6(e). 220

Exhibit No. 89.02, CCA-MC Alberta-07(c). 221

Decision 2011-374, paragraph 15 and Order.



customers.222 As there is no evidence that MC Alberta has any intention to disregard

commitments made in the current proceeding MC Alberta submitted that the crystalizing

commitments in the form of a condition for the Commission’s approval is unnecessary and

inconsistent with prior decisions.

Commission findings

272. MC Alberta has resisted the imposition of any condition as requested by the CCA and has

relied on Commission Decision 2011-374, which also considered a change to the AltaLink

ownership structure. In that decision, the Commission chose to not impose a condition that costs

related to the transaction under consideration would not be passed on to customers.

273. The Commission does not find the scope of the transaction considered in Decision 2011-

374 to be analogous to the current transaction. Unlike the transaction in Decision 2011-374,

which involved the acquisition by SNC of the remaining ownership interest in AltaLink held by

MacQuarie GP Holdings Ltd., which represented a 23 per cent ownership interest, this

transaction, which contemplates a 100 per cent divestiture of SNC’s ownership in AltaLink, is

more complex and extensive, and as such, the transaction-related costs involved would not be

inconsequential. AltaLink customers could be harmed if any portion of these costs were to be

recovered through end-use customer rates.

274. Additionally, any costs that may have been incurred by registered interveners to assess

the potential impact of the applications and to participate in the current proceeding should also

be considered part of the transactional costs and, therefore, the responsibility of AltaLink

shareholders and not recovered through AltaLink’s hearing cost reserve or any other similar

tariff recovery mechanism.

275. The Commission also accepts the submission of the CCA that the preparation and

advancement of the applications has likely involved significant time and resources of AltaLink

senior executives, and the time and associated resources of other AltaLink staff. The

Commission finds that any costs not related to the operation of the regulated business should be

included as part of the transaction costs and not recovered from ratepayers.

276. As AltaLink’s revenue requirement forecasts are assessed for reasonableness against

actual expenditures in prior years, it is important that any AltaLink staff time or other resources

that may be included in AltaLink reports of actual expenditures provided as part of AltaLink

tariff applications clearly indicate any AltaLink resources used in relation to the transaction and

used to prepare and support the applications in this proceeding and the applications in

Proceeding No. 2983, which was the prior application filed by the SNC group to divest a certain

percentage of its ownership interest in AltaLink. Proceeding No. 2983 is currently suspended.

Accordingly, the Commission directs AIML to prepare a full accounting of all AIML activities

and resources and the costs related thereto, associated with the acquisition and any costs to

prepare and support the applications in this proceeding and the application in Proceeding

No. 2983 and to file that accounting on the record of Proceeding No. 3524, which is AltaLink’s

tariff application for the test years of 2015-2016.

277. In addition, the Commission further directs AIML to file correspondence on the record of

Proceeding No. 3524 which fully describes the amendments that AltaLink expects to make to its

222

Exhibit No. 89.02, CCA-MC Alberta-07(d).



2015-2016 GTA in order to comply with this direction and the timing by which such

amendments will be filed.

5.6 Industry Canada approval conditions

5.6.1 Effect of commitments to Industry Canada

278. In Section 4.2 of the MC Alberta application,223 MC Alberta indicated that the Investment

Canada Act requires a review of the transactions described in the applications by the industry

minister of Canada which MC Alberta expected to receive prior to December 1, 2014.

279. In information request CCA-MC Alberta-05, the CCA referenced a statement dated July

25, 2014 made by government of Canada Industry Minister James Moore regarding the

acquisition of AltaLink by Berkshire Hathaway Energy, which included the following statement:

As a result of this review, Berkshire Hathaway Energy has agreed to the following

commitments:

• There will be no reductions in the level of employment at AltaLink as a result of the

transaction.

• AltaLink will remain locally managed and incorporated under the laws of Canada,

with its headquarters, senior management team and operations located in Alberta.

AltaLink's independent board of directors will also continue to be composed of a

majority of Canadians.

• One hundred percent of AltaLink's earnings will be reinvested in AltaLink, elsewhere

in Alberta or in other regions of Canada for at least five years. This commitment will

support AltaLink's three-year C$2.7-billion investment in Alberta's energy

infrastructure, subject to continued oversight by the Alberta Utilities Commission and

the Alberta Electric System Operator.

• At least C$27 million will be invested in joint development opportunities in Canada

and the United States, with Canadian partners, over the next five years.

• Berkshire Hathaway Energy will invest at least C$3 million of new funds over three

years to support academic programs focused on energy-related topics, cultural

organizations and community-based programs across Alberta.

• AltaLink's commitment to provide C$3 million over three years in community and

charitable contributions across Alberta will be maintained.

• Berkshire Hathaway Energy will share best practices, at no cost, with AltaLink on

safety, customer satisfaction, cybersecurity and supplier diversity.

• Berkshire Hathaway Energy will provide opportunities for Albertan and other

Canadian companies to supply products and services to its other businesses.224

280. In reply argument, ATCO noted that MC Alberta will have ultimate authority over the

appointment of the board of directors and management that will exercise total control over the

AltaLink transmission business. Given this, ATCO submitted that while the applicants point to

approvals under the Investment Canada Act as an indicator of the acceptability of the proposed

transaction by another regulator,225 the applicants ignore the fact that significant material

conditions have been imposed on the approval by the federal government minister.

223

Exhibit No. 10, paragraph 16. 224


ATCO reply argument, paragraph 15.



281. ATCO indicated that it does not hold the view that it is within the mandate of the

Commission to impose the same or similar conditions to those imposed by the federal minister of

industry. Instead, ATCO submitted that the Commission’s public interest mandate, which ATCO

considered to be far broader than the Investment Canada Act net benefits to Canada test, requires

the Commission to balance all of the potential positive and negative impacts and implications of

the proposed sale and reach a conclusion that its mandate has been satisfied.

282. In its reply argument, the CCA submitted that commitments made to Industry Canada and

reiterated in argument that protect ratepayers from harm should be conditions of the sale to

MC Alberta, a 100 per cent owned subsidiary of BHE.

283. The CCA submitted that if BHE is prepared to make these commitments as a condition of

the sale to Industry Canada and are acting in good faith, then BHE, via its 100 per cent owned

subsidiary, MC Alberta, should make certain of these commitments to the Commission and

interveners if they are relevant to protecting ratepayers from harm.

284. The CCA submitted that the Commission and interveners have a substantial disclosure

process in AltaLink GTAs and deferral account applications that can be used to ensure these

commitments are honored. However, the CCA contrasted MC Alberta’s description of the

monitoring process set out by Industry Canada,226 and highlighted in particular statements to the

effect that:

Industry Canada’s assessment of investment performance will be judged in the context of

overall results.

Industry Canada’s assessment will be determined on the basis of being “substantially”

consistent, not fully consistent with its expectations.

If Industry Canada finds performance to be “substantially consistent” with original

expectations, it does not expect to undertake additional monitoring so long as no major

commitments have been left unfulfilled.

Where the inability to fulfill a commitment deemed to be beyond the control of the

investor, the investor will not be held accountable for plans and undertakings.227

285. In consideration of the relatively soft enforcement provisions set out by Industry Canada,

the CCA submitted that establishing a Commission-monitored process would offer greater

assurance that ratepayer interests will be protected in relation to commitments made by BHE to

Industry Canada. At the same time, the CCA submitted that a Commission-monitored process

with respect to the BHE undertakings to Industry Canada would be beneficial because the

Commission could take into account in GTA or deferral account application proceedings whether

unforeseeable challenges would prevent full compliance with Industry Canada commitments at a

“just and reasonable” cost.228

286. The CCA submitted that while the applicants may object to being accountable to two

government agencies, such additional responsibility is warranted when jurisdictions overlap. The

CCA submitted that such overlaps are common in practice for transmission facility owners

226

Exhibit No. 89.02, CCA-MC Alberta-05 (d) which references the Administrative Procedures section of

guidelines located at https://www.ic.gc.ca/eic/site/ica-lic.nsf/eng/lk00064.html#p3.6. 227

CCA reply argument, paragraphs 23 and 24. 228

Electric Utilities Act, Section 121(2).

https://www.ic.gc.ca/eic/site/ica-lic.nsf/eng/lk00064.html#p3.6



(TFOs), since there are many instances where a TFO may be held accountable to comply with

Federal or Provincial environmental regulations while at the same time accountable to the

Commission to ensure that the TFO’s compliance with environmental regulation is done at a

reasonable cost.

287. In rebuttal argument, MC Alberta noted that the CCA has acknowledged that the

referenced commitments to Industry Canada under the Investment Canada Act are commitments

of BHE, not MC Alberta or AltaLink. Notwithstanding, MC Alberta submitted that conditions

proposed by the CCA would essentially place the Commission in the role of policing BHE’s

compliance with commitments made to a federal agency, pursuant to a federal statute, and

subject to a different legal standard of review.

288. MC Alberta submitted that the policing role that the CCA wishes the Commission to

assume would not only be unprecedented, but well outside of the Commission’s jurisdiction.

Furthermore, the CCA’s request also raises the spectre of inconsistent interpretations of

conditions by two different regulators under two different legal standards of review, and the

potential impossibility of an entity being able to comply with inconsistent legal obligations.

289. MC Alberta noted that the Commission’s ruling in respect of ATCO’s procedural motion

confirmed the Commission’s understanding that it “…operates under a mandate separate from

federal agencies and applies different considerations in its review of the proposed transaction.”229

In this regard, MC Alberta submitted that while the Investment Canada Act defines the legal

standard requires a demonstration of net benefit to Canada, the Commission operates under the

well-established no harm test. As such, contrary to the view of the CCA, there is no overlap

between the authority of the Commission and Industry Canada.

290. MC Alberta noted that it has provided unequivocal confirmation that no costs associated

with the transaction or any costs associated with its commitments to Industry Canada under the

Investment Canada Act will be reflected in AltaLink’s rates.230 As such, MC Alberta submitted

there is no need, or basis in law or regulatory principle, for the CCA’s recommended conditions.

Commission findings

291. Further to the findings in Section 5.6.2 below, the minister of Industry Canada, not the

Commission, is responsible to ensure that any expectations or conditions it has established for

BHE as a pre-condition to its approval of the transactions it assessed pursuant to the Investment

Canada Act are met. In any event, the Commission has no jurisdiction to compel BHE to comply

with Industry Canada’s commitments.

292. Accordingly, the Commission denies the CCA’s request for the establishment of a

Commission-monitored process of BHE’s compliance with Industry Canada commitments.

5.6.2 Funding of Industry Canada commitments

293. In its reply argument, the CCA submitted that commitments that BHE has made as a

condition of sale to Industry Canada should not be a financial burden to ratepayers. Accordingly,

to the extent that specific Industry Canada commitments could create a financial burden to

229

Exhibit No. 127.01, page 1. 230

Exhibit No. 89.02, CCA-MC Alberta-05.



ratepayers, they should be identified and, if necessary, conditions should be applied to prevent

harm to ratepayers.

294. The UCA submitted that while MC Alberta has confirmed that there will be no additional

costs paid by utility customers in Alberta as a result of BHE commitments to Industry Canada,231

it would be in the public interest to formalize this commitment by way of a further condition to

any approval issued by the Commission. In light of this concern, the UCA submitted that the

Commission should impose the following condition on any approval issued in respect of the

applications:

None of the Applicants, nor any related entity nor successor of them, shall seek to

recover from customers any costs associated with BHE’s commitments made in

association with the Investment Canada Act approval.

295. In rebuttal argument, MC Alberta submitted that the UCA’s suggested condition in

respect of commitments made by BHE in respect of the Investment Canada Act approval is

problematic and should not be adopted.

296. In particular, MC Alberta submitted the condition suggested by the UCA is overly broad,

insofar as it could be construed as precluding AltaLink from seeking to recover any costs

associated with fulfillment of BHE’s commitments to Industry Canada under the Investment

Canada Act made within the context of Industry Canada’s jurisdiction.

297. MC Alberta noted that it provided a clear and unequivocal commitment in its response to

UCA-MAAC-6(b) that BHE’s commitments in relation to the Minister of Industry’s approval

will not result in any additional costs paid by utility customers in Alberta. In addition,

MC Alberta submitted that BHE’s commitments to Industry Canada cannot limit the jurisdiction

of the Commission with respect to its ongoing regulatory authority to approve just and

reasonable rates for AltaLink.

298. MC Alberta expressed particular concern that the adoption of the UCA’s proposed

condition could result in legitimate utility expenses that are solely within the jurisdiction of the

Commission being characterized as inappropriate based on the argument that they are “costs

associated with BHE’s commitments” to Industry Canada.

Commission findings

299. The Commission agrees that BHE shareholders, and not ratepayers, should be required to

pay any costs that may have to be incurred solely to comply with undertakings made to Industry

Canada in the pursuit of BHE’s approval under the Investment Canada Act.

300. However, the Commission acknowledges the concern expressed by MC Alberta that if

the Commission were to adopt the UCA’s request for a condition prohibiting MC Alberta (or

affiliates and successors thereof) from seeking inclusion within revenue requirement for any

costs associated with fulfillment of BHE’s commitments to Industry Canada under the

Investment Canada Act, legitimate utility expenses within the Commission’s jurisdiction could

be characterized as ineligible for inclusion within AltaLink’s revenue requirement. To address

this concern, the Commission will not formally impose a sale condition to this effect.

231

Exhibit No. 86.02, UCA-MAAC-6(b).



301. However, the Commission expects that MC Alberta will not seek to recover costs arising

from BHE’s compliance with Industry Canada conditions through the rates of AltaLink as part of

the just and reasonable cost of AltaLink’s provision of transmission service (beyond those costs

that would be prudently incurred to provide service in the absence of Industry Canada

conditions) and the Commission will not approve such costs should they be submitted.

5.6.3 Employment level commitments

302. In reply argument, the CCA expressed concern that the BHE commitment to Industry

Canada that there “will be no reductions in the level of employment at AltaLink as a result of the

transaction” could negatively impact ratepayers by limiting AML’s ability to reduce staff levels,

particularly when the current high levels of new construction declines.

303. Considering this concern, the CCA noted that in an information request response,232 MC

Alberta confirmed that there will be no reductions in the level of employment at AltaLink as a

result of the transaction for 2015 to 2017233 and provided clarifications that:

The reference to no reduction in level of employment “refers specifically to the

immediate post acquisition period and does not place any other constraints on the

company with regard to efficient management of employee numbers, particularly

following completion of the significant capital build that is currently underway.”234

Staff levels can be reduced under appropriate circumstances unrelated to the

transaction.235

304. Given the above, the CCA submitted that the Commission’s approval of the applications

should include a condition that specifies that the commitment to no reduction in employment

levels applies only to the immediate 2015 to 2017 period, and places no constraints with respect

to the efficient management of employees after that period, when AltaLink’s significant current

capital build is expected to be substantially complete.

305. In rebuttal argument, MC Alberta submitted that the CCA’s requested condition in

respect of employment level reductions effectively amounts to a request for the Commission to

vary BHE’s commitment to Industry Canada under the Investment Canada Act.

306. MC Alberta noted that while BHE committed to Industry Canada “there will be no

reductions in the level of employment at AltaLink as a result of the transaction,”236 BHE’s

commitment does not impose a constraint on AltaLink to efficiently manage staffing levels, and

AltaLink is in no way precluded from managing staffing levels under appropriate circumstances

after the acquisition.237

307. MC Alberta also noted that it has confirmed on the record that:

AltaLink will continue to maintain its own employment practices and policies.238

232

Exhibit No. 89.02, CCA-MC Alberta-05(e). 233

Exhibit No. 89.02, CCA-MC Alberta-05(e)(i). 234

Exhibit No. 89.02, CCA-MC Alberta-05(e)(ii). 235

Exhibit No. 89.02, CCA-MC Alberta-05(e)(iv). 236

Exhibit No. 70.03, UCA-MAAC-06, Attachment 1, page 1. 237

Exhibit No. 89.02, CCA-MC Alberta-05(e)(ii). 238

Exhibit No. 89.02, CCA-MC Alberta-20(b).



It will not interfere with AML’s independent determinations regarding the staff and

management required to manage and operate the transmission assets and business of

ALP.239

308. MC Alberta submitted that both the plain language of BHE’s Industry Canada

commitment and the record of the current proceeding are clear that AltaLink will not be

restricted by BHE’s commitment to Industry Canada in managing its staffing levels as needed to

meet its workloads. Given this, and the Commission’s ongoing jurisdiction to ensure that

forecast costs are just and reasonable for the service provided, MC Alberta submitted that the

CCA’s recommended condition is unnecessary and should be denied.

Commission findings

309. The Commission is not prepared to specify, as requested by the CCA, that the BHE

commitment to Industry Canada not to reduce the level of employment at AltaLink as a result of

the proposed transaction is only in respect of the period from 2015 to 2017. The Commission

cannot comment on whether this period was understood to be implied by the commitment and

the language is not clear. Regardless, it is up to Industry Canada to ensure compliance with its

conditions.

310. Notwithstanding, the Commission does have clear jurisdictional authority to approve the

reasonable costs necessary for AltaLink to deliver safe, efficient and reliable transmission

service in Alberta. In this regard, the Commission has identified a growing concern with the rate

of growth in AltaLink FTE levels in relation to the rate at which AltaLink’s transmission system

and associated activity levels have been growing, in its findings in decisions issued in respect of

AltaLink’s last two GTAs.240

311. The Commission will continue to exercise its mandate to approve AltaLink’s regulated

service revenue requirement in future GTAs. Accordingly, while AltaLink is responsible for

managing its resources, including staffing levels, as necessary to fulfill its statutory mandate to

provide service, the Commission will not allow any costs for staffing or other resources that the

Commission does not consider to be necessary to fulfill this mandate when it makes its decision

in respect of future GTAs, regardless of any commitment that BHE has made to Industry Canada

to maintain staffing levels at AltaLink. In such an event, the costs for staffing levels that

AltaLink may have to incur to fulfill its commitment to Industry Canada beyond what the

Commission has allowed will not be borne by ratepayers.

312. The CCA’s request to establish a condition clarifying the nature of BHE’s commitment to

Industry Canada as it pertains to AltaLink staffing levels is denied.

5.6.4 Contributions for academic, cultural, and community purposes

313. In Section 2.7 of its reply argument, the CCA made specific comments in respect of the

following BHE commitment to Industry Canada:

239

Exhibit No. 90.02, AE-MC-5(a). 240

See Decision 2011-453, paragraph 206, and Decision 2013-407, paragraph 64.



Berkshire Hathaway Energy will invest at least C$3 million of new funds over three years

to support academic programs focused on energy-related topics, cultural organizations

and community-based programs across Alberta.241

314. The CCA expressed concern that the costs of the new funds alluded to in the BHE

commitment to Industry Canada, which appear to be charitable donations or investments that

may not benefit AML, could become a direct or indirect cost charged to ratepayers. However, the

CCA noted that this issue was addressed in an information request response in which MC

Alberta indicated the shareholders of MC Alberta “will fund the additional C$3 million of

contributions to support academic programs, cultural organizations and community-based

programs across Alberta.”242

315. In light of its concerns, the CCA recommended that the Commission’s approval of the

application contain the condition that any new funds invested over three years to support

academic programs will be funded by shareholders of MC Alberta.

316. In rebuttal argument, MC Alberta submitted that its evidence respecting this BHE

commitment as set out in its response to CCA-MC Alberta-05(h)243 is clear and included an

unambiguous commitment that MC Alberta, not customers, will fund these contributions. As

such, MC Alberta submitted that the condition requested by the CCA is not necessary.

Commission findings

317. Utility requests for rate payer funding of charitable donations, including funding to

cultural organizations and community based programs have been consistently disallowed by the

Commission. In Decision 2009-151,244 in respect of AltaLink’s 2009-2010 GTA, the

Commission made the following finding:

224. The Commission recognizes that, in a competitive market, companies make

decisions about charitable giving through sponsorships on behalf of their shareholders,

often recognizing that these contributions will assist the company in achieving certain

business objectives. In this regard, shareholders have an opportunity, whether directly or

indirectly, to allocate where these sponsorship dollars will be employed. However, when

a company is a regulated monopoly, including community sponsorships in revenue

requirement would have the effect of mandating that ratepayers make charitable

contributions without being able to direct where these sponsorship dollars will be

employed. The Commission does not consider that ratepayers should be expected to

provide sponsorship or other charitable funding to a utility and, in turn, have the utility

decide how or where to distribute the funds on their behalf. Nor should the Commission

be expected to choose where to distribute these funds on behalf of ratepayers. The

Commission considers that it should not usurp, through the regulatory process,

ratepayers’ entitlement to support only the charitable organizations they individually

choose.245

241

Exhibit No. 89.02, CCA-MC Alberta-05(h). 242

Exhibit No. 89.02, MC-Alberta-05(h). 243


Decision 2009-151: AltaLink Management Ltd. and TransAlta Corporation, 2009 and 2010 Transmission

Facility Owner Tariffs, Application No. 1587092, Application No. 1594573, Proceeding ID. 102, October 2,

2009. 245

Decision 2009-151, paragraph 224.




318. MC Alberta’s response to CCA-MC Alberta-05(h) represents a clear commitment on MC

Alberta’s part that BHE shareholders, and not ratepayers, will fund any commitments to

academic programs, cultural organizations and community-based programs within Alberta that

BHE has made as part of its commitments to Industry Canada in pursuit of its Investment

Canada Act approval.

319. Any costs for proposed expenditures that might be considered charitable donations or

community sponsorships that are brought forward by AltaLink in future GTAs will be subject to

Commission oversight. Accordingly, the Commission does not find it necessary to impose a

condition that any new funds invested over three years to support academic programs will be

funded by shareholders of MC Alberta

320. In consideration of the above, the Commission finds that the proposed sale transaction

does not fail the no harm test on the basis of BHE undertakings to Industry Canada in respect of

the funding of academic programs, cultural organizations, and community-based programs.

5.6.5 Joint development opportunities

321. In response to UCA-MAAC-4(a), MC Alberta provided a copy of the “Joint

Transmission Development Agreement Term Sheet” (term sheet) which was entered into by

SNC-Lavalin Group Inc. and MidAmerican Transmission, LLC on May 1, 2014. Along with

other undertakings set out therein, the term sheet provides for the following:

Regularly scheduled senior executive level meetings between representatives of

SNC and MidAmerican Transmission LLC (MA) and subsidiaries including at

least one annual meeting at the CEO, President or COO/EVP level;

Sharing of advance information about plans, strategies and other information to

facilitate long lead preparation for upcoming opportunities to recognize that SNC

will need time to mobilize for new geographic areas of entry;

Proactively supporting SNC's continued relationship status with AltaLink LP

within the regulatory, legal and contractual framework existing from time to

time;

Where possible, for joint development projects, within regulatory frameworks

and applicable laws, the formation of exclusive or sole source agreements with

market testing or cost surety achieved through mechanisms other than

competitive bidding. This recognizes that SNC also commits to consider joint

equity arrangements, as a minority partner, with MA, and SNC commits to

deploying industry competitive resources to project opportunities;

Where practicable, for projects where SNC is a short-listed bidder, within

competitive or regulatory frameworks and applicable laws, the formation of

agreements with market testing or cost surety achieved through competitive

bidding including the pre-qualification of SNC to work with all MA companies

and supporting prequalification of SNC with MA affiliates;

A partnership duration of approximately 5 years over which period MA commits

to expend US$25 million for SNC support, fully dedicated resources and third

party costs for development and services to MA-Subs;

MA shall work with SNC to introduce SNC to representatives of MA affiliates,

including senior procurement officers, to allow SNC to prequalify for bidding

opportunities. MA affiliates include businesses that own and operate natural gas

pipelines in the U.S. and electric generation, transmission and distribution assets

in the U.S., U.K. and the Philippines.



The intent of this TS will be included as part of the Tower sale announcement.

It is intended that SNC and MA will cooperate and allocate expenses in preparing and

submitting transmission development proposals to the RTOs in North America as

mutually agreeable opportunities arise. Prior to any Party independently pursuing any

opportunities with third parties, the Parties shall discuss whether such opportunities may

be pursued jointly first. In the event that prior relationships exist, such opportunities shall

still be discussed between the Parties to determine if there is any opportunity for the other

Party to participate, subject to the applicable contractual, regulatory or legal frameworks.

…246

322. In reply argument, the CCA stated that the BHE commitment to Industry Canada

included an undertaking to invest at least $27 million in joint development opportunities in

Canada and the United States, with Canadian partners, over the next five years. The CCA was

concerned that the costs of pursuing these joint development opportunities could become direct

or indirect costs charged to ratepayers, notwithstanding MC Alberta’s response to CCA-MC

Alberta-05(g),247 which stated that AltaLink will have no obligation to fund any of the joint

development opportunities and that funding of opportunities under the joint transmission

development term sheet will be sourced from MidAmerican Transmission and BHE.

323. Consequently, the CCA recommended that approval of the applications include the

condition that the cost of joint development opportunities in Canada and the United States, with

Canadian partners, over the next five years, will be sourced from MidAmerican Transmission

and BHE and will not be included in any direct or indirect charges from AML to ratepayers.248

324. In rebuttal argument, MC Alberta submitted that it had clearly and consistently confirmed

on the record of the current proceeding that no costs associated with the joint development

opportunities reflected in BHE’s commitments to Industry Canada, which related to the joint

transmission development term sheet, would be passed on to AltaLink’s customers, as

particularly set out in its response to CCA-MC Alberta-5(g).

325. MC Alberta further argued that in its response to AE-MC-2(e) and (f), reproduced below,

it stated that as neither MC Alberta nor AltaLink is a party to the term sheet, it represents no

potential for harm to Alberta customers:

(e) There are no plans to make MAAC or any of the acquired entities, including ALP,

parties to the joint transmission development term sheet or any of the agreements arising

from the joint transmission development term sheet.

(f) There are no potential impacts, positive or negative, to Alberta customers from the

joint transmission development term sheet.249

326. Further, MC Alberta asserted that, consistent with its response to CCA-MC Alberta-

10(c),250 there are no costs that need to be identified for purposes of the Inter-Affiliate Code of

Conduct, since neither MC Alberta, ALP, or an ALP affiliate is involved in the term sheet.

246



CCA reply argument, paragraph 37. 249

Exhibit No. 90.02, AE-MC-2(e) and (f).



327. Given the foregoing, and given that the Commission will continue to exercise jurisdiction

over AltaLink rates in future proceedings, MC Alberta submitted that there is no basis for the

CCA’s recommended condition.251

Commission findings

328. MC Alberta stated in its response to CCA-MC Alberta-5(g) that the reference to joint

development opportunities in the BHE undertaking to Industry Canada generally related to

commitments made in the May 1, 2014 term sheet entered into by SNC-Lavalin Group Inc. and

MidAmerican Transmission, LLC, which was provided on the record of the current proceeding

in MC Alberta’s response to UCA-MAAC-4(a).

329. As stated previously in this decision, it is not within the jurisdiction of the Commission to

monitor BHE’s commitments to Industry Canada, including those related to the commitments

entered into by SNC-Lavalin Group Inc. and MidAmerican Transmission, LLC in their May 1,

2014 term sheet.

330. The Commission approves the tariff of AltaLink. As such, the Commission will only

approve those costs that are reasonably incurred by AltaLink to provide safe, efficient and

reliable transmission service. Any requests from AltaLink to recover costs associated with

BHE’s compliance with Industry Canada commitments referencing the term sheet must be

shown to be reasonably included as part of AltaLink’s regulated costs and, as such, will be

examined by the Commission in future tariff and deferral account proceedings.

331. The Commission does not find it necessary to impose a condition on the sale transaction

that the cost of joint development opportunities will not be included in any direct or indirect

charges from AML to ratepayers.

332. In consideration of the above, the Commission finds that the proposed sale

transaction does not fail the no harm test on the basis of joint development opportunities in the

BHE undertaking to Industry Canada.

5.7 Other matters

5.7.1 Proactive support for SNC

333. The third bullet on page one of the term sheet states:

Proactively supporting SNC's continued relationship status with AltaLink LP

within the regulatory, legal and contractual framework existing from time to

time;252

334. MC Alberta’s response to UCA-MAAC-4 (a) provided the following explanation

regarding this commitment:

The Term sheet does not (and cannot) impose any obligation on MAAC or AltaLink,

including AltaLink’s selection or use of any particular service provider. The management

of vendor contracts will remain with AML’s independent management.253

250


MC Alberta rebuttal, paragraph 49. 252

Exhibit No. 86.02, UCA-MAAC-4(a).



335. In its argument submission, the CCA indicated that while it took some comfort from MC

Alberta’s response to UCA-MAAC-4 (a), the undertaking in the term sheet could potentially be

interpreted to mean that SNC could benefit from preferential access to future vendor contract

awards from AML. Consequently, the CCA recommended that the Commission impose a

condition on the sale that would prohibit any preferential treatment of SNC in relation to any

future vendor contracting activities undertaken by AML.254

336. In rebuttal argument, MC Alberta submitted that the Commission should deny the CCA’s

request for a condition and stated that the record of the current proceeding, as evidenced by its

response to UCA-MAAC-4(a) was clear that SNC-Lavalin will not be given any such

preferential status or consideration.255

337. Further, MC Alberta referred to its response to AE-MC-14(b) and (d),256 and argued that

the Commission retains its ongoing broad regulatory authority over AltaLink, and thus has the

ability to address matters arising under the current or any future commercial arrangements

between AltaLink and SNC-Lavalin that could impact the cost or reliability of the utility service

provided by AltaLink. Additionally, MC Alberta asserted that the condition sought by the CCA

that has been consistently rejected in precedents established by the Commission and its

predecessor.257

338. In its rebuttal argument, SNC submitted that the CCA has ignored the additional evidence

set out in UCA-MAAC-4 regarding what constitutes proactive support for SNC. It also explained

that:

the term sheet does not (and cannot) impose any obligation on MC Alberta or AltaLink,

including AltaLink's selection or use of any particular service provider

the management of vendor contracts will remain with AML’s independent management

team258

the term sheet expressly provides that action which may be taken by parties must be

consistent with competitive and regulatory frameworks, and is subject to all applicable

laws259

339. Given the above, SNC submitted that the CCA’s requested condition is unnecessary and

also submitted that the Commission need not address any issues arising from the term sheet in

the context of the current proceeding.

Commission findings

340. As noted in the Commission’s findings in Section 5.4.4 above, with a change in

ownership, the services provided to AltaLink by SNC affiliates would no longer be subject to the

253

Exhibit No. 86.02, UCA-MAAC-4(a). 254

CCA reply argument, paragraphs 67 and 68. 255




Exhibit No. 86.02, response to UCA-MAAC-4. 259

Exhibit No. 139.02, SNC rebuttal argument at paragraph 24, citing Exhibit 110.02, responses to CCA-

SNCEAL-04(a) to (c).



AltaLink Inter-Affiliate Code of Conduct. However, the Commission would continue to exercise

regulatory oversight of the costs for any services provided to AltaLink, whether from an affiliate

or from an arms-length entity.

341. Notwithstanding, the clause within the term sheet which commits the parties to

proactively support SNC’s continued relationship status with AltaLink LP within the regulatory,

legal and contractual framework existing from time to time represents a potential source of harm

to ratepayers that would not exist if not for the existence of the term sheet. Given this

commitment, the Commission will exercise a more particular scrutiny of costs arising from the

provision of goods or services to AltaLink that are provided by any SNC entity, including, if

necessary, all of the processes and tools that the Commission could apply if SNC were an

affiliate. Consequently, the Commission finds that the proposed sale transaction does not fail the

no harm test on the basis of commitments made by MidAmerican Transmission to support SNC's

continued relationship status with AltaLink within the regulatory, legal and contractual

framework existing from time to time.

5.7.2 Retention of records

342. In reply argument, the CCA submitted that the current proceeding is the optimal time to

consider how to handle the impact of the severance of the existing relationship between AML

and the SNC group of companies in the context of future AltaLink GTA and deferral account

application proceedings.

343. The CCA submitted that it is the responsibility of AML to ensure that they have in their

possession, or at least have secured access to, all information necessary to ensure that they can

document the reasonableness and prudence of their decisions, regardless of the identify of their

ultimate owner at the time decisions are made. The CCA further submitted that, to the extent that

it has not already secured any information necessary for this purpose, AML needs to ensure that,

if the sale proceeds, the transaction contains any terms necessary for it to secure information that

might be needed in the future. In light of this concern, the CCA recommended that the

Commission’s approval of the application contain the following conditions:

a. AML is responsible to ensure that they have in their possession or have secured

access to all of the necessary information from SNC Entities to ensure that AML can

document the reasonableness and ultimately the prudence of their decisions for future

GTAs and Deferral Account applications.

b. In future hearings, AML will not be excused from the need to produce supporting

evidence by pleading that they no longer have access to it by reason of the severing

of relationships caused by this transaction.260

344. The UCA noted that the applicants have represented that the proposed transaction will

not introduce a new operator of the transmission business or assets comprising that business, and

also noted that no change in the management and operation of AltaLink has been proposed.

345. The UCA expected that all records necessary for the preparation of subsequent tariff

applications and financial reporting, including historical records and the data necessary for the

preparation of forecasts, will be retained by AltaLink and related entities to be owned by MC

260

CCA reply argument, paragraph 65.



Alberta if the applications are approved. However, to ensure no harm to customers in light of

these facts, the UCA also submitted that the Commission should include the following condition:

The Applicants shall ensure that all historical records relating to the ownership and

operation of the electricity transmission business shall be retained by AltaLink and the

related entities which will ultimately be owned by MC Alberta. Additionally, to the

extent that any such historical records are in the possession of any of the entities

divesting themselves of their legal or beneficial interest in the transmission business and

assets, such records shall be transferred to AltaLink, or its related entities, to ensure

continuity of record keeping and data retention.261

346. Responding to the CCA and the UCA requests regarding record retention in its rebuttal

argument, AIML submitted that the imposition of any conditions on any party to the

applications, or on persons who are not even a party to these applications, is unwarranted and

unnecessary.

347. AIML submitted that while the CCA’s requested condition with respect to record

retention appears to relate to information in the possession of SNC-Lavalin ATP Inc. (SNC-

ATP), the Commission should be aware that SNC-ATP was, and remains, a third party provider

of engineering services to AltaLink. However, if the proposed transaction is approved by this

Commission, SNC-ATP will no longer be an affiliate of AltaLink.

348. Moreover, AIML submitted that both prior to and after the closing of the proposed

transaction, AltaLink will be required to prudently incur the cost of engineering services, as it is

with all other costs. Given this, AIML submitted there is nothing in the proposed transaction that

impacts AltaLink’s obligation in the slightest, and thus no condition is remotely required or

necessary.

349. AIML noted that regardless of the sale by an upstream owner, AltaLink is untouched by

the proposed transaction and remains subject to ongoing Commission oversight. Furthermore, as

the officers and directors of AltaLink have the obligation to manage the business and affairs of

AltaLink both prior to and after the sale, and as maintaining business books and records is one of

the many obligations that management of any enterprise must undertake, AIML submitted that

the UCA’s request for conditions on books and records is unwarranted, and amounts to a request

for the Commission to become involved in the business and affairs of the utility.

350. In its rebuttal argument, MC Alberta submitted that it had reviewed and adopted the

position of AIML with respect to record retention related conditions suggested by the CCA. As

such, MC Alberta submitted that the conditions requested by the CCA are unnecessary and

inappropriate, and should be denied.

351. SNC submitted that the conditions in respect of the retention of records requested by both

the CCA and the UCA is without precedent in the context of a share transaction, and wholly

unnecessary. SNC submitted that while a condition of this sort might be required in the context

of a transaction where only specific assets are being transferred from one entity to another,262 by

its nature, a share sale is fundamentally different in that the entirety of the legal entity, together

261

UCA reply argument, paragraph 23. 262

Decision 2002-038.



with all assets including business records, are transferred to the new owner. In addition, SNC

supported the submissions of AIML with respect to the record retention issue.

Commission findings

352. The utility, AltaLink, has the statutory onus to demonstrate that its tariff is just and

reasonable. If it does not provide sufficient evidence to demonstrate this, the costs it seeks to

recover are at risk of being disallowed. The Commission finds that AltaLink will be motivated to

ensure that it maintains sufficient records or access to records for this purpose.

353. Regardless, the Commission has the statutory authority to direct the owners of an electric

utility to provide records and documents as necessary to discharge its mandate. In this regard, the

duty of the owner of an electric utility to maintain required records and accounts and to comply

with Commission direction to provide accounts and records is set out in Section 118 of the

Electric Utilities Act:

Duty to keep accounts and records

118(1) An owner of an electric utility must, with respect to the electric utility,

(a) maintain records and accounts in a manner that provides a reasonable

understanding of the operation of the electric utility, including keeping track

separately of the costs and expenses of

(i) transmission facilities, and

(ii) electric distribution systems,

(b) provide, when requested by the Commission, a detailed report of finances and

operations relating to the electric utility in the form, containing the information

and verified in the manner the Commission requires, and

(c) subject to any order of the Commission, maintain proper and adequate

depreciation, amortization or depletion accounts using any basis or method the

Commission directs.

(2) The Commission may make rules respecting the information required to be filed

with the Commission and the person required to file it, including

(a) forecasts, and

(b) separate information in relation to transmission, distribution, exchange,

purchase or sale of electric energy when one or more of those functions is

undertaken by the same person.

354. The Commission may also investigate any matter concerning a public utility, as set out in

Section 87 of the Public Utilities Act:

Investigation of public utility

87(1) The Commission may, on its own initiative, or on the application of a person

having an interest, investigate any matter concerning a public utility.



(2) When in the opinion of the Commission it is necessary to investigate a public

utility or the affairs of its owner, the Commission shall be given access to and may

use any books, documents or records with respect to the public utility and in the

possession of any owner of the public utility or municipality or under the control of

the Alberta Energy Regulator or a board, commission or department of the

Government.

(3) A person who directly or indirectly controls the business of an owner of a public

utility within Alberta and any company controlled by that person shall give the

Commission or its agent access to any of the books, documents and records that

relate to the business of the owner or shall furnish any information in respect of it

required by the Commission. RSA 2000 cP-45 s87;2007 cA-37.2 s82(25);

2012 -17.3 s104

355. In addition, under the Alberta Utilities Commission Act, the Commission has the powers

ascribed to a judge of the Court of Queen’s bench, as set out below:

Commission has powers of Queen’s Bench judge

11 In addition to any other powers conferred or imposed by this Act or any other

enactment, the Commission has, in regard to the attendance and examination of

witnesses, the production and inspection of records or other documents, the

enforcement of its orders, the payment of costs and all other matters necessary or

proper for the due exercise of its jurisdiction or otherwise for carrying any of its

powers into effect, all the powers, rights, privileges and immunities that are vested in

a judge of the Court of Queen’s Bench.

356. In light of the legislative provisions outlined above, the Commission considers that the

attachment of conditions requested by the CCA and the UCA regarding the preservation of

certain types of records is not required as a condition of the Commission’s approval of the

applications.

357. Consequently, the Commission finds that the proposed sale transaction does not fail the

no harm test on the basis that sufficient documentation will not be available to test AltaLink

GTAs because SNC-ATP will no longer be an affiliate of AltaLink.

5.7.3 Retention of key employees

358. In reply argument, the CCA referred to its preamble to CCA-MC Alberta-20,263 in which

it identified a concern with respect to material transfers of staff from AltaLink to SNC-Lavalin.

This preamble is reproduced below:

In the Statement from the Industry Minister, Berkshire Hathaway Energy claims it will

share best practices, at no cost, with AltaLink on safety, customer satisfaction,

cybersecurity and supplier diversity. MC Alberta confirmed that this statement

“accurately reflects the commitments of Berkshire Hathaway Energy to the Government

of Canada” in CCA-MC Alberta-05(b). However, MC Alberta would not confirm that

Berkshire Hathaway Energy (BHE) is prepared to make this commitment to the Alberta

Utilities Commission and noted that BHE is not an applicant in this proceeding in CCA-

MC Alberta-05(c).

263

Exhibit No. 108.02.



In Exhibit 10, when demonstrating no-harm to customers, MC Alberta makes a similar,

but not identical, claim.

In CCA-MC Alberta-05 (i) and CCA-MC Alberta-11(a)(v) and (vi), CCA endeavoured to

obtain information, among other matters, on the financial resources required to share

these best practices and to determine who will pay for the cost to share these best

practices.

For clarity, CCA does not, in principle, object to the sharing of best practices. Such

exchanges of information have the potential to benefit customers as well as MC Alberta

(as a company), MC Alberta shareholders and MC Alberta affiliates. However, based on

the responses to these information requests, CCA remains unclear as to the extent of this

proposed arrangement in terms of employees time and costs and, should the cost of these

exchanges become material, it is unclear who will pay for them.

Furthermore, CCA assumes that this “best practices” information could flow from

AltaLink to the MC Alberta affiliates as well as from MC Alberta affiliates to AltaLink.

It is unclear if such an exchange could involve the secondment or temporary transfer of

key AltaLink employees to an affiliate of MC Alberta. Experienced AltaLink employees

could find a short-term or long-term transfer to a more conducive climate in Nevada or

the PacifiCorp service territory to be particularly appealing. CCA is acutely aware of the

shortage of experienced engineering, procurement and construction resources in Alberta

that have been and will be required to address the large capital construction build

underway.

CCA is concerned about the potential for transfers of key experienced AltaLink staff to

MC Alberta affiliates, without proper compensation to AltaLink and that there are

assurances that such transfers will not cause harm to AltaLink customers.

In the original transfer of employees from TransAlta to AltaLink and then to SNC

Lavalin in the 2002 timeframe, there were concerns that such transfers resulted in harm to

customers. For example, in Decision 2003-061[264] (page 47), FIRM (an intervener)

“pointed out that some of these skills had left AltaLink with the transfer of the employees

to SNC-ATP, and now AltaLink was expressing concern for the lack of in-house

expertise.”

In a subsequent proceeding, the importance of using employees to provide base-load

EPCM requirements was noted. In Decision 2005-019[265] (page 75), it was stated:

In light of these factors, the Board finds that AltaLink’s outsourcing

arrangements with SNCATP provides no substantive benefit relative to the

management of workload variability arising from direct assign project work

anticipated at the present time. Rather, the Board is persuaded by the arguments

of IPCAA that AltaLink would have had the ability to manage such risks by

maintaining a baseload component of in-sourced full time EPCM employees to

handle the minimum amount of direct assign projects [and] by directly

264

Decision 2003-061: AltaLink Management Ltd. and TransAlta Utilities Corporation, Transmission Tariff for

May 1, 2002 – April 30, 2004, TransAlta Utilities Corporation, Transmission Tariff for January 1, 2002 –

April 30, 2002, Application Nos. 1279345, 1279347, and 1287507, August 3, 2003. 265

Decision 2005-019: AltaLink Management Ltd. and TransAlta Utilities Corporation, 2004-2007 General Tariff

Application, Application No. 1336421, March 12, 2005.





contracting with EPCM contract employees and/or consultants to handle peak

periods, just as has been done by SNC-ATP.

While it is noted that the circumstances leading to Decision 2005-019 are somewhat

different than the current circumstances, CCA seeks assurances that after the sale, key

experienced AltaLink employees will remain in AltaLink to address the forecast

substantial baseload work requirements of AltaLink. CCA anticipates potential for harm

to customers if employee transfers out of AltaLink to MC Alberta affiliates for various

reasons, including sharing of best practices and pursuit of preferred employment

opportunities are unrestrained and even encouraged.

359. The CCA submitted that, when questioned about this concern, MC Alberta stated it: “…is

not aware of the circumstances associated with specific employees before and after the

acquisition of AltaLink by SNC-Lavalin.”266 The CCA noted that in CCA-MC Alberta-20 g), it

questioned MC Alberta as to whether it could provide assurance that there will not be a material

transfer of key, experienced employees subsequent to the acquisition of AltaLink that could harm

AltaLink customers, and MC Alberta responded as follows:

AltaLink will continue to operate as an independent, stand-alone entity. MAAC does

not foresee any potential for a material transfer of key, experienced employees

occurring subsequent to the proposed acquisition that could cause harm to AltaLink

customers.267

360. In light of the foregoing, the CCA recommended that the Commission’s approval of the

applications contain the condition that MC Alberta and AML will not permit a material transfer

of key, experienced employees to other BHE affiliates subsequent to the proposed acquisition

that could cause harm to AltaLink customers.

361. In rebuttal argument, MC Alberta took note of its response to CCA-MC Alberta-20 g)268

in which it noted that AltaLink will continue to operate on an independent, stand-alone basis and

that it does not foresee a potential for a material transfer of experienced employees to occur.

Given this, MC Alberta submitted that it is unnecessary and inappropriate to condition the

approval of the applications, as the CCA recommends.

Commission findings

362. Generally, individuals can elect to terminate their relationship with their current employer

in order to work for a different employer of their choosing.

363. In the event that a material transfer of experienced employees occurs, and this transfer is

found to be at the direction of the owners of AltaLink, the Commission would consider any

financial and service quality impacts of this transfer in the context of its review of an AltaLink

tariff application. However, it is the evidence in this proceeding that such a transfer is not

contemplated. Accordingly, the Commission will not impose the condition requested by the

CCA.

266

Exhibit No. 108.02, CCA-MC Alberta-20(f). 267

Exhibit No. 108.02, CCA-MC Alberta-20(g). 268

Exhibit No. 108.02.



5.7.4 Fort McMurray project costs

364. Section 5.6 of the SPA entitled “Fort McMurray Project” addresses issues related to a

Request for Proposals (RFP) process initiated by the AESO allowing proponents to compete for

the opportunity to build, finance, own and operate the Fort McMurray West 500-kilovolt (kV)

transmission project (Fort McMurray Project), consisting of approximately 500 kilometres of

transmission infrastructure from the Wabamun area of Alberta to the Fort McMurray area of

Alberta. Section 5.6 of the SPA states that the AESO is expected to announce the preferred

proponent for the RFP process in December 2014.

365. In an attachment to the response to AUC-MAAC-5(a),269 MC Alberta provided a copy of

a joint press release dated January 17, 2014 which announced that TransAlta Corporation and

MidAmerican Transmission had, through a consortium named “TAMA Transmission,”

successfully qualified to participate as a proponent within the AESO’s Fort McMurray West

500-kV transmission project competitive process. In parts (b) and (c) of its response to AUC-

MAAC-5, MC Alberta confirmed that, at the time of its response, MidAmerican Transmission

continued to be involved in the AESO’s Fort McMurray West 500-kV transmission project RFP

process, and that no changes had been made to the structure or membership of TAMA

transmission since the issuance of the joint press release.

366. In its reply argument, the CCA referred to subsection (e) of Section 5.6 of the SPA,

which has been reproduced below:

The Parties acknowledge that American Electric Power Company, Inc. (directly or

indirectly through its Affiliates) (in this Section 5.6(e), AEP) are involved in the Fort

McMurray Project as part of the Athabasca consortium and, consequently, that the

Parties shall cooperate with AEP to the extent necessary for the fulfillment of their

respective obligations and responsibilities set forth above in Sections 5.6(b) and (c).

367. The CCA submitted that as MC Alberta has confirmed that paragraph 11.7 of the SPA

prevents any person other than the parties to the SPA from being able to rely upon or enforce the

agreements,270 neither the Commission nor interveners can rely upon any provision of the SPA to

ensure no harm to ratepayers. Given this, the CCA submitted that the Commission’s approval of

the applications should include the condition that none of the costs incurred under Section 5.6 of

the SPA will be passed on to ratepayers.

368. In rebuttal argument, MC Alberta noted that it confirmed in its response to CCA-MC

Alberta-02(e)271 that any costs incurred pursuant to Section 5.6 of the SPA payable to the

“Sellers” as designated in the SPA will not be passed on to customers. In any event, however,

MC Alberta noted that Commission review and approval within in a future tariff proceeding

would be necessary for any costs of this nature to be “passed on.” Therefore, as this commitment

is clear and unequivocal, and as the matter would be addressed, if at all, in a future tariff

proceeding, MC Alberta submitted that it is unnecessary for the Commission to take the

unprecedented step of conditioning its approval to reflect this commitment.

269


Exhibit No. 89.02, CCA-MC Alberta-02(a). 271

Exhibit No. 89.02.



Commission findings

369. The Commission accepts the undertaking of MC Alberta set out in CCA-MC Alberta

02(e) that any costs incurred pursuant to Section 5.6 of the SPA that would be payable to

“Sellers” as designated in the SPA will not be passed on to ratepayers.

370. In the event that any deliberate or inadvertent violation of this commitment to ensure that

costs related to Article 5.6 of the SPA are not passed on to customers occurs, the Commission

can address the matter in the context of future AltaLink tariff applications.

371. Given the foregoing, the Commission finds that the proposed sale transaction does not

fail the no harm test on the basis of the effect of Article 5.6 of the SPA.

6 Designation and implementation matters

6.1 Designation as owner of utility pursuant to Section 101 of the Public Utilities Act

372. In conjunction with the approval of the transaction, the applicants requested that the

Commission:

Following the closing of the acquisition272 or the pre-closing reorganization,273 add

NewCo to the Public Utilities Designation Regulation as a designated owner of a public

utility to which sections 101, 102 and 109 of the Public Utilities Act apply, and that

effective from that time to the time of actual designation, as a condition of the granting

of the applications, the Commission require NewCo to conduct itself as if it had been

designated.

Following the completion of the acquisition, remove T1 and T2 from the Public Utilities

Designation Regulation as owners of a public utility to which sections 101, 102 and 109

of the Public Utilities Act apply, and issue a declaration or order that T3 no longer be

required to conduct itself as an owner of a public utility to which sections 101, 102 and

109 of the Public Utilities Act apply.

373. Currently, AIML, AML, SNCEAL, T1, and T2 are designated in the Public Utilities

Designation Regulation Section 1(1) as an owner of a public utility to which sections 101, 102

and 109 of the Public Utilities Act apply.274 T3 is required to conduct itself as if it has been

designated as an owner of a public utility to which sections 101, 102 and 109 of the Public

Utilities Act apply.275 NewCo is not designated as a public utility owner under Section 101(1) of

the Public Utilities Act and therefore sections 101, 102 and 109 of the Public Utilities Act do not

apply to NewCo.276

374. The transfer of ownership, as described in the MC Alberta application, is a two-step

process. First, the current ownership structure of AltaLink will be reorganized such that it will be

272

Exhibit No. 129, MC Alberta, reply argument, paragraph 41. 273

Exhibit No. 139.02, SNC reply argument, paragraph 16. 274

Exhibit No. 3, SNC application, PDF page 2; Public Utilities Designation Regulation, AR 194/2006,

Section 1(1). 275

Exhibit No. 3, SNC application, PDF page 6 citing Decision 2011-374, paragraph 61. 276

Exhibit No. 3, SNC application, PDF page 12, paragraph 31.



100 per cent owned by the new corporation NewCo (pre-closing reorganization). Second, all

issued and outstanding shares in NewCo will be transferred to MC Alberta from SNC

(acquisition).277

375. The applicants submit that acquisition will not substantively change the Commission’s

regulatory authority over designated owners of public utilities in relation to the AltaLink

transmission business:278

… SNCEAL, T1, T2 and T3 will continue to be designated until the Acquisition has

closed.

Following the Acquisition, AIML and AML will continue to be designated. NewCo will

replace the SNC-Lavalin entities that are currently designated under the Public Utilities

Designation Regulation or deemed to be designated by the Commission (i.e., T1, T2 and

T3) and, as such, it is appropriate that NewCo be designated following the Acquisition

and govern itself as such until it may be designated under the Public Utilities Designation

Regulation. MC Alberta, through its purchase of the shares of NewCo, will replace the

SNC-Lavalin entities in the current AltaLink entities ownership structure that are not

designated under the Public Utilities Designation Regulation (i.e., SNC-Lavalin

Investment Alberta Ltd. and 942064), and it is appropriate that MC Alberta similarly not

be designated. The following Pre- and Post-Closing organizational charts illustrate the

designations.

376. In Decision 2011-374, authorizing the reorganization of the ownership structure of

AHLP, the Commission made the following findings:

277

Exhibit No. 129, MC Alberta argument, paragraph 7. 278

Exhibit No. 10, MC Alberta application, Attachment B, paragraphs 31-33; Exhibit No. 3, SNC application,

Attachment B, paragraphs 31-33; Exhibit No. 1, AIML application, Attachment B, paragraphs 31-33.



51. In considering the balance between the potential for positive and negative

impacts from the proposed reorganization, the Commission has taken into account

representations by the applicants that: …

…

The Commission’s regulatory oversight over ALP will remain the same.279

377. The ownership structure and organization of the entities related to AltaLink will remain

unchanged at all stages of the pre-closing reorganization and acquisition. Post-acquisition, at the

levels below NewCo, the ownership structure of AltaLink will be identical to what exists today.

378. Following the acquisition, MC Alberta will replace SNC, and NewCo will replace SNC

in the ownership structure. The SNC entities in the organization structure that remain post-

acquisition will be renamed as follows:

The SNC-Lavalin name will not continue to exist within the post- Acquisition ownership

structure. Following the completion of the Acquisition, MC Alberta intends to change the

name of SNCEAL to BHE Alberta Ltd., and change the name of SNCGPHL to BHE GP

Holdings Ltd. Additionally, MC Alberta intends to change the name of NewCo to BHE

AltaLink Ltd.280

379. No other changes, other than the name changes identified above, are contemplated in the

applications.

6.1.1 NewCo

380. As noted above, while MC Alberta supports the applications of AIML and SNC, it is not

seeking, nor does it require, approvals pursuant to sections 101 and 102 of the Public Utilities

Act to effect the acquisition. However, to provide regulatory certainty, MC Alberta requests that

in disposing of the applications, the Commission:

a) confirm that it will, following the closing of the Acquisition, request the Lieutenant

Governor in Council to add NewCo281 to the Public Utilities Designation Regulation as a

designated owner of a public utility to which sections 101, 102 and 109 of the Public

Utilities Act apply; and

b) effective from the time of completion of the Acquisition until the time of designation,

as a condition of granting the Applications, require NewCo to conduct itself as if it had

been so designated.282

381. MC Alberta submitted that these designations will maintain consistency with the

Commission’s and its predecessor’s past practice of designating both the utility itself and its

direct owner:

The basis for the request that NewCo, not MC Alberta, be designated or deemed to be

designated under the Public Utilities Designation Regulation is based on the Alberta

279


Exhibit No. 86.02, UCA-MAAC-12(c). 281

Per Exhibit No. 86.02, UCA-MAAC-12(c), MC Alberta intends to change the name of NewCo to BHE

AltaLink Ltd. 282

Exhibit No. 10, MC Alberta application, PDF page 4, paragraph 7.



Utilities Commission’s (Commission), and its predecessor the Alberta Energy and

Utilities Board’s (EUB), analyses of similar corporate organizational structures and the

existing designations in respect of the AltaLink structure.

The Commission’s and the EUB’s practice has been to recommend the designation of

“both the utility itself (as the utility operator or owner of utility assets) and the direct

owner, or parent, of the utility” (Terasen Utility Services Inc. Part 1: Proposed

Transactions, EUB Decision 2006-038[283] at paragraph 12). The EUB noted in Decision

2002-038 that:

The general partners will legally own the transmission assets of

the limited partnerships as well as control, manage and operate

the transmission facilities. They and their shareholders fall

squarely within the definition of owner of a public utility through

direct ownership and management of the business or, in the case

of the shareholders, control of the business through the election

of directors.

Applying this principle to AltaLink’s limited partnership structure, the Commission and

EUB have consistently determined that only the following “persons” should be

designated under the Public Utilities Designation Regulation as owners of public utilities

to which sections 101, 102 and 109 of the Public Utilities Act apply (see EUB Decision

2002-038, EUB Decision 2005-001,[284] EUB Decision 2006-056, and Commission

Decision 2011-374):

(i) the general partner of the limited partnership (ALP) that owns the public utility

(i.e., as the entity holding legal ownership of the assets): AML;

(ii) the general partner of the limited partnership (AHLP) that is, in turn, the limited

partner (through AILP) of the limited partnership (ALP) that owns the utility:

AIML;

(iii) the shareholders of the general partners AML and AIML: SNCEAL and

SNCGPHL; and

(iv) the corporate holders of limited partnership units of the limited partnership

(AHLP) that is, in turn, the limited partner (through AILP) of the limited

partnership (ALP) that beneficially owns the utility: T1, T2 and T3.

AML, AIML, SNCEAL and SNCGPHL should continue to be designated as owners

because they are the general partners, and the direct shareholders of the general

partners of ALP, AML, AILP and AHLP. In addition, NewCo should now be

designated because it will replace T1, T2 and T3 as the corporate holder of limited

partnership units in AHLP.285

382. Consistent with these findings, MC Alberta submitted that AltaLink Management Ltd.,

AIML, SNCEAL and SNC G.P. Holdings Ltd., should continue to be designated as owners

because they are the general partners or the direct shareholders of the general partners.286 In

283

Decision 2006-038: Terasen Utility Services Inc., Part 1: Proposed Transactions, Application No. 1443803,

April 26, 2006. 284

Decision 2005-001: AltaLink Investment Management Ltd. and Limited Partners of AltaLink Investments L.P.,

Application for Refinancing and Restructuring Under Sections 101, 102 and 109 of the PUB Act, Application

No. 1369212, January 12, 2005. 285

Exhibit No. 85.02, AUC-MAAC-2. 286

Exhibit No. 129, MC Alberta argument, paragraph 43.





addition, NewCo should be designated, as it will replace the SNC entities that are the corporate

holders of the limited partnership units in AltaLink Holdings Limited Partnership.287

383. MC Alberta argued that the same level of ownership is proposed pursuant to the Public

Utilities Designation Regulation, following the acquisition, as demonstrated in its information

request responses to the Commission:

Under the post-acquisition ownership structure, MC Alberta will be similarly situated to

SNC-Lavalin Investment Alberta Ltd. in the current ownership structure, and SNC-

Lavalin Investment Alberta Ltd. is not a designated owner. The proposed designation of

“owners” under the post-acquisition structure will be made in a manner fully consistent

with past practice of the EUB and Commission. …288

384. In its information request response to the CCA, MC Alberta indicated that it did not

support amending its application to request the Commission add MC Alberta to the Public

Utilities Designation Regulation:

Not confirmed. There is no need to amend the application because T1, T2 and T3 are

each designated owners due to the fact that they are each limited partners. T1, T2 and T3

are each designated owners due to the fact that they are each limited partners in AHLP.

Once all of the limited partnership units are transferred to NewCo, NewCo will be the

sole holder of limited partnership units in AHLP, taking the place of T1, T2 and T3 in the

AltaLink ownership structure. The proposed acquisition is a share purchase transaction

and will not affect customers or any regulatory protections for customers.289

385. SNC submitted that following completion of the proposed acquisition, NewCo will be the

“owner” of the utility under the terms of the Public Utilities Act, not MC Alberta.290 SNC argued

that the requests for relief made in respect of T1, T2 and T3 are entirely consistent with past

decisions and past practice of the Commission.291 SNC submitted that once NewCo is added to

the Public Utilities Designation Regulation, or in the alternative is directed by the Commission

to conduct itself as an owner of a public utility to which sections 101, 102 and 109 of the Public

Utilities Act apply, then the Commission will continue to have regulatory oversight over the

owner of the public utility.292

386. Further, SNC submitted that the Commission's ability to exercise its considerable

regulatory powers and oversight of ALP's regulated transmission business in the public interest

(including with respect to any future ownership change) remains undiminished by the

contemplated pre-closing reorganization and acquisition.293

387. Should the transaction proceed, the CCA argued it is necessary for NewCo to be added to

the Public Utilities Designation Regulation as an owner of a public utility and that pending that

designation, the Commission impose a condition that NewCo conduct itself as if so designated

287


Exhibit No. 129, MC Alberta argument, PDF page 14, paragraph 39, citing Exhibit No. 90, AE-MC-17(f). 289

Exhibit No. 89.02, MCCA responses to CCA IRs, CCA-MCA-003(e). 290

Exhibit No. 128, SNC argument, PDF page 10, paragraph 15. 291



Exhibit No. 128, SNC argument, PDF page 8, paragraph 10(i) citing Exhibit No. 3, Attachment B at

paragraph 30.



from the time of completion of the pre-closing reorganization until the time of designation.294 The

CCA submitted that NewCo should be required to comply fully with its obligations as the new

owner of a public utility, whether these be imposed by condition or designation.295

388. The UCA agreed that NewCo should be added to the list of designated owners of a public

utility under the Public Utilities Designation Regulation and supported a request from the

Commission to the Lieutenant Governor in Council to this effect.296 The UCA also agreed that

until such time as NewCo is included in the Public Utilities Designation Regulation, it should be

required to conduct itself as if it were so designated.297

389. MC Alberta and AIML requested that the Commission confirm that it will, following the

closing of the acquisition, request the lieutenant-governor in council to add NewCo to the Public

Utilities Designation Regulation as a designated owner of a public utility and, effective from the

time of completion of the acquisition until the time of designation, require NewCo to conduct

itself as if it were so designated.298

390. SNC requested that NewCo be required to govern itself as though it is an owner of a

public utility following the completion of the entirety of the pre-closing reorganization.

391. The UCA submitted that the appropriate timing for NewCo to be required to conduct

itself as if it has been designated as an owner pursuant to the Public Utilities Designation

Regulation is immediately following its acquisition of limited partnership units in T1, T2 and T3

(or any of them).299 The UCA proposed the following condition:300

The Commission shall request of the Lieutenant Governor in Council that NewCo be

added to the list of designated owners of a public utility under the Public Utilities

Designation Regulation and further, that NewCo shall be required to conduct itself as if it

were so designated immediately following its acquisition of any limited partnership units

in T1, T2 and T3, or any of them, until such time as NewCo is included in the Public

Utilities Designation Regulation.

392. The UCA relied on the Commission’s discussion in Decision 2011-374, which stated:

“…the ultimate beneficial owners of a limited partnership structure and the general partners

should be considered designated owners pursuant to sections 101, 102 and 109 of the Public

Utilities Act.”301 The UCA further highlighted information request UCA-SNC-2(c), reproduced

below:

Please explain why the effective date of NewCo being treated / designated as a public

utility should be following the completion of the Pre-Closing Reorganization. In

particular, please explain why a more appropriate effective date would not be upon

NewCo’s acquisition of T1, T2 and T3’s LP Units in AHLP.

294

Exhibit No. 137, CCA reply argument, paragraph 71. 295


Exhibit No. 135, UCA reply argument, paragraph 29. 297




Exhibit No. 135, UCA reply argument, paragraph 35(c). 301

Exhibit No. 135, UCA reply argument, paragraph 31 citing Decision 2011-374, at paragraph 64.



Response: SNC anticipates that the steps in the Pre-Closing Reorganization will occur

quickly and in succession, and therefore, it would be appropriate for Newco to govern

itself as though it is an owner of a public utility following completion of the entirety of

the Pre-Closing Reorganization. It is open for the AUC to determine that Newco should

govern itself as an owner of a public utility earlier in the Pre-Closing Reorganization

process, such as upon Newco's acquisition of T1, T2 and T3's LP Units in AHLP, which

is why SNC has requested in the alternative that the AUC issue all necessary orders in

order to effect the Pre-Closing Reorganization and proposed Acquisition.302

393. Additionally, in UCA-SNC-002a, the UCA asked SNC to explain why the transaction

discussed in (2) and (3) below should not require Commission approval:

T1, T2, T3 and SNCEAL are also making application to the Commission for: (i) a

declaration that Orders are not required pursuant to: …

(2) subsection 102(1) of the Public Utilities Act authorizing NewCo to make on its books

a transfer of all of the common shares of its capital held by 942064 to T1 in consideration

for T1 issuing shares in T1's capital to 942064, as set out in step (d) below;

(3) subsection 102(1) of the Public Utilities Act authorizing NewCo to make on its books

a transfer of all of the common shares of its capital held by T1, T2 and T3 to MC Alberta,

as set out in step (e) below;

394. SNC responded:303

It is anticipated that the steps in the Pre-Closing Reorganization described in the

Application and Attachment B to the Application will occur quickly and in succession.

During the course of the Pre-Closing Reorganization, NewCo will not have been

designated as an owner of a public utility, and as a result, SNC has requested a

declaration from the AUC that an order pursuant to section 102(1) of the Public Utilities

Act is not required in order for NewCo to make on its books a transfer of any shares of its

capital stock. SNC has, however, requested in the alternative that the AUC grant such

order authorizing NewCo to make on its books a transfer of any shares of its capital stock

if the AUC determines such order is necessary.

395. MC Alberta adopted this submission.304

396. The UCA submitted that upon NewCo acquiring any limited partnership interest in

AHLP, it will become an ultimate beneficial owner of a public utility and should be required to

conduct itself as such.305 The UCA argued that it would be more appropriate for NewCo to

govern itself as though it is an owner of a public utility as soon as it, in fact, becomes an owner

of a public utility, irrespective of the anticipated timing of the subsequent steps of the

transaction.306 The UCA claimed that this will ensure that should the transaction not be

completed as proposed, or the timing of the same is not accomplished as anticipated, there is no

risk that NewCo is in a position of being the owner of a public utility without being subject to the

302

Exhibit No. 91.02, UCA-SNC-2(c). 303

Exhibit No. 91.02, SNC response to UCA information requests, UCA-SNC-002. 304

Exhibit No. 138.02, MC Alberta reply argument, paragraph 71 citing SNC reply argument. 305


Exhibit No. 135, UCA reply argument, paragraph 34.



regulatory oversight and requirements that the owners of public utilities are intended to be

governed by, pursuant to the Public Utilities Act.307

6.1.2 T1, T2, and T3

397. In order to provide regulatory certainty, T1, T2, T3 and SNCEAL requested that, as part

of the order or orders, the Commission will, following the completion of the acquisition, request

the lieutenant-governor in council:308

Remove T1 and T2 from the Public Utilities Designation Regulation as owners of a

public utility to which sections 101, 102 and 109 of the Public Utilities Act apply

Issue a declaration or Order that T3 no longer be required to conduct itself as an owner of

a public utility to which sections 101, 102 and 109 of the Public Utilities Act apply.

398. SNC submitted that following completion of the proposed acquisition, NewCo will be the

“owner” of the utility under the terms of the Public Utilities Act, not MC Alberta.309 SNC argued

that once NewCo is added to the Public Utilities Designation Regulation, or in the alternative is

directed by the Commission to conduct itself as an owner of a public utility to which sections

101, 102 and 109 of the Public Utilities Act apply, there simply would be no need to keep T1, T2

and T3 designated as owners, as following close of the Acquisition, T1, T2 and T3 will not have

any interest (legal or beneficial) in any public utility assets or business in Alberta310 and will no

longer be the owners of a public utility pursuant to the terms of the Public Utilities Act.

399. SNC noted once NewCo is designated or directed to conduct itself as if designated, the

Commission will continue to have regulatory oversight over the owner of the public utility.311

400. SNC argued that the requests for relief made in respect of T1, T2 and T3 are entirely

consistent with past decisions and past practice of the Commission.312

401. The UCA did not object to:

the designations of T1 and T2 as owners of public utilities pursuant to the Public Utilities

Designation Regulation being rescinded following the completion of any approved sale

a declaration by the Commission that T3 is no longer required to conduct itself as if it

were a designated public utility following the transaction

on the basis that SNC has confirmed that none of T1, T2 or T3 will have any interest, legal or

beneficial, in any public utility assets or business in Alberta following completion of the

Acquisition.313 Similarly, the UCA did not object to a declaration by the Commission that T3 is

no longer required to conduct itself as if it were a designated public utility following the

transaction.314

307


Exhibit No. 3, SNC application, PDF page 9, paragraphs 19-20. 309


Exhibit No. 91.02, response to UCA-SNC-1(a) to (c). 311



Exhibit No. 135, UCA reply argument, paragraph 28, citing Exhibit No. 91.02, UCA-SNC-1(a) to (c). 314

Exhibit No. 135, UCA reply argument, paragraph 28.



402. T1, T2, T3 and SNCEAL requested that, as part of the order or orders, the Commission

will, following the completion of the acquisition, request the lieutenant-governor in council to:315

Remove T1 and T2 from the Public Utilities Designation Regulation as owners of a

public utility to which sections 101, 102 and 109 of the Public Utilities Act apply.

Issue a declaration or order that T3 no longer be required to conduct itself as an owner of

a public utility to which sections 101, 102 and 109 of the Public Utilities Act apply.

403. None of the parties to the applications disagreed with the proposed timing.

6.1.3 Commission findings

404. Extracts from Sections 101, 102 of the Public Utilities Act were provided above in

paragraphs 50 and 51 of this decision. For convenience, the full sections have been reproduced

here along with Section 109 of the Public Utilities Act:

Designated public utilities

101(1) The Lieutenant Governor in Council may by regulation designate those owners of

public utilities to which this section and section 102 apply.

(2) No owner of a public utility designated under subsection (1)shall

(a) issue any

(i) of its shares or stock, or

(ii) bonds or other evidences of indebtedness, payable in more than one

year from the date of them,

unless it has first satisfied the Commission that the proposed issue is to

be made in accordance with law and has obtained the approval of the

Commission for the purposes of the issue and an order of the

Commission authorizing the issue,

(b) capitalize

(i) its right to exist as a corporation,

(ii) a right, franchise or privilege in excess of the amount actually paid to

the Government or a municipality as the consideration for it, exclusive of

any tax or annual charge, or

(iii) a contract for consolidation, amalgamation or merger,

(c) without the approval of the Commission, capitalize any lease, or

(d) without the approval of the Commission,

315

Exhibit No. 3, SNC application, PDF page 9, paragraphs 19-20.



(i) sell, lease, mortgage or otherwise dispose of or encumber its property,

franchises, privileges or rights, or any part of them, or

(ii) merge or consolidate its property, franchises, privileges or rights, or

any part of them,

and a sale, lease, mortgage, disposition, encumbrance, merger or

consolidation made in contravention of this clause is void, but nothing in

this clause shall be construed to prevent in any way the sale, lease,

mortgage, disposition, encumbrance, merger or consolidation of any of

the property of an owner of a public utility designated under subsection

(1) in the ordinary course of the owner’s business.

(3) Notwithstanding subsection (2), the approval, authority, permission or consent of the

Commission is not required in or with respect to

(a) the issue of any shares of its capital stock by an owner of a public utility

under the exercise of an optional right of conversion attaching to any shares,

stocks, bonds, debentures, debenture stock or other evidence of indebtedness the

issue of which has previously been approved by the Commission or was not

required to be approved by the Commission by reason of an existing declaration

made under subsection (4),

(b) a right of entry, sale, disposition or other proceedings for the enforcement of a

mortgage or charge created by trust deed or other instrument or security, in the

enforcement of, or pursuant to, the security constituted by it or in the exercise of

the rights or remedies granted in it or otherwise available at law, if the trust deed

or other instrument or security was approved or authorized by the Commission or

was not required to be approved or authorized by the Commission by reason of

an existing declaration made under subsection (4), or

(c) the declaration or issuance of a stock dividend by an owner of a public utility.

(4) The Commission, on its own initiative or on the application of a person having an

interest, may, or on the order of the Lieutenant Governor in Council shall, declare that

subsection (2) or any part of it does not apply with respect to any transaction or class of

transactions specified in the declaration.

(5) Where a declaration is made under subsection (4) in respect of a transaction entered

into before the making of the declaration, the transaction,

(a) in the case of a transaction under subsection (2)(a), (b) or (c), is deemed not to

have been in contravention of that subsection, and

(b) in the case of a transaction under subsection (2)(d), is deemed to be no longer

void and to have been in force and effect from the date of the transaction, except

that the declaration does not affect any other rights that have accrued prior to the

declaration.

Prohibited share transaction

102(1) Unless authorized to do so by an order of the Commission, the owner of a public

utility designated under section 101(1) shall not sell or make or permit to be made on its



books a transfer of any share of its capital stock to a corporation, however incorporated,

if the sale or transfer, in itself or in connection with previous sales or transfers, would

result in the vesting in that corporation of more than 50% of the outstanding capital stock

of the owner of the public utility.

(2) A purported

(a) assignment or transfer, or

(b) agreement for assignment or transfer,

by or through any person or corporation in contravention of subsection (1) is void.

(3) Nothing in subsection (1) shall be construed to prevent the holding of stock lawfully

acquired before July 1, 1923.

Union of utilities

109(1) The Lieutenant Governor in Council may by regulation designate those owners of

public utilities to which this section applies.

(2) When, by a general or special Act, an owner of a public utility that is the subject of a

designation under subsection (1) is authorized to unite with the owner of any other public

utility, whether or not the owner of that other public utility is the subject of such a

designation, the union has no effect unless it is first approved by the Commission and

published in The Alberta Gazette.

405. The Commission notes that designation of AltaLink general partners as owners, pursuant

to Section 101 of the Public Utilities Act, was previously addressed by the Commission’s

predecessor in Decision 2002-038.316 The Commission continues to be of the view that the

ultimate beneficial owners of a limited partnership structure and the general partners should be

considered designated owners to which sections 101, 102 and 109 of the Public Utilities Act

apply.

406. MC Alberta and AIML requested that the Commission confirm that it will, following the

closing of the acquisition, request the lieutenant-governor in council to add NewCo to the Public

Utilities Designation Regulation as a designated owner of a public utility.

407. The Commission therefore considers that, consistent with Decision 2002-038, NewCo

should be designated by the lieutenant-governor in council as an owner of a public utility to

which sections 101, 102 and 109 of the Public Utilities Act apply. The Commission therefore

will, following the acquisition, request that the lieutenant-governor in council designate NewCo

as an owner of a public utility to which sections 101, 102 and 109 of the Public Utilities Act

apply.

408. There were some differences among the parties regarding when NewCo should conduct

itself as if it were designated. MC Alberta and AIML recommended that the obligation begin

with the completion of the acquisition, SNC recommended that the obligation commence

following the pre-closing reorganization, and the UCA recommended that the obligation start

316

Decision 2002-038, page 14.



immediately following its acquisition of limited partnership units in T1, T2 and T3 (or any of

them).

409. In Decision 2011-374,317 the applicants requested that T3 conduct itself as if it had been

designated following the close of the proposed transaction. In that proceeding, there were no

alternative submissions as to timing, and the Commission granted the applicants’ requests.

410. The Commission notes the applicants’ submissions that the transactions will occur

quickly. However, the Commission finds that not much is known about NewCo, as the entity has

not yet been incorporated, and will be fully-owned by a new participant to Alberta’s regulated

utility market. In addition, the Commission considers that the UCA’s proposed timing is

consistent with the wording of the Public Utilities Act.

411. For the above reasons, NewCo should be required to conduct itself as if designated,

effective from the time it acquires limited partnership units in T1, T2 or T3, until the time of

designation, as a condition of granting the applications. NewCo will inform the Commission

when it acquires limited partnership units in T1, T2 or T3, either before or on the day of

acquisition.

412. For similar reasons, once NewCo acquires T1, T2, and T3, none of T1, T2 or T3 will

have any interest, legal or beneficial, in any public utility assets or business in Alberta, following

completion of the acquisition. The Commission notes that no parties contested the removal of

designation, or requirement to act as if designated, for T1, T2, or T3, or the timing. Therefore,

the Commission will, following the completion of the acquisition, request the lieutenant-

governor in council to remove T1 and T2 from the Public Utilities Designation Regulation as

owners of a public utility to which sections 101, 102 and 109 of the Public Utilities Act apply,

and issue a declaration or order that T3 no longer be required to conduct itself as an owner of a

public utility to which sections 101, 102 and 109 of the Public Utilities Act apply.

413. The Commission is concerned that MC Alberta, as an applicant, has made representations

to the Commission respecting owner commitments. Conversely, NewCo, which the applicants

wish to be identified as a designated owner, is not yet incorporated and consequently, no

commitments have been provided regarding AltaLink. For these reasons, following the closing of

the acquisition, the Commission also directs MC Alberta to act as if it is a designated owner of a

public utility pursuant to Public Utilities Designation Regulation. In time, e.g., once NewCo has

been incorporated and MC Alberta’s representations as set out in the applications have been

transferred to NewCo, MC Alberta may apply to the Commission to have this requirement

removed.

6.2 Legislative procedures

414. There are certain steps in the pre-closing reorganization and acquisition which require, or

may require, Commission approval, declarations and orders. The applicants requested that the

Commission consider the pre-closing reorganization and acquisition as a whole, and determine

that approval of the series of transactions as a whole is in the public interest because the no harm

test has been met.318 The applicants submitted it would therefore be in the public interest for the

Commission to issue all necessary approvals, authorizations and declarations necessary to give

317

Decision 2011-374. 318

Exhibit No. 3, SNC application, PDF page 9, paragraph 19.



effect to the proposed pre-closing reorganization and acquisition.319 The relief requested is set out

in Section 3.2 of this decision.320

415. In their reply argument, the CCA submitted that, for the relief requested in paragraphs

37(g), (h), and (j) of the decision, the Public Utilities Act expressly requires that, in addition to

obtaining approval from the Commission, an order must also be obtained from the Commission

authorising each of the requests described.321 The CCA argued that none of the applicants has

provided justification for the request that the Commission dispense with the prerequisites set out

by the legislature that the Commission must issue specific orders permitting NewCo as the owner

of a public utility to issue and transfer its shares in this way.322

416. The CCA requested that in these circumstances, the Commission grant the applicants the

relief requested in the alternative; that is, that the Commission issue the orders enabling NewCo

and any other owners of the public utility from time to time during the transaction, as necessary,

to effect each of the relevant share related transactions that the Commission determines should

proceed.323

417. In SNC’s reply argument, it referenced its information request response to UCA-SNC-

002:

It is anticipated that the steps in the Pre-Closing Reorganization described in the

Application and Attachment B to the Application will occur quickly and in succession.

During the course of the Pre-Closing Reorganization, Newco will not have been

designated as an owner of a public utility, and as a result, SNC has requested a

declaration from the AUC that an order pursuant to section 102(1) of the Public Utilities

Act is not required in order for Newco to make on its books a transfer of any shares of its

capital stock. SNC has, however, requested in the alternative that the AUC grant such

order authorizing Newco to make on its books a transfer of any shares of its capital stock

if the AUC determines such order is necessary.324

418. MC Alberta adopted SNC’s submission.325

419. The Commission approves the alternative relief requested in paragraph 37 (g), (h) and (j)

of this decision.

319

Exhibit No. 3, SNC application, PDF page 9, paragraph 19. 320

Exhibit No. 3, SNC application, paragraphs 14 to 25. 321




Exhibit No. 91.02, SNC response to UCA information requests, UCA-SNC-002. 325

Exhibit No. 138.02, MC Alberta reply argument, paragraph 71 citing SNC reply argument.



7 Order

420. The following orders are hereby provided:

(1) Pursuant to Section 101(2) of the Public Utilities Act, an order authorizing T1, T2

and T3 to sell and transfer 100 per cent of the Limited Partnership Units in AHLP

to NewCo in consideration for NewCo issuing common shares in the capital of

NewCo to each of T1, T2 and T3, resulting in NewCo owning directly or

indirectly, 100 per cent of the limited partnership interests of AHLP, AILP and

ALP.

(2) Pursuant to Section 102(1) of the Public Utilities Act, an order authorizing the

transfer on SNCEAL’s books of all of the shares in its capital from 942064 to

NewCo in consideration for NewCo issuing common shares in its capital to

942064, which will result in NewCo owning directly or indirectly, 100 per cent of

AML and AIML.

(3) Pursuant to Section 101(2)(a)(i) of the Public Utilities Act, an order authorizing

T1 to issue shares in the capital of T1 to 942064.

(4) Pursuant to Section 101(2) of the Public Utilities Act, an order authorizing

NewCo to issue common shares in its capital to each of T1, T2, T3 and 942064.

(5) Pursuant to 102(1) of the Public Utilities Act, an order authorizing a transfer on

NewCo’s books of all of the common shares in its capital held by 942064 to T1 in

consideration for T1 issuing shares in T1’s capital to 942064.

(6) Pursuant to Section 102(1) of the Public Utilities Act, an order authorizing a

transfer on NewCo’s books of all of the common shares of its capital held by T1,

T2 and T3 to MC Alberta.

(7) Pursuant to Section 102(1) of the Public Utilities Act, an order authorizing T1, T2

and T3 to sell and transfer all issued outstanding shares in the capital of NewCo to

MC Alberta.

(8) Following the completion of the pre-closing reorganization, an order requesting

that the lieutenant-governor in council add NewCo to the Public Utilities

Designation Regulation as an owner of a public utility to which sections 101,102

and 109 of the Public Utilities Act apply and that effective from the time of the

completion of the pre-closing reorganization until the time of designation, NewCo

will conduct itself as if it has been so designated.

(9) Following completion of the pre-closing reorganization, an order that effective

from the time of the completion of the pre-closing reorganization that MC Alberta

conduct itself as if it has been designated as an owner of a public utility to which

sections 101, 102 and109 of the Public Utilities Act, apply.

(10) Following the completion of the acquisition, an order requesting that the

lieutenant-governor in council remove T1 and T2 from the Public Utilities



Designation Regulation as owners of a public utility to which sections 101,102

and 109 of the Public Utilities Act, apply.

(11) Following completion of the acquisition, an order that T3 no longer be required to

conduct itself as an owner of a public utility to which sections 101,102, and 109

of the Public Utilities Act, apply.

Dated on November 28, 2014.


(original signed by)

Willie Grieve, QC

Chair


Mark Kolesar

Vice-Chair


Bill Lyttle

Commission Member



Appendix 1 – Proceeding participants

Name of organization (abbreviation) counsel or representative

AltaLink Investment Management Ltd. (AIML)

K. Barnes (Borden, Ladner, Gervais LLP) R. Block (Borden, Ladner, Gervais LLP) C. Hollar (Borden, Ladner, Gervais LLP) T. Petrenko (Borden, Ladner, Gervais LLP) H. Williamson (Borden, Ladner, Gervais LLP)


T. Campbell Z. Lazic


L. Keough (Bennett Jones) S. Ambeault L. Brown D. DeChamplain D. Freedman J. Gordey L. Kizuk B. Li A. Phillips

Benign Energy II Inc. (BECI)

A. Kettles

Consumers’ Coalition of Alberta (CCA)

J. A. Wachowich R. Retnanandan

EPCOR Distribution and Transmission Inc. (EDTI)

J. Baraniecki N. Lamers

Individuals

J. Anglin J. Flatman B. Overly S. Mansell A. Romanchuk A. Sadée

Industrial Power Consumers Association of Alberta (IPCAA)

V. Bellissimo J. Cheng

MidAmerican (Alberta) Canada Holdings Corporation (MidAmerican)

D. Both (Fasken Martineau Dumoulin LLP) P. Feldberg (Fasken Martineau Dumoulin LLP) J. Liteplo (Fasken Martineau Dumoulin LLP) A. Kelly M. McVee




Office of the Utilities Consumer Advocate (UCA)

T. Marriott (Brownlee LLP) K. Kellgren (Brownlee LLP) R. Daw (Brownlee LLP) H. Gnenz

SNC-Lavalin Transmission Ltd., SNC-Lavalin Transmission II Ltd., SNC-Lavalin Transmission III Ltd., and SNC-Lavalin Energy Alberta Ltd. (collectively SNC)

B. Ho (Norton Rose Fulbright Canada LLP) M. Jodoin

The Alberta Utilities Commission Commission Panel W. Grieve, QC, Chair M. Kolesar, Vice-Chair B. Lyttle, Commission Member Commission Staff

C. Wall (Commission counsel) J. Halls A. Eckert J. Graham



Appendix 2 – Oral hearing – registered appearances


AltaLink Investment Management Ltd. (AIML)

H. Williamson M. Massicotte


Z. Lazic


L. Keough

Benign Energy II Inc. (Benign)

A. Kettles

Individuals

J. Anglin

MidAmerican (Alberta) Canada Holdings Corporation (MC Alberta)

P. Feldberg (Fasken Martineau Dumoulin LLP) J. Liteplo (Fasken Martineau Dumoulin LLP)

Office of the Utilities Consumer Advocate (UCA)

T. Marriott (Brownlee LLP)

SNC-Lavalin Transmission Ltd., SNC-Lavalin Transmission II Ltd., SNC-Lavalin Transmission III Ltd., and SNC-Lavalin Energy Alberta Ltd. (collectively SNC)

B. Ho (Norton Rose Fulbright Canada LLP)

The Alberta Utilities Commission Commission Panel W. Grieve, QC, Chair M. Kolesar, Vice-Chair B. Lyttle, Commission Member Commission Staff

C. Wall (Commission counsel) J. Halls



Appendix 3 – Summary of Commission directions

This section is provided for the convenience of readers. In the event of any difference between

the directions in this section and those in the main body of the decision, the wording in the main

body of the decision shall prevail.

1. Accordingly, the Commission considers that the proposed transactions do not fail the no

harm test on the basis that the transactions may adversely affect the credit worthiness of

AltaLink. Nonetheless, to ensure that the ring-fencing measures remain in place and are

adequate, following consummation of the transaction, the Commission directs

AIML/AML to file an updated affidavit on the revised ring-fencing measures upon

closing of the transactions proposed in the applications. .............................. Paragraph 180

2. The Commission directs AIML/AML to provide any changes to its Inter-Affiliate Code

of Conduct to reflect the new ownership structure upon closing of the transactions.

........................................................................................................................ Paragraph 195

3. As AltaLink’s revenue requirement forecasts are assessed for reasonableness against

actual expenditures in prior years, it is important that any AltaLink staff time or other

resources that may be included in AltaLink reports of actual expenditures provided as

part of AltaLink tariff applications clearly indicate any AltaLink resources used in

relation to the transaction and used to prepare and support the applications in this

proceeding and the applications in Proceeding No. 2983, which was the prior application

filed by the SNC group to divest a certain percentage of its ownership interest in

AltaLink. Proceeding No. 2983 is currently suspended. Accordingly, the Commission

directs AIML to prepare a full accounting of all AIML activities and resources and the

costs related thereto, associated with the acquisition and any costs to prepare and support

the applications in this proceeding and the application in Proceeding No. 2983 and to file

that accounting on the record of Proceeding No. 3524, which is AltaLink’s tariff

application for the test years of 2015-2016. .................................................. Paragraph 276

4. In addition, the Commission further directs AIML to file correspondence on the record of

Proceeding No. 3524 which fully describes the amendments that AltaLink expects to

make to its 2015-2016 GTA in order to comply with this direction and the timing by

which such amendments will be filed. .......................................................... Paragraph 277

5. The Commission is concerned that MC Alberta, as an applicant, has made representations

to the Commission respecting owner commitments. Conversely, NewCo, which the

applicants wish to be identified as a designated owner, is not yet incorporated and

consequently, no commitments have been provided regarding AltaLink. For these

reasons, following the closing of the acquisition, the Commission also directs MC

Alberta to act as if it is a designated owner of a public utility pursuant to Public Utilities

Designation Regulation. In time, e.g., once NewCo has been incorporated and MC

Alberta’s representations as set out in the applications have been transferred to NewCo,

MC Alberta may apply to the Commission to have this requirement removed.

........................................................................................................................ Paragraph 413



Appendix 4 – Abbreviations

Abbreviation Name in full

942064 942064 Alberta Ltd.

AESO Alberta Electric System Operator

AHLP AltaLink Holdings, L.P.

AILP AltaLink Investments, L.P.

AIML AltaLink Investment Management Ltd.

ALP AltaLink, L.P.

AML AltaLink Management Ltd.

ARC advance ruling certificate

ATCO ATCO Electric Ltd.

AUC Alberta Utilities Commission

BECI Benign Energy Canada II Inc.

BHE Berkshire Hathaway Energy Corporation

CCA Consumers’ Coalition of Alberta

Commission Alberta Utilities Commission

DBRS Dominion Bond Rating Service

EDTI EPCOR Distribution & Transmission Inc.

EPCM engineering procurement and construction management

EUB Alberta Energy and Utilities Board

FortisAlberta FortisAlberta Inc.

GTA general tariff application

ISO Independent System Operator

kV kilovolt

MC Alberta or

MAAC MidAmerican (Alberta) Canada Holdings Corporation

NewCo

NewCo will be incorporated under the Business Corporations

Act (Alberta) and will be created for the purpose of the

acquisition of the shares of the SNC-Lavalin entities who are

currently the designated owners of AltaLink.

RFP request for proposals

S&P Standard & Poor’s

SIP statement of intent to participate

SNC collectively, T1, T2, T3 and SNCEAL

SNC-ATP SNC-Lavalin ATP Inc.

SNCEAL SNC-Lavalin Energy Alberta Ltd.

SNCGPHL SNC-Lavalin G.P. Holdings Ltd.



Abbreviation Name in full

SPA share purchase agreement

Stores Block ATCO Gas and Pipelines Ltd. V. Alberta (Energy and Utilities

Board)1 [2006] 1 S.C.R. 140, [2006] S.C.J. No.4, 2006 SCC 4

T1 SNC-Lavalin Transmission Ltd.

T2 SNC-Lavalin Transmission II Ltd.

T3 SNC-Lavalin Transmission III Ltd.

term sheet Joint Transmission Development Agreement Term Sheet

TFO transmission facility owner

UCA Office of the Utilities Consumer Advocate

decision 2014-326 altalink investment management ltd. and snc lavalin … · 2018-02-23 ·...

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