Hay River urges rejection of ’11th-hour’ Northland franchise request

Hay River says it “objects in the strongest possible terms” to Northland Utilities’ suggestion that handing the town’s power franchise to another operator may be against the public interest.

Almost seven years have passed since the town chose the NWT Power Corporation to replace Northland Utilities as the local power distributor, in the hope that residents would enjoy cheaper rates.

The transfer from Northland to NTPC has been delayed by years of litigation and arbitration.

While that transfer is set to be finalized this year, Northland used a September regulatory filing to ask the Public Utilities Board – the NWT’s power regulator – whether customers might be better off with Northland in charge, despite town council’s wishes. The company suggested the board could use its power to call off the entire transfer and leave the franchise in Northland’s hands.

Northland says $2.2 million in costs associated with transferring the franchise will need to be paid by someone else, most likely either Hay River residents or Northland’s other customers. In September’s filing, Northland suggested to the board that such an outcome would not be fair to residents.

“We want to make sure the remaining customers aren’t affected, and that’s that public interest test,” said Jay Massie, Northland’s vice-president of northern development and Indigenous relations, in October.

Massie told Cabin Radio that calling off the transfer would be “a reasonable outcome.”

In a response filed with the Public Utilities Board last week, the Town of Hay River said Northland Utilities was trying to avoid paying costs that an arbitrator had already ruled on last year.

The town also submitted arbitrator Jack Marshall’s January 2022 ruling to the board, making that document public for the first time.

In that ruling, Marshall dismissed what he said was Northland Utilities’ central argument – that the town had terminated the franchise agreement and that, as a consequence, the town should bear the cost of the transfer.

Marshall instead agreed with the Town of Hay River that the franchise had ended as it was always supposed to, in November 2016 as set out in documents governing the franchise, and the town had simply decided to select another provider after that point, as it was always entitled to do.

The arbitrator said Northland had been under the “apparent mistaken assumption that the franchise agreement would continue indefinitely,” instead of assuming the franchise might end on November 30, 2016 as established in the documentation. If the company had planned for that reasonable outcome, Marshall wrote, “it may have been in a better position to control what it now faces as transaction costs.”

‘No-one’s fault but NUL’s’

In last week’s letter to the Public Utilities Board, the town said Northland was now simply taking the arguments already rejected by the arbitrator and trying them on the board instead, hoping for a different outcome.

“This second request for recovery of these costs is, with respect, inappropriate, and amounts to an abuse of process,” lawyer Thomas Marriott of Brownlee LLP, representing the town, wrote to the board.

Marriott argues that the Public Utilities Board cannot be considered a court of appeal if Northland does not like the arbitrator’s ruling. The actual court system exists to hear those appeals, Marriott noted, and has twice rejected appeals by Northland regarding an earlier arbitration during this same transfer process. (Northland did not appeal the January 2022 arbitration ruling, Marriott said.)

Marriott said Northland, also known as NUL, is now “asking the board to directly quash the decision of the arbitrator and replace it with a determination in NUL’s favour. This is made plain when NUL refers to the so-called termination costs as costs ‘related to the franchise termination,’ in spite of the arbitrator’s finding that the franchise had not been ‘terminated’ by the town at all.”

Rather than trying to shift the $2.2 million in transfer costs onto customers, Marriott stated, Northland has already been ordered by the arbitrator to absorb transfer costs itself as the consequence of failing to plan for the eventuality that the franchise might end on schedule.

“If it did not recognize or account for this risk, that is no-one’s fault but NUL’s. It is certainly not the fault of the town or of customers either within or outside of the town,” Marriott wrote.

Lastly, he warned that the board accepting Northland’s public-interest argument would set a concerning precedent.

“Having now gone through this lengthy legal process with the town, having exhausted its available appeal rights respecting the arbitrator’s decisions, and having worked extensively with the town and NTPC to facilitate the upcoming transfer of the franchise, NUL cannot now, at the 11th hour, ask the board to consider unwinding all steps that have taken place to date,” Marriott said of Northland’s suggestion that the transfer could be called off.

“If the board allows this, the town is concerned that the legislated jurisdiction of the arbitrator to set the terms of purchase and sale will effectively be eliminated. A franchise will be purchased on the utility’s terms, or not at all.”

Northland Utilities is expected to file more documents with the Public Utilities Board this month. The board is ultimately tasked with deciding what happens to the transfer costs if the parties involved can’t agree, and must then issue formal approval for the franchise switch to go ahead.

In its own brief letter on January 6, the board requested fresh documentation from the town and Northland and gave them 60 days to respond, taking the process into March at the earliest. Hay River has said it expects the transfer to be completed by the fall.