Alberta Court of Appeal Sets Aside Compensation Determination for Transfer of Rural Electrification Association Assets

On December 3, 2025, the Alberta Court of Appeal allowed the appeal of Battle River Power Coop (BRPC) regarding a compensation determination issued by the Alberta Utilities Commission (AUC) in Decision 28358-D01-2024 (Decision 28358). The compensation arose from a service area change approved by the AUC in Decision 22164-D01-2018 (Decision 22164).

In Alberta, generation is unregulated, while transmission and distribution of electric energy are regulated by the AUC.  Rural Electrification Associations or REAs are unique features of Alberta’s distribution system that were created in the 1940s as not-for-profit cooperatives to construct distribution facilities and serve rural communities pursuant to the Rural Utilities Act that investor-owned utilities didn’t want to serve.  REA service areas overlap with those of investor-owned distribution utilities and REA rates are approved by their Board of Directors instead of the AUC. As such, REAs remain an important element of Alberta’s electric distribution system and continue to provide reliable service to thousands of Albertans.

BRPC is the second largest REA in Alberta with a service area that spans 12 counties and overlaps with the service area of FortisAlberta. In Decision 22164, pursuant to Section 29 of the Hydro and Electric Energy Act (HEEA), the AUC approved the service area change resulting from multiple urban annexations and FortisAlberta became the new service provider in these urban areas (e.g., the municipal boundaries expanded and FortisAlberta became the de facto provider because of their pre-existing municipal franchise agreement). The AUC directed the parties to negotiate the compensation amounts and asked them to return if they were unable to agree on the appropriate compensation.  

In 2024, after unsuccessful negotiations, FortisAlberta brought an application under Section 32 of the HEEA and requested that the AUC: (a) direct the transfer of BRPC’s assets; and (b) determine compensation accordingly. BRPC argued that Section 32 of the HEEA was not applicable because the “continued distribution of electric energy” (a pre-requisite for a Section 32 order) was not an issue and instead, compensation should be determined under Section 29 of the HEEA. The AUC disagreed and ordered both the transfer and compensation under Section 32.

In 2024 ABCA 259, the Alberta Court of Appeal granted BRPC leave to appeal Decision 28358 on an issue of whether the compensation ought to have been determined under Section 29 or Section 32 of the HEEA.  The Appeal was heard on October 17, 2025 and, quickly, on December 3, 2025, the Court issued its unanimous Decision.  

The Court conclusively agreed with BRPC that Section 32 did not apply, and compensation had to be determined under Section 29(4) of the HEEA. In reaching this conclusion, the Court of Appeal found that:

1. Sections 29 and 32 of the HEEA serve different functions within the statutory scheme. Section 29 is a general mechanism for service area changes that allows the AUC to change the boundaries of service areas, transfer service areas and facilities, and determine compensation for such transfers. On the other hand, Section 32 of the HEEA applies only to REAs and was introduced in 1977 to “ensure continued distribution of electric energy” in areas served by REAs if REAs are no longer viable and cannot continue to distribute power to REA members. In these cases, the AUC would have statutory authority to direct another party to take over and award compensation, if any.

2. The statutory purposes of the HEEA, such as the need to promote safe and efficient electricity distribution of electric energy, as well as the relevant Hansard evidence, including the statements made by the Minister of Telephones and Utilities on the second reading of the HEEA amendments in 1977 – all supporting the Court’s interpretation of Section 32 of the HEEA.

3. The use of the word “another person” in Section 32 of the HEEA (as opposed to an “interested person” under Section 29) was designed to allow other persons to take over the service area, facilities and operation of the REAs, if the existing REA was unable to ensure continued distribution of electric energy.

4. The Court disagreed with FortisAlberta and the AUC that the Commission’s broad discretion under both statutory provisions made the distinction between these two sections of the HEEA irrelevant – the compensation criteria listed in Section 29(4) of the HEEA ought to have been considered by the AUC and the AUC failed to do so.

5. The fact that the original application underlying Decision 22164 was brought under Section 29 of the HEEA was also considered relevant, i.e., compensation could and should have been determined by the AUC under the same statutory provisions of the HEEA – there was no need to resort to Section 32 of the HEEA in the first place.  

The Court found that BRPC was not experiencing any issues related to “continued distribution of electric energy” (as the AUC itself confirmed when it changed service area boundaries in Decision 22164). Therefore, Section 29(4) compensation mechanism ought to have been applied by the AUC instead of Section 32 of the HEEA. As a result, the Court of Appeal remitted the issue of compensation to the Commission for reconsideration.

As Alberta becomes more urbanized and the service areas of urban investor-owned utilities gradually expand into service areas of REAs through annexation, it is important for the AUC to understand the applicable statutory compensation and asset transfer mechanisms, and how they work within the overall statutory framework of the HEEA.

Service area changes and asset transfers are important to the business of REAs and compensation must be determined based on the correct statutory provisions of the HEEA. As not-for-profit power cooperatives, REAs continue to work hard to protect the interests of their rural members across Alberta, just as they did back in the 1940s when they were asked by the Government of Alberta to construct facilities and start serving rural Albertans.  

P2 Regulatory Solutions represented the Appellant, BRPC, in this Appeal. P2 is a boutique firm specializing in energy regulatory matters and related litigation.

__________________________________________

The above summary is presented for information purposes only and it does not constitute legal advice. If you have any questions regarding this Appeal or questions related to energy regulation matters, please feel free to reach out to Nick Bryanskiy, Sandy Carpenter or Evan W. Dixon.

‍