The diesel generators at the Northland Utilities (NWT) Ltd. operations in Hay River were among the issues dealt with in a Jan. 20 decision by the Court of Appeal for the Northwest Territories. The decision is part of an ongoing effort by the Town of Hay River to buy the assets of Northland Utilities in the community.
Photo courtesy of Northland Utilities (NWT) Ltd.

The Town of Hay River has won another court decision in its years-long effort to buy the assets of the electricity franchise-holder in the community.

On Jan. 20, the Court of Appeal for the Northwest Territories released a decision that supported the town’s arguments on the valuation of the assets and whether back-up diesel generators should be included in a sale.

“The Town is pleased with the decision of the NWT Court of Appeals and looks forward to working through the remaining steps of the franchise process,” said Glenn Smith, the senior administrative officer with the Town of Hay River, in a written comment supplied to The Hub.

ATCO, the parent company of franchise-holder Northland Utilities (NWT) Ltd., was not pleased with the decision.

“Obviously, we’re disappointed with the decision from the NWT Court,” said Melanie Bayley, president of ATCO Electricity Division, which includes Northland Utilities (NWT) Ltd., in a written statement for The Hub. “Since we just learned of this decision, we will review our options and determine our next steps.”

Bayley noted that this year marks the 70th anniversary of Northland Utilities (NWT) Ltd. providing electricity to Hay River.

“And it continues to be an honour serving customers and the community even while negotiations with the town are underway,” she said.

The town launched a process in 2016 to buy the franchise assets from Northland Utilities – as permitted in the franchise agreement – and turn the system over to the Northwest Territories Power Corporation in hopes of lowering electricity costs in the community.

In 2016, the town and Northland Utilities agreed to arbitration, which decided on a valuation method for assets and that back-up diesel generators should be included in a sale.

Northland Utilities appealed the arbitrator’s ruling to the Supreme Court of the NWT in 2019, and it then took that court’s decision to the Court of Appeal.

The Supreme Court judge who heard the matter in 2019 concluded that the arbitrator had made no reviewable error.

“The chambers judge did not err in reaching these findings,” stated the Court of Appeal decision, referring to the Supreme Court justice as the chambers judge. “As a result, the appeal is dismissed.”

Northland Utilities objected to the arbitrator’s decision on the methodology to establish the value of the franchise assets.

The arbitrator set the means of determining the purchase price based on a modified book value, rather than on the basis of replacement cost less depreciation.

The arbitrator’s decision would permit the Town of Hay River to purchase certain assets from Northland Utilities used to supply, transmit and distribute electricity within the town limits for a price – subject to final adjustments – ranging from $13,064,262 to $14,754,429.

Northland Utilities argued the arbitrator should have utilized the replacement cost less depreciation, which produced a purchase price of $39,974,082.

Along with the overall value of the assets, there was the issue of whether five back-up diesel generators should be included in the sale.

The arbitrator found that the generators were essential to the continuity of electricity distribution within the town and therefore fell within the definition of assets subject to sale.

Northland Utilities had argued that the franchise agreement granted the company the exclusive right to “distribute, supply and sell electrical energy” within Hay River and that did not include the right to generate electricity, meaning that the diesel generators are not properly the subject of the franchise agreement and therefore not caught in the right of purchase.

The Supreme Court ruling in 2019 noted the franchise agreement has a provision that prevented the Town of Hay River from granting any other person, firm or corporation the right to generate, distribute or sell electric energy in the town.

“The chambers judge was therefore correct in concluding that the arbitrator reasonably included these diesel generators within the assets covered by the purchase under the franchise agreement,” stated the Appeal Court decision. “That reasonable standard does not disclose any palpable and overriding error by the arbitrator.”

Hay River is powered by the hydroelectricity produced on the Taltson River, except when that supply is occasionally interrupted and the back-up diesel generators are used.

The Appeal Court decision was written by Justice J.A. Bielby. It was then reviewed by Justice J.A. Veldhuis and Justice J.A. Strekaf, who both concurred with the decision.

The appeal was heard on Oct. 27, 2020.

The most recent 10-year renewal of the franchise agreement between the town and Northland Utilities began in 2006 and expired in 2016.

Prior to the expiry of that 10-year renewal, the town gave notice that it intended to purchase the assets of Northland Utilities in the community.

The company has continued to operate the franchise while negotiations with the town are ongoing.

Paul Bickford

Paul Bickford is the reporter for Hay River Hub.

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