The NWT Supreme Court has denied an appeal by Northland Utilites Ltd over an arbitrator’s ruling on the value of the electrical infrastructure in Hay River.
In a judgment released Oct. 23, Justice Andrew M. Mahar wrote the the arbitrator made reasonable and “not incorrect” decisions after fairly considering the arguments from each side.
The dispute in question is about the value of electricity delivery assets owned by NUL in Hay River.
The town ended its franchise agreement with NUL in 2016 and notified the company it intended to exercise its right to buy the rights to distribute, supply and sell electricity to consumers there.
In February 2018, arbitrator John Marshall, adopting a business cash flow methodology proposed by an expert hired by the town, released his “partial final award,” valuing Northland’s assets in Hay River at around $14 million.
Marshall valued Northland’s assets at 1.3 times their net book value, the value of an asset when depreciation is taken into account, to factor in the future potential earnings the assets could yield.
Northland wanted to use a valuation system that would have placed the cost of the equipment to be purchased at around three times the value Hay River’s preferred method came up with. The town said the amount NUL settled on was “so unfair” it would not have gone through with the purchase.
The judge agreed.
“On a sale to the town, NUL is entitled to recover the un-depreciated value of the assets in question and will thus be made whole,” he wrote. “To recover significantly more would be a windfall to the utility and an unreasonable burden for the utility customers as their rates would face a significant increase were the PUB to approve the transaction.”
Doug Tenney, NUL vice-president, said he was “disappointed” to hear the decision.
Moving forward he said legal counsel would be reviewing this decision.
In addition to the appeal of the arbitrator’s partial final award, the firm had been working with the Town and its negotiator NTPC. They were “pretty close to the end of that process,” he said, while not being completely done on some issues.
He added that there was the possibility of further work in the NWT Court of Appeals.
Following the court processes, with a signed purchase and sale agreement, he said it would be likely for both parties to the NWT Public Utilities Board.