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BCUC’s Indigenous Utilities Inquiry Comes to a Close with Release of Final Report

Fasken
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Energy Bulletin

On April 30, 2020, the British Columbia Utilities Commission (“BCUC”) released its Final Report (PDF) as part of its Indigenous Utilities Regulation Inquiry (“Inquiry”). The Final Report includes thirty-five (35) recommendations for the Government of British Columbia, intended to spur the development of Indigenous controlled utilities (including power projects), and provides the government with a rubric for potential foundational change to the regulatory framework applicable to public utilities and power producers.

As discussed below, the Final Report addresses matters such as:

  • whether Indigenous-controlled power projects should be able to access the transmission system and sell directly to customers (Answer: yes);
  • whether Indigenous-controlled thermal, electric or gas utilities should be able to expand beyond the boundaries of reserve, self-government or modern treaty lands (Answer: yes, subject to consideration of principles in the United Nations Declaration on the Rights of Indigenous Peoples (“UNDRIP”) and other aspects of the public interest), and how they would be regulated in such cases (Answer: by the BCUC); and
  • how the BCUC could potentially consider Indigenous interests when reviewing infrastructure projects or energy purchase agreements proposed by non-Indigenous utilities and power producers (Answer: potentially given greater weight, depending on legislative amendments).

Impetus for the Inquiry

Public utilities in British Columbia are regulated by the BCUC which administers the Utilities Commission Act (“UCA”). This currently includes energy utilities (distribution, transmission and/or generation) owned, operated or otherwise affiliated with an Indigenous group.

The merits of differentiated regulation for Indigenous utilities was raised before the BCUC in 2016, following Beecher Bay First Nation’s unsuccessful application for an exemption from the UCA. Beecher Bay sought to provide utility services to the Spirit Bay Community, a mixed residential/commercial development on its reserve lands near Victoria, BC.

On March 11, 2019, the Government of British Columbia directed the BCUC to undertake the Inquiry with terms of reference requiring the BCUC to consider “the appropriate nature and scope, if any, of the regulation of Indigenous utilities”, including the defining characteristics of an Indigenous utility. The process included extensive engagement with Indigenous communities and representative organizations, in addition to other stakeholders.

Defining an Indigenous Utility

The Final Report provides several scenarios illustrating the forms an Indigenous utility may take. As the examples below illustrate, the BCUC’s recommendations were intended to address the variety of purposes Indigenous utilities could serve:

  • A remote, off grid, Indigenous community developing a clean generation project to replace diesel generated electricity. The electricity generated could be distributed by the Indigenous utility or sold to an existing utility for distribution to the community.
  • An Indigenous group owning or operating a district energy system on its reserve lands for the purposes of residential or commercial development.
  • A rural on-grid Indigenous group with a number of dispersed reserves developing a geothermal co-generation plant, relying on an incumbent utility's existing infrastructure to distribute electricity to each reserve. This may require use of a distribution and/or transmission grid.
  • An Indigenous utility developing a clean generation project near existing transmission infrastructure, with the electricity produced being sold to an incumbent utility at a price that allows the Indigenous utility to recover its costs.

In order to ensure that its proposed regulatory framework would include the above scenarios and could not be exploited by non-Indigenous proponents, the BCUC limited the definition of an “Indigenous utility” to circumstances where an Indigenous group has the ability to influence the utility’s decisions and actions. This requirement of “control” could take the form of either legal (de jure) control or effective (de facto) control.

The BCUC’s definition of an Indigenous utility is not geographically confined, and therefore contemplates Indigenous utilities operating beyond lands controlled by the Indigenous group.

Encouraging Development While Protecting Consumers

The BCUC’s recommendations broadly focus on encouraging the development of Indigenous utilities by addressing existing systemic barriers, including providing a regulatory environment that allows for economic viability. The key elements of the regulatory framework include:

  • Affirmation of UNDRIP: The BCUC notes that notwithstanding its status as an independent regulatory agency it is guided by the “broad directions of government” – including the Declaration on the Rights of Indigenous Peoples Act (“DRIPA”). DRIPA affirms the application of UNDRIP to the laws of British Columbia, contributes to its implementation and supports the affirmation of and development of relationships with Indigenous groups. The policies and the principles reflected in DRIPA are incorporated into the Final Report’s recommendations. Additional information regarding DRIPA can be accessed here.
  • Self-Regulation: The BCUC recommended allowing Indigenous groups to easily “opt out” of BCUC regulation on their reserve, modern treaty, or self-government lands in favour of a regulatory framework prescribed by the group itself. While the scope and form of regulation could vary based on the capacity of the Indigenous group, a robust complaint and dispute resolution process would need to be in place to ensure consumer protection (as approved by a panel or body of Indigenous peoples rather than the BCUC).
  • Status Quo on Traditional Territory (For Now): Under the proposed framework, Indigenous utilities could operate beyond their reserve, modern treaty, or self-government lands, but in such cases would continue to be subject to BCUC regulation.  However, under BCUC regulation they would benefit from revised considerations in applying for project approvals (Certificate of Public Convenience and Necessity). The BCUC also recommended that the Government of BC consider providing Indigenous power producers with access to BC Hydro’s transmission and distribution systems to facilitate transmitting power from one area of the province to another.

The BCUC noted that Indigenous groups could negotiate expanded areas of self-regulation through modern treaties or other agreements as contemplated by DRIPA.

Reshaping the BCUC to Promote Reconciliation

The Final Report places considerable emphasis on empowering Indigenous groups to regulate themselves, in particular, leveraging the expertise of the BCUC to build expertise and guide the implementation of its recommendations. As part of this process, the BCUC also laid out how it must change to better address reconciliation and Indigenous issues generally.

The proposed institutional changes include: (1) increasing the role Indigenous peoples in BCUC proceedings by recruiting Indigenous staff, consultants and Commissioners; (2) developing a strategy to build capacity in Indigenous-led utility regulation; and (3) modifying BCUC regulatory policies and procedures to better reflect the objectives of reconciliation.

Standing Offer Program 2.0?

BC Hydro’s Standing Offer Program (“SOP”) was first launched in 2008 to provide independent power producers with an opportunity to develop small-scale renewable energy projects, selling the electricity generated to BC Hydro. The program was suspended in 2017, reflecting BC Hydro’s ongoing surplus supply of electricity.

The Final Report lays some groundwork for the potential revival of the SOP in order to promote opportunities for Indigenous communities. The BCUC proposes legislative changes to the UCA that would facilitate the BCUC accepting energy purchase agreements between utilities like BC Hydro and Indigenous power producers where the price is generally based on market electricity prices.  However, “Under certain circumstances, it may be appropriate to provide a subsidy (or a premium to market price) if it can be shown that a subsidy or premium is required to “mitigate adverse environmental, economic, social, cultural or spiritual impact.”” Premiums to the price offered in the SOP “could be provided by government if it was determined that a specific project required it to mitigate adverse economic impact and that this mitigation was required for the province to meet its obligations under the DRIPA.” 

The Regulation of Utilities Going Forward

The BCUC’s Final Report and the regulation of Indigenous utilities in British Columbia will now be reviewed by the Government of British Columbia – likely resulting in reforms to the UCA or the creation of a new legal framework for the regulation of Indigenous utilities.

While the timeframe for implementing the BCUC’s recommendations remains unclear, the Final Report provides a comprehensive rubric for the provincial government as it considers a path forward. Whether some of its recommendations, including the BCUC’s reliance on the modern treaty process, are practicable remains to be seen.

Given the importance of the matters considered, any next-steps following the Inquiry will presumably necessitate further consultation with Indigenous groups, incumbent utilities and the public to ensure energy stability and the protection of consumers over the course of a period of change.

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