Utilities Must Disclose Contemplated Corporate Reorganizations

In a recent decision concerning Union Gas Limited (Union), the Ontario Energy Board (OEB) ruled that a utility has a duty to disclose, as part of its rate application, any contemplated corporate reorganizations that have a "real prospect" of proceeding, even if the utility's board has not yet granted final approval.

The issue arose in an application to the OEB for approval to transfer a controlling interest in Union to a limited partnership. The purpose of the transaction was to generate $50 million in tax savings for Union's parent, which in turn would reduce Union's annual revenue requirement by approximately $1.3 million. As part of the application, Union requested the cost reduction not be factored in to its rates until after the expiry of its Incentive Rate Mechanism Plan (IRM Plan) in 2012. Under the IRM Plan, which was approved by the OEB in January 2008, Union's rates are set by a formula that is tied to the cost of inflation and a productivity-improvement