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DECISION 2020 NSUARB 70 M09583

NOVA SCOTIA UTILITY AND REVIEW BOARD

IN THE MATTER OF THE PUBLIC UTILITIES ACT

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IN THE MATTER OF AN APPLICATION by HALIFAX REGIONAL WATER COMMISSION for determination by the Board as to whether a proposed district energy system is regulated pursuant to the Public Utilities Act BEFORE: Peter W. Gurnham, Q.C., Chair

Roberta J. Clarke, Q.C., Member Richard J. Melanson, LL.B., Member

APPLICANT: HALIFAX REGIONAL WATER COMMISSION Cathie O'Toole, General Manager INTERVENORS: NOVA SCOTIA POWER INC. Blake Williams (Counsel)

HALIFAX REGIONAL MUNICIPALITY Martin C. Ward, Q.C. E. Roxanne MacLaurin (Counsel) NOVA SCOTIA DEPARTMENT OF ENERGY AND MINES Peter Craig Kendra Campbell HERITAGE GAS Michael Johnston CONSUMER ADVOCATE William L. Mahody, Q.C. Emily Mason (Counsel) AFFORDABLE ENERGY COALITION Peter Duke Claire McNeil (Counsel)

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FINAL SUBMISSIONS: April 14, 2020 DECISION DATE: May 19, 2020 DECISION: Halifax Water will be a public utility with respect to the

ownership and operation of a proposed Ambient Temperature District Energy System if it is completed as proposed in this application.

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TABLE OF CONTENTS

1.0 INTRODUCTION .................................................................................................. 4 2.0 BACKGROUND .................................................................................................... 4 3.0 ISSUE ................................................................................................................... 6 4.0 LEGAL FRAMEWORK ......................................................................................... 6

4.1 Legislation .................................................................................................. 6

4.2 Case Law ................................................................................................... 9 5.0 FACTS AND ASSUMPTIONS ............................................................................ 12 6.0 ANALYSIS AND FINDINGS ............................................................................... 15

6.1 Public Utility Service ................................................................................ 15 6.2 Directly or indirectly to or for the public .................................................... 21

7.0 SUMMARY AND CONCLUSION ........................................................................ 25

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1.0 INTRODUCTION

[1] Halifax Regional Water Commission (Halifax Water), a regulated public

utility currently providing water, stormwater and wastewater services, within the Halifax

Regional Municipality (HRM), is proposing to establish and provide another service: an

Ambient Temperature District Energy System (ATDES) in an area currently occupied by

the Cogswell Interchange, that is slated for redevelopment.

[2] The proposed ATDES is to provide central heating or cooling for six

buildings through an underground distribution system of pipes carrying steam or water.

The ATDES would recover, store and reuse heat energy from wastewater generated at a

nearby wastewater treatment facility owned and operated by Halifax Water.

[3] Halifax Water applied to the Board for a ruling that the proposed ATDES

would be a public utility service, regulated by the Board pursuant to the Public Utilities

Act, R.S.N.S. 1989, c.380 (PUA).

[4] The Board has determined that, if the ATDES is established as set out in

the application, Halifax Water will own and operate it as a public utility, subject to the

Board’s oversight under the PUA.

2.0 BACKGROUND

[5] Halifax Water filed its application on February 7, 2020. The application

contained written submissions providing details related to the ATDES and Halifax Water’s

position that the ATDES, as proposed, would constitute a public utility.

[6] The Board determined the application should proceed by paper hearing. By

order dated February 14, 2020, the Board established a timeline for processing the

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application. A publicly advertised notice of the application invited interventions from

interested parties.

[7] Notices of Intervention were received from the Affordable Energy Coalition

(AEC), the Consumer Advocate (CA), Heritage Gas Limited (Heritage Gas), HRM, Nova

Scotia Department of Energy and Mines (NS Energy) and Nova Scotia Power Inc. (NS

Power). All these parties, except NS Energy, filed written submissions for the Board’s

consideration. The AEC, the CA and HRM supported Halifax Water’s position that the

proposed ATDES would be a public utility. NS Power and Heritage Gas said the Board

could not make a ruling in favour of Halifax Water on the record before it, to which position

Halifax Water responded.

[8] It is evident from the filings that the feasibility and desirability of a district

energy system in the Cogswell Interchange redevelopment area has been the subject

matter of study and discussion for some time. It also appears that HRM and Halifax Water

are awaiting a Board ruling before proceeding further with the ATDES. The Board

therefore does not have a completed project before it.

[9] Despite arguments to the contrary from NS Power and Heritage Gas, in the

Board’s opinion, there is sufficient information to make a ruling based on the facts as

presently known, and assuming, where required, the information provided by Halifax

Water accurately sets out how the ATDES will be developed and operated. If it turns out

the ATDES is developed and operated in a materially different way, this ruling may no

longer apply.

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3.0 ISSUE

[10] The discrete issue to be determined by the Board is: will Halifax Water be

operating the ATDES as a public utility under the PUA, if it proceeds with the project in

the manner outlined in the application?

[11] The Board has determined that the answer to this question is yes.

4.0 LEGAL FRAMEWORK

4.1 Legislation

[12] Sections 2(e) and (f) of the PUA define what constitutes a public utility. The

parts of these provisions which impact the Board’s analysis are:

(e) “public utility” includes any person that may now or hereafter own, operate, manage or control

…

(iv) any plant or equipment for the production, transmission, delivery or furnishing of electric power or energy, water or steam heat either directly or indirectly to or for the public,

…

(vi) any plant or equipment for the extraction, transmission, delivery or furnishing of a geothermal resource or for the production, transmission, delivery or furnishing of geothermal energy or heat either directly or indirectly to or for the public;

(f) “service” includes

…

(iii) the production, transmission, delivery or furnishing to or for the public by a public utility for compensation of electrical energy for purposes of heat, light and power,

(iv) repealed 1997, c. 4, s. 43.

(v) the production, transmission, delivery or furnishing to or for the public by a public utility for compensation of water,

(vi) the production, transmission, delivery or furnishing to or for the public by a public utility for compensation of steam heat,

(vii) the extraction, transmission, delivery or furnishing to or for the public by a public utility for compensation of a geothermal resource,

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(viii) the production, transmission, delivery or furnishing to or for the public by a public utility for compensation of geothermal energy or heat;

[13] The legislative framework includes amendments to the Halifax Regional

Municipality Charter, S.N.S. 2008, c.39 (HRM Charter), which were enacted by An Act to

Amend Chapter 39 of the Acts of 2008, the Halifax Regional Municipality Charter,

Respecting a District Energy System, S.N.S., 2018, c.9 (Bill 82) and amendments thereto.

[14] These amendments specifically address a proposed district energy system

for a portion of the Cogswell Interchange redevelopment. The amendments are included

and underlined below, within the context of the relevant HRM Charter provisions:

3 In this Act,

…

(f) “Board” means the Nova Scotia Utility and Review Board;

…

(jb) “Cogswell District Energy Boundary” means the area delineated in the map in Schedule D to this Act;

…

(va) “district energy system” means a system designed to supply heating or cooling by continuously circulating, to more than one building, through a system of interconnected pipes, steam or water that is heated or cooled using thermal energy recovered from wastewater;

…

104 (1) The Council may make by-laws imposing, fixing and providing methods of enforcing payment of charges for

…

(aa) expenditures incurred for the district energy system within the Cogswell District Energy Boundary; …

(7) Notwithstanding the Public Utilities Act and for greater certainty, any by-law made pursuant to this Section and any charge imposed or fixed pursuant to this Section do not require approval by the Board.

(8) Subsection (7) does not apply in respect of any by-law made and any charge imposed or fixed pursuant to clause 104(1)(aa).

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…

104A (1) The Council may make by-laws imposing, fixing and providing methods of enforcing payment of charges for the financing and installation of any of the following on private property with the consent of the property owner:

(a) equipment installed in respect of a district energy system within the Cogswell District Energy Boundary;

(b) energy-efficiency equipment;

(c) renewable energy equipment;

(d) equipment for the supply, use, storage or conservation of water; and

(e) on-site sewage disposal equipment.

…

188 (1) The Council may make by-laws, for municipal purposes, respecting

…

(la) subject to the regulation of the Board, the establishment and operation of a district energy system within the Cogswell District Energy Boundary;

(lb) the authorization of the General Manager of the Halifax Regional Water Commission to exercise the powers and authorities of the General Manager set out in Sections 9 and 10 of the Halifax Regional Water Commission Act in respect of the district energy system;

(lc) the authorization of the Council to require, where the Council considers it necessary or advisable, that a building or other structure, built within the Cogswell District Energy Boundary after the coming into force of the by-law, be connected to the district energy system;

…

235(5) Where a municipal planning strategy so provides, a land-use by-law may

…

(ja) require and regulate the establishment of a district energy system within the Cogswell District Energy Boundary;

(jb) require, where the Council considers it necessary or advisable, that a building or other structure, built within the Cogswell District Energy Boundary after the coming into force of the by-law, be connected to the district energy system;

[Emphasis added]

[15] Finally, HRM and Halifax Water advise there is a draft by-law (By-Law D-

500, Respecting District Energy) (Draft By-Law) being prepared pursuant to the HRM

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Charter amendments. The Draft By-law has not received first reading before HRM

Council. It has not been made public. The form of the proposed by-law was approved

by the board of Halifax Water in January 2020. Halifax Water has requested the Draft

By-law require mandatory connection to the ATDES within the area to which the HRM

Charter amendments apply. Halifax Water says it will not proceed with the ATDES if

mandatory connection is not required.

4.2 Case Law

[16] The two main areas of contention as to the status of the ATDES relate to

whether the service provided is in fact a public utility service and whether that service is

being provided “directly or indirectly to or for the public”. There is, perhaps surprisingly,

limited jurisprudence on this topic in Canada. American jurisprudence has addressed the

issue on many occasions.

[17] In a letter dated March 30, 2010, in response to an inquiry from HRM, the

Board refused to make a formal ruling on the status of two district energy projects, neither

of which is the subject of this application, without a public process.

[18] The Board provided some guidance on the tests to be applied in

determining whether an enterprise would come within its jurisdiction under the PUA:

Drawing on American jurisprudence HRM notes various tests that have been applied to determine whether an entity providing a commodity which is included in the definition of “service” in the Act is in fact a public utility.

HRM states:

Public utility is defined in ss 2(e) of the PUA as being a service which is provided to or for the public. This phrase is worded in a manner consistent with American legislation. Over the past 100 years, while Canadian jurisprudence has not tested this statement, American case law has extensively examined what this phrase means.

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In Nova Scotia, the phrase to or for the public has not been defined, as in American legislation, but American case law has developed several keystone concepts which signal whether a service is being provided to or for the public and is therefore a public utility which requires regulatory oversight including:

• The number of customers being served does not determine whether a service is to or for the public: but rather is determined by whether a company holds itself out to serve anyone who asks for that service (Tab 1);

• A service being offered to a closed class or special class of persons is not service to or for the public (Tab 2);

• Services being offered within a defined and limited geographic scope are not services to or for the public (Tab 3);

• To constitute a public utility, the devotion to the public use must be of such character that the product and service is available to the public generally and indiscriminately:

• Control or an ability to discriminate who receives a service is an indicator that that service is not to or for the public (Tab 4);

• A service may be contrary to the public interest which may require public regulatory oversight. If services of this nature were allowed to proliferate without consideration of the ability of franchised public utilities to carry out their substantial responsibilities, it could jeopardize existing regulated public utilities (Tab 5);

HRM attached (at Tabs 1 to 5) American cases that dealt with each of the bulleted concepts noted above.

In the view of the Board, HRM has correctly identified some of the various legal tests that have been applied by American courts and regulators and which could guide the deliberations of the Board. The Board would note however that several American jurisdictions have applied the number of retail customers as one of the tests used in determining whether the service is a regulated service.

A leading U.S. case not cited by HRM is Re Camden Cogen, L.P., 158 P.U.R. 4th 637 (1995), a decision of the New Jersey Board of Public Utilities Commission.

The following test was set out by the Commission:

A determination as to whether an entity is operating for the public use depends on the facts of each case. The underlying consideration is whether the character and extent of a particular operation affects the public at large in a way which requires submittal to public regulation for the common good. See, Munn v. Illinois. 94 U.S. 113. 24 L.ed. 77 91876); Lewandowski v. Brookwood Musconetcona River. Ass’n., 37 N.J. 433 (1962); Petition of South Jersey Gas, supra. The principle guiding factors which we apply in this regard are:

1. whether the facilities are located in public streets;

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2. whether the company provides meters and/or charges separately for its service;

3. whether the company is holding itself out to serve the general public;

4. whether there is an economic impact on the regulated market;

5. whether there is a potential for expansion; and

6. whether a significant number of retail customers are being served.

In Arizona Water Company v. Arizona Corporation Commission, 107 P.U.R. 4th 439, (1989), the Arizona Court of Appeals used the following criteria to determine whether an entity is a public service corporation:

1. What the corporation actually does;

2. Articles of incorporation, authorization, and purposes;

3. A dedication to public use;

4. Dealing with the service of a commodity in which the public has been generally held to have an interest;

5. Monopolizing or intending to monopolize the territory with a public service commodity;

6. Acceptance of substantially all requests for service;

7. Actual or potential competition with other corporations whose business is clothed with public interest;

8. Service under contracts and reserving the right to discriminate.

[Exhibit H-2, pp.2-4]

[19] While the parties to this proceeding expanded on the foregoing analysis,

including some Canadian jurisprudence, there was no material disagreement with the

above tests and the factors the Board should consider in coming to its determination.

[20] As with any case regarding whether the provision of a particular service

creates a public utility, context is key, and not every factor outlined above is significant or

carries the same weight in every fact situation.

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5.0 FACTS AND ASSUMPTIONS

[21] Halifax Water is requesting a ruling on the status of the proposed ATDES.

The ATDES has not been constructed. Final designs have not been completed. A Draft

By-law which Halifax Water deems necessary to proceed with the ATDES, including

mandatory connection requirements, has not been placed before HRM Council for first

reading. The wording of the Draft By-law is not known. Due to the COVID-19 pandemic,

it is not known when the proposed by-law will come before HRM Council.

[22] NS Power says it is premature to make a ruling on the status of the ATDES.

It says a detailed analysis of the facts are required to determine if a particular enterprise

is a public utility.

[23] NS Power submits the following information is not made clear in Halifax

Water’s application:

• The scope and operation of the ATDES;

• Ownership and funding of the ATDES;

• How the ATDES will be metered and the number of customers it is proposed

to directly serve;

• What, if any, contractual relationship will exist between the owner/operator of

the ATDES and its customers;

• Draft By-law D-500; and,

• The market share allocated to the ATDES thereunder and any obligation to

serve it may have or be capable of fulfilling .

[24] The answers to much of the foregoing are found in the Halifax Water and

HRM filings. In any event, it must be kept in mind that what is being requested of the

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Board is an advance ruling. While the Board does not provide legal advice to parties, if

the issue is of sufficient public importance, it will, in limited circumstances, provide such

rulings.

[25] The scope of the proposed ATDES is relatively novel in the Nova Scotia

context. It has potential public policy benefits in relation to, for example, limiting

greenhouse gas emissions. The proponents’ operational requirements appear to require

an answer as to the status of the ATDES to enable project planning to move ahead. Given

these circumstances, the Board is prepared to provide an advance ruling in this case.

[26] The Board will assume that the ATDES will proceed in the manner outlined

by Halifax Water and HRM. As with any advance ruling, if the project does not unfold

substantially in the manner described by the parties requesting it, the applicability of the

ruling becomes questionable.

[27] The following are therefore the facts or assumed facts upon which the Board

will base its advance ruling:

• The service boundary of the ATDES will be the Cogswell District Energy

Boundary (CDEB), which is depicted in Schedule D attached to Bill 82;

• The ATDES will be owned and operated by Halifax Water;

• As set out in s.188(1)(lb) of the HRM Charter, with respect to the ATDES, the

General Manager of Halifax Water will have the same powers as an HRM

engineer, exercised in the same manner as the other mandates of Halifax

Water;

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• From an institutional and corporate governance perspective, Halifax Water will

operate the ATDES service in substantially the same way as it operates its

water, wastewater and stormwater services;

• The ATDES will supply service to six buildings within the CDEB. The buildings

will encompass approximately 300,000 square meters of floor space, including

approximately 3300 residential units with approximately 7531 residents, as

well as a number of retail businesses;

• The six building owners will be Halifax Water’s customers. The meters will be

supplied to the building owners. There will be no Halifax Water meters for the

individual residential units and retail businesses;

• The six buildings receiving the ATDES service will be the only buildings in the

CDEB;

• The ATDES will have access to sufficient thermal energy to supply the six

buildings;

• A by-law will be enacted by HRM which will provide that the six buildings within

the CDEB must be connected to the ATDES;

• The ATDES will utilize components of the Halifax Wastewater Treatment

Facility (HWTF) located near the Cogswell Interchange and will be directly

connected to its effluent outfall;

• There will be an energy center located on the HWTF property which will extract

wastewater effluent from the facility, remove or sink thermal energy to or from

the ATDES piping loop, and inject the wastewater effluent back into the

wastewater effluent outfall at the HWTF;

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• The ATDES will have supply and return piping loops, and individual

mechanical rooms located at each building. These mechanical rooms would

include heat pumps and backup heating capabilities;

• The waste and renewable energy contained in wastewater to be used as part

of the ATDES will come from commercial and residential hot water heating,

other residential, commercial and industrial processes, wet weather run-off,

and through geothermal exchange within Halifax Water’s extensive

underground wastewater collection system throughout the year; and,

• The ATDES will provide or transfer energy to be used for heating, cooling, and

domestic hot water for the six serviced buildings in the CDEB.

[28] The above description of the ATDES provides the Board with sufficient

information, as elaborated upon in the following part, to make a decision in this matter.

6.0 ANALYSIS AND FINDINGS

6.1 Public Utility Service

[29] The first issue that arises is whether the service or commodity to be supplied

by Halifax Water through the ATDES is of the type included in the definitions and

regulatory scheme set out in the PUA.

[30] While Heritage Gas argued the ATDES would not qualify as a public utility,

in part because it would not have a monopoly in supplying heating and cooling services,

it did not address the PUA statutory definitions.

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[31] NS Power says:

While the ATDES may represent “plant or equipment for the production, transmission, delivery or furnishing of electric power or energy, water or steam heat”, it does not provide service “directly or indirectly to or for the public”. In addition, the ATDES does not have the potential monopolistic characteristics necessary to warrant the imposition of regulation in order to preserve the public interest.

[Exhibit H-7, p. 5]

[32] NS Power therefore appears to acknowledge that the ATDES supplies the

type of service to which the PUA could apply, but for its argument the service is not

provided “…directly or indirectly to or for the public.” This said, the caveat relating to the

lack of monopolistic characteristics is expanded upon later, where NS Power argues the

proposed service does not involve a public service commodity. In essence, NS Power,

like Heritage Gas, sometimes equates the commodity and the service which Halifax

Water proposes to provide as a heating and cooling service.

[33] It is true that the end result of the ATDES will be to provide heating and

cooling to buildings through the medium of water and steam. NS Power supplies electrical

energy to allow for the operation of heaters, water boilers and heat pumps, the end result

of which is heating and cooling. This does not detract from its status as a public utility.

[34] It is the nature of the thermal energy to be supplied by Halifax Water which

is key to the analysis. The ATDES will supply thermal energy to power the heating and

cooling functions required for the six buildings in the CDEB. The question is whether this

type of thermal energy is the kind which the PUA seeks to regulate, if this heat energy is

supplied “… directly or indirectly to or for the public.”

[35] The non-exhaustive definitions in ss. 2 (e) and (f) of the PUA address the

following commodities and thermal energy sources:

• Water;

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• Steam heat;

• Geothermal energy or heat; and,

• Geothermal resources.

[36] While water will be used in the heating and cooling process, the ATDES is

not primarily a water service as ordinarily envisioned by the PUA definitions. In other

words, it is not the supply of potable water for a metered price; however, the ATDES

includes the supply of water for heating and cooling purposes, for a price. Steam heat

provided for a price is directly implicated. This is also a listed commodity and service in

the above definitions.

[37] The Board acknowledges the proposed ATDES is not simply a mechanism

to deliver steam or water heat. The predominant characteristic of the ATDES is the

extraction of thermal energy or heat from the HWTF effluent stream and the delivery of

that heat to six urban buildings through interconnected piping carrying steam and water.

The Board has therefore also considered the meaning of the terms “geothermal energy

or heat” and “geothermal resource.”

[38] These terms are not defined in the PUA. In the legislation, geothermal

energy and a geothermal resource are two separate concepts. Logical distinction arises

where there is a natural source of heat such as a hot spring, or in some cases, sea water

as compared to the latent heat of the earth itself. In the Board’s opinion, the concept of

“geothermal energy or heat” or a “geothermal resource” is wide enough to include a

system, such as the ATDES, where the heat energy is extracted from a man-made

source, and uses a form of geothermal exchange within Halifax Water’s extensive

underground wastewater collection system as part of the mechanism.

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[39] Alternatively, even if the Board were to find that the thermal energy used in

the ATDES is not, strictly speaking, geothermal energy, or a geothermal resource, it is

sufficiently similar in kind to these thermal energy sources to be included in the non-

exhaustive list of commodities and services to which the PUA applies. The ATDES

involves the extraction of renewable thermal energy from a non-traditional source. It also

uses the geothermal exchange discussed above as part of the process in the commercial

development of this renewable thermal resource.

[40] The waste effluent stream from which the heat energy is derived is not a

heat-generating commodity which is generally publicly available and readily

transportable, such as, for example, propane and firewood for home heating, or coal for

industrial purposes. It is a renewable energy source only available to Halifax Water. Only

Halifax Water has the capacity to efficiently make use of it in the manner described. If

use is not made of the effluent stream, it is wasted. It is the type of “commodity” which

should be impressed with a public interest.

[41] In arguing it was not the type of commodity in which the public had an

interest, NS Power compared the ATDES to the situation considered by the Board in 1971

involving Nova Scotia Light and Power. In that case, the utility had been selling steam

created by its electricity generation to nearby businesses. When the number of

customers dwindled to two, the Board agreed the sale of steam in that context was no

longer a utility service offered to the public because of the limited number of customers

confined to the immediate location of the generating unit. The Board compared the

situation to the salvage and sale of a waste by-product, rather than a commodity

impressed with a public interest. While Halifax Water used the language of salvage, use

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and sale of a waste by-product in a part of its submissions, the two situations are not

analogous. Aside from the difference in the number of customers serviced, the recovery

of heat from the waste stream (which is actually not a product which Halifax Water sells)

involves a considerably different type of process, and is conceptually different, than

capturing steam produced in creating a product the Nova Scotia Light and Power sold to

the public.

[42] NS Power also submitted there was no evidence the ATDES was needed

or wanted by the public so as to create a public interest in the service and commodity.

This disregards the fact that the Legislature, made up of the public’s elected

representatives, perceived a sufficient need and public interest in a project such as the

proposed ATDES to consider and enact legislation directly related to it.

[43] In this regard, that the form of thermal energy used in the ATDES is included

in the PUA definitions of water, steam heat, geothermal energy, geothermal resources,

or analogous sources of heat energy, is also supported by the amendments to the HRM

Charter enacted in 2018. In particular, s.188(1) (la) indicates the very type of system

contemplated by this application can be established and operated “…[s]ubject to

regulation by the Board.”

[44] Since the HRM Charter amendments did not establish a new regulatory

regime for “…a system designed to supply heating or cooling by continuously circulating,

to more than one building, through a system of interconnected pipes, steam or water that

is heated or cooled using thermal energy recovered from wastewater…”, it follows that

the Legislature envisaged Board regulation to arise from the PUA. In order to achieve

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legislative consistency, the PUA definitions should be interpreted to include the type of

thermal energy associated with the ATDES.

[45] Section 104(8) of the HRM Charter, says expenditures incurred pursuant to

s.104(1)(aa), related to a district energy system in the CDEB, are not exempt from the

PUA. This is also consistent with an interpretation that the PUA definitions discussed

above include the ATDES.

[46] The Board further finds the ATDES service will have monopolistic

characteristics. While the Draft By-law has yet to be enacted, the Board will assume for

the purposes of this Decision a by-law will be enacted in a form compliant with the

direction in s. 188(1)(lc) and s. 235(5)(jb) of the HRM Charter. These provisions say:

where the Council considers it necessary or advisable, that a building or other structure, built within the Cogswell District Energy Boundary after the coming into force of the by-law, be connected to the district energy system;

[47] Halifax Water submitted the project would not proceed if the Draft By-law

did not require buildings within the CDEB to connect to the ATDES. Halifax Water also

submitted the ATDES would be the sole source of heating and cooling for the six

buildings. NS Power argued s. 188(1)(lc) and s. 235(5)(jb) of the HRM Charter did not

say the ATDES had be the sole source of heating and cooling and questioned the

authority of HRM to enact such a by-law.

[48] The Board need not resolve this last issue, as the ATDES need not be the

sole source of heating and cooling energy to be monopolistic in nature. Neither NS Power

nor Heritage Gas can claim to be the sole source of energy for heating and cooling where

their franchise territories overlap. The ATDES will clearly be the sole source of renewable

thermal energy derived from an effluent waste stream. As the six buildings within the

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CDEB will have to connect to this alternative source, monopolistic characteristics are

clearly established.

[49] For all the foregoing reasons, the proposed ATDES will be monopolistic in

nature and provide a service to which regulation under the PUA applies, if it is provided

“…either directly or indirectly to or for the public.” The Board will now address this issue.

6.2 Directly or indirectly to or for the public

[50] In its March 30, 2010 letter to HRM, the Board outlined factors which could

assist it in determining whether a service is being offered directly or indirectly to or for the

public. Having already determined that the proposed ATDES will have monopolistic

characteristics, and encompasses a type of commodity and service which the PUA was

designed to regulate, the factors which are most germane to whether the ATDES is

dedicated to public use are:

• What Halifax Water does;

• The number of customers which Halifax Water proposes to serve, whether

directly or indirectly, and the size of the proposed franchise territory;

• Whether Halifax Water proposes to offer the service indiscriminately to all

customers within the proposed franchise territory; and,

• Considerations relating to regulated public utility markets.

[51] In considering what Halifax Water does, NS Power is correct that the issue

under consideration, and the focus of the Board’s analysis, is the proposed ATDES. NS

Power is also correct that some public utilities engage in non-utility business activities. In

those circumstances, the utility must ensure non-regulated activities are not cross-

subsidized by the regulated public utility enterprise. On this latter point, the Board notes

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ring-fencing and accounting for utility and non-utility costs can be a major source of Board

oversight and disagreement between a utility and its stakeholders. In any event, Halifax

Water is a public utility. This is a relevant consideration.

[52] Halifax Water’s status as a public utility means its core function is to provide

utility services. This distinguishes it from certain other enterprises discussed in the

caselaw such as landlords, mobile home park owners and operators, and subdivision

developers, where the issue of whether sub-metering or private water supplies attain

public utility status is sometimes raised. Where essentially non-utility private enterprises

engage in activities with a utility service component, an analysis of the nature of their

actual business activities, including incorporating documents, is an important

consideration in assessing whether there really has been a dedication of assets to public

use.

[53] Halifax Water is a public utility created by statute. Provisions of this statute

are incorporated by reference in the HRM Charter amendments. It intends to operate the

proposed ATDES as a public utility in the same manner as its existing utility services. It

intends to use the effluent stream which passes through significant utility assets, such as

its comprehensive wastewater management system, including the HWTF, and create

capital assets on utility owned lands. All of these factors support the proposition that

there will be a co-mingling and dedication to public use of Halifax Water assets associated

with the ATDES.

[54] In addition, given the ATDES underground piping system, it is reasonable

to assume at least some of the new assets will be laid under public streets, which is

another indication of dedication to public use.

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[55] There is no doubt the geographic scope of the proposed service territory,

which is set out in legislation, is limited. The limited geographic scope was specifically

considered by the Legislature when it enacted the HRM Charter amendments, yet these

amendments contemplate regulation of the ATDES by this Board under the PUA.

[56] The geographic scope of the proposed franchise area is significantly

overshadowed by the number of potential customers. While the number of direct

customers will be limited, the number of indirect customers, estimated to be in excess of

7500 residential units and numerous retail outlets, is significantly higher than all of the

municipal electric utilities in Nova Scotia, and higher than most water utilities outside HRM

and the Cape Breton Regional Municipality. It is also significantly higher than the projects

discussed in the Board’s March 30, 2010 letter, or any other case where the issue of

public utility status has been raised before the Board. The number of potential indirect

customers weighs heavily in favour of public utility status.

[57] Under the PUA, a utility must provide safe and reasonably adequate service

on a non-discriminatory basis, throughout its franchise territory, unless provision of that

service creates an unreasonable financial burden on the utility and its ratepayers. The

proposed service area has been delineated by the HRM Charter amendments. If the

Draft By-law is enacted as described by Halifax Water, all the building owners will become

customers of Halifax Water. Halifax Water will therefore not be in a position to

discriminate as to which customers to serve, based on private contractual dealings. It will

have to serve all customers in the service area.

[58] In fact, because presumably Halifax Water will have no say in which

developer(s) will own the lands in the CDEB, it will have no say in who ultimately becomes

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its customers. This can be contrasted with the situation involving landlords and mobile

home operators, who, provided they do not discriminate on prohibited grounds under, for

example, human rights legislation, can in fact ordinarily choose by private contractual

arrangements, who they will accept as tenants, and therefore who may ultimately receive

sub-metered or private utility services.

[59] The fact that Halifax Water will have to service all the building owners in the

service territory renders any discussion with respect to expansion somewhat moot at this

stage. This said, Halifax Water is prepared to consider expansion, if economically and

technically feasible to do so. While perhaps much more limited in potential scope, this is

not entirely dissimilar to, for example, Heritage Gas’ situation, where expansion, even

within its franchise territory, gives rise to similar considerations.

[60] The potential impacts on other regulated utilities can be considered when

determining whether a proposed enterprise should be considered a public utility. The

ATDES will provide service in the franchise territories of both NS Power and Heritage

Gas, who are in competition with each other, and non-regulated commodities such as

propane, with respect to home heating.

[61] A legislated mandatory ATDES connection for a redevelopment of the

magnitude envisaged in the CDEB has the potential to reduce the number of future

customers available to NS Power and Heritage Gas. Given that this result will occur, if

the ATDES project proceeds, in large part because of legislation over which the Board

has no control, this factor is of limited importance in the overall determination of the issue

of whether or not the ATDES attains public utility status. In any event, entering the field

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of other publicly regulated entities can be an indication the new enterprise should also be

regulated.

[62] While the geographic scope of the CDEB is admittedly limited, when

weighing all the factors discussed above, the Board has little difficulty in finding that if

Halifax Water proceeds with the ATDES as proposed, the utility service will be offered “…

directly or indirectly to or for the public.” As such, Halifax Water’s ownership and

operation of the ATDES will be as a public utility subject to regulation under the PUA.

[63] In discussing the applicable tests, the CA, AEC and HRWC all discussed

the merits of public utility regulation with respect to transparency and protection of

customer interests. The Board agrees this is an overarching purpose of the PUA. The

specifics related to achieving this purpose are more appropriately addressed if, and when,

Halifax Water applies to the Board to formally confirm the franchise area and the initial

rates, rules and regulations applicable to the ATDES.

7.0 SUMMARY AND CONCLUSION

[64] The Board has considered Halifax Water’s application to establish the

ATDES, which, if the project proceeds as set out in the application, will recover, store and

re-use thermal energy from the waste effluent stream which Halifax Water manages as

part of its wastewater mandate.

[65] If Halifax Water proceeds as set out in the application, the Board has

determined that the ATDES will be a public utility service offered for compensation directly

and indirectly to and for the public. Halifax Water will therefore, in its ownership and

operation of the ATDES, be a public utility, subject to regulation by the Board under the

PUA.

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[66] An Order will issue accordingly.

DATED at Halifax, Nova Scotia, this 19th day of May, 2020.

______________________________Peter W. Gurnham

foberta J. Cla,

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