Supreme Court of Canada Cites MacAvoy and Sidak in ATCO Decision

February 9, 2006

On 9 February 2006, the Supreme Court of Canada released a decision in which it ruled that the Alberta Energy and Utilities Board did not have jurisdiction to allocate the proceeds of the sale of public utility assets to consumers (in whole or in part).  Critical to the decision was the conclusion that no power to allocate proceeds had been explicitly conferred on the Board and that none could be said to exist by "necessary implication" because such a power was required for the Board to discharge its public interest mandate. The decision not only puts clear constraints on the "doctrine of jurisdiction by necessary implication" recognized in earlier decisions of the Court; it may also signal a new judicial readiness to closely monitor regulatory action, especially where property rights come into play. In its decision, the Supreme Court relied heavily on the academic research of Professors Paul MacAvoy and J. Gregory Sidak, founder of Criterion. For example, the Court quoted the professors extensively to distinguish the risks faced by a utility's customers from the risks faced by its shareholders.

The decision appears to significantly constrain the ability of regulatory authorities to resort to the doctrine of "jurisdiction by necessary implication" to supplement the powers expressly conferred upon them. In future, it will be necessary to show, for example, that there are no other means of accomplishing the regulatory objective using express powers. The recent judicial tendency to read regulatory authority broadly (which remains very much in evidence in the decision of the dissenting justices) may be giving way to a different approach where the onus is placed squarely on advocates of regulation to find specific authority for intervention in markets, especially where property rights are in issue.