Update: Ontario has applied to the Supreme Court of Canada for leave to appeal in National Steel Car’s ongoing challenge to the “Global Adjustment”

We recently reported in Canadian Power on the Ontario Court of Appeal’s decision in National Steel Car Limited v. Independent Electricity System Operator[1]. In that case, the Court of Appeal found that National Steel Car’s constitutional challenge to “Global Adjustment” charges deserved a full hearing on its merits. Relevant excerpts of our case comment on the Court of Appeal decision are reproduced below.

On January 27, 2020, the Attorney General of Ontario applied for leave to appeal to the Supreme Court of Canada. This may come as a surprise to some, given that counsel for Ontario previously suggested that the solution to this issue does not lie with the courts.

National Steel Car is now expected to file a response to Ontario’s application for leave, following which the Supreme Court will decide whether to hear the case. It should be noted that, even if the Supreme Court does hear the case, it will not be deciding the issue on the merits, but instead will look at whether the Court of Appeal was right to send the case back to the lower court for a full hearing. Nevertheless, if the case is accepted for hearing, the Supreme Court may still provide some instructive comments that touch on the core issue of whether the Global Adjustment is a regulatory charge or an impermissible tax.

Excerpt from our recent commentary in Canadian Power

National Steel Car Limited v. Independent Electricity System Operator

The Ontario Court of Appeal has decided that the ongoing constitutional challenge to the “Global Adjustment” brought by National Steel Car Limited deserves a full hearing.

The Global Adjustment is a charge paid by all Ontario electricity consumers to cover the difference between the hourly electricity price and the price guaranteed to generators pursuant to their IESO procurement contracts. It is also intended to cover various infrastructure improvements and conservation programs. The amount paid by consumers, including National Steel Car (a heavy industrial user), has increased substantially since 2008, due to a number of factors including the Green Energy Act.

National Steel Car is challenging the Global Adjustment by arguing that it is actually a tax in disguise, and is therefore unconstitutional because Ontario cannot levy indirect taxes.

Last year we reported on the decision of the lower court, in which the motions judge struck National Steel Car’s applications on the basis that it was “plain and obvious” that the applications had no chance of success because the Global Adjustment was a regulatory charge and not a tax.

National Steel Car successfully appealed that decision this year. The company’s argument focuses particularly on the existing FIT contracts, which it states are not actually part of a closed regulatory system designed to promote cleaner energy sources, but instead are being used to accomplish broader policy goals unrelated to electricity generation, such as rural development.

The Court of Appeal ruled on November 29, 2019, that National Steel Car’s claim is sufficiently plausible that the lower court should not have dismissed it without a full hearing on all of the evidence. The Court of Appeal did not make any findings on the merits of National Steel Car’s arguments. The matter has been sent back to the lower court to be considered on a full evidentiary record.

 

[1] 2019 ONCA 929

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