Skypower judicial review dismissed

September 26, 2012

On September 10, 2012, the Divisional Court released its decision dismissing SkyPower group of companies’ (Skypower) application for judicial review of Ontario’s new Feed-In-Tariff (FIT) rules.

Skypower sought a number of declarations concerning the Ontario Power Authority’s (OPA) and Ministry of Energy’s (MoE) decision not to process FIT applications submitted before April 5, 2012 (FIT 1 Applications) in accordance with FIT rules version 1.5.1 (FIT 1). Skypower had 66 applications submitted under FIT 1 awaiting review and a further 52 applications that had been screened by the OPA and not offered a contract. On April 6, 2012, upon a MoE directive, the OPA released new draft rules for FIT applications that were finalized on August 10, 2012 (FIT 2). The new FIT 2 rules applied to Skypower’s 118 applications (Existing Applications) that were submitted under FIT 1. Skypower argued that as a consequence of these changes, virtually all of its Existing Applications would be ineligible for a FIT contract. It contended this result was unfair and unreasonable.

On July 12, 2012, Skypower applied to the Divisional Court for a judicial review to declare that the OPA had a duty to process in good faith Existing Applications in accordance with the FIT 1 rules. A three judge panel of the Divisional Court heard oral arguments on August 24, 2012. A unanimous decision of the Court dismissed Skypower’s application.

The Court found the standard of review to be reasonableness. It opined the MoE is given very broad discretion under the Electricity Act to direct the OPA in the development of a FIT program. Therefore, the Court found it necessary to be deferential to the MoE in exercising its discretion in connection with directing the OPA to implement FIT. The Court found no foundation Skypower’s assertion that FIT 2 is ultra vires of the Electricity Act.  The Court was of the view that Skypower must have been aware of two basic facts. First, there was no guarantee that they would be offered a FIT contract. Second, there exists no right to connect to the electricity grid in Ontario. In support of this, the Court found FIT 1 rules sections 10.01(a), 12.2(d), 12.2(c), and 12.2(g) provided the OPA near unlimited discretion to run FIT.

The Court then considered the individual issues raised by Skypower. First, it rejected the premise that FIT is a tender process. Instead, the Court found FIT to be more than a strictly commercial arrangement.  It had a public policy aspect: the provision of renewable energy to Ontario.

The Court then considered whether OPA representations and timelines had given rise to a legitimate expectation. It found that Skypower had no such legitimate expectation. The OPA representations were not clear, unambiguous or unqualified. Further, a time-of-the-essence provision in the rules did not give substantive rights to Skypower. Even if Skypower did have a legitimate expectation, it would have waived any entitlements it had for relief because it did not seek a judicial review when it became apparent that the OPA would not run an Economic Connection Test within six months of September 24, 2009, as originally represented by the OPA.

The Court found Skypower did not acquire any vested rights from their participation in FIT. The Court found it difficult to see how someone could gain vested rights from an unreviewed and unapproved application. Essentially, Skypower did not have rights arising under the application other than for the OPA to consider the application. Consequently, the changes to FIT 1 were not retroactive because they did not affect any rights. In summary, the Court found that the MoE direction to the OPA to make changes to FIT 1 was a reasonable use of its discretion.

Quoting Justice Binnie in Mount Sinai Hospital Centre v. Quebec, the Court ended its judgment with a dramatic quip: “In government, nothing is done until it is done”.

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