P.U.
4(2000-2001)
IN THE MATTER OF THE PUBLIC
UTILITIES ACT, R.S.N. 1990,
CHAPTER P-47 (“THE ACT”)
AND
IN THE MATTER OF THE APPLICATION
BY NEWFOUNDLAND POWER INC. (THE
“APPLICANT”) TO VARY AN ORDER
PRESCRIBING THE CONDITIONS AND
COMPENSATION FOR THE USE BY
GLOVERTOWN CABLE TV LTD.
(“GLOVERTOWN CABLE”) OF THE
APPLICANT’S POLES PURSUANT TO
SECTION 53(2) OF THE ACT.
The application was filed with the
Board on October 1, 1999, seeking to have the Board vary the existing Order
P.U. 8 (1986) as it applies to Glovertown Cable’s use of the Applicant’s
poles. The application was submitted
under Section 53 (2) of the Act after attempts between the Applicant and
Glovertown Cable to negotiate the conditions and compensation for use of the
poles were unsuccessful.
In Order P. U. 8 (1986) the Board
prescribed the conditions and compensation for the use of the Applicant’s poles
by cable operators, including Glovertown Cable, in their respective service
territories. This Order incorporated
the formula for the determination of compensation established by the Pole
Attachment Rate Order issued by the Lieutenant- Governor in Council in December
1985.
In 1992 the Applicant sought
approval from the Board for the removal of Newfoundland Telephone’s costs from
the formula as Newfoundland Telephone was under the jurisdiction of the
Canadian Radio-television and Telecommunications Commission (the “CRTC”). Before deciding the matter the Board
ordered, at the request of the cable operators, an audit of pole attachments of
the cable operators and froze the rental rate at that set by P. U. 8 (1986)
pending completion of the audit.
On April 17, 1997 the Applicant
entered into a settlement agreement with nine (9) cable operators, not
including Glovertown Cable (the “Other Cable Operators”) which settled, as of
June 30, 1996, all outstanding issues relating to the attachment of their plant
and facilities to the Applicant’s poles.
The Board issued P. U. 1 (1997-98) approving
the pole rental rates outlined in the settlement agreement, excluding
Glovertown Cable, since they were not party to the agreement. The rates to be charged to Glovertown Cable
continued to be governed by P. U. 8 (1986) as modified by the Board’s ruling in
December 1992.
Glovertown Cable has expressed its
dissatisfaction with the terms of P. U. 8 (1986) and, according to the
Applicant, has not paid invoices for pole attachments since April 1995. By letter dated May 6, 1995, Glovertown Cable
advised the Applicant that it would no longer honour the existing
arrangement. Several attempts to reach
agreement during 1997 and 1999 were unsuccessful, with the result that the
current application from the Applicant was filed under Section 53 of the Act.
The
Hearing
Public notice of the
application was published in The Telegram on November 6, 1999 and in The Gander
Beacon on November 8, 1999, and a pre-hearing conference was held on Wednesday,
November 17, 1999. An Intervenor’s
submission was received from Glovertown Cable on December 17, 1999.
A public hearing was
held on March 1, 2000. Appearing for
the Applicant were Mr. Gerard M. Hayes, Senior Counsel, Regulatory Affairs and
Mr. Phonse Delaney, Manager of Avalon Operating Region. Witnesses for the Applicant were: Earl Ludlow, P.Eng., V.P., Operations, and
Lorne Henderson, P.Eng., Superintendent of Regional Engineering, St. John’s
Region. Appearing for Glovertown Cable
were Mr. Glenn Belbin, Counsel, with Mr. Terry Burry called as a witness. Several letters of comment were also
received and entered into the record.
In opening statements
it was agreed by both parties that there were only two issues of contention
with respect to the settlement agreement proposed by the Applicant. These two issues were the compensation
structure and the remedy in the event of non-payment. With respect to the latter issue, the parties cannot agree on
whether the Applicant ought to be given the authority to disconnect Glovertown
Cable’s electrical supply in the event of non-payment. The evidence dealt primarily with these two
matters and is summarized below along with the Board’s findings.
The Applicant has
proposed conditions and compensation for use of its poles that are substantially
the same as those already agreed to by the Other Cable Operators and approved
by Order P. U. 1 (1997-98). In this
agreement the formula for the calculation of compensation is based on a “per
pole” rental rate that is escalated annually according to the all-items
Consumer Price Index for Newfoundland (the “Formula”). The Formula is attached to the application
as Schedules 3 and 4 of Schedule “A” of the application.
The Other Cable Operators in the Province pay
the same “per pole” rental rate, with the final billing determined on the
actual number of poles used. For the
purpose of billing, the Formula requires two inputs: (1) an agreed-upon ratio of poles to cable subscribers, and (2)
the number of each of the cable operator’s subscribers as reported to the CRTC
for the current year. In the case of
the existing agreement with the Other Cable Operators approved under Order P.
U. 1 (1997-98) the rental rate was negotiated as part of the agreement and
currently stands at $1.1145 per pole per month. The Applicant is proposing the same rental rate for Glovertown
Cable. The rate currently applicable
to Glovertown Cable is $1.2675 per pole per month as set by Order P. U. 8
(1986).
Glovertown Cable has
objected to the use of a per pole rental rate for pole attachments. In his testimony, Mr. Burry stated that
this method is a product of history and is now obsolete. He also suggests that this system
discriminates against smaller cable operators who have a limited number of
subscribers and a limited ability to generate additional revenues through other
types of services such as Internet service.
Cable operators are also facing increased competition from direct to
home satellite systems. Mr. Burry
proposed that the rental rate be based on a “per subscriber” rate where the
cable operators would be billed based on the number of cable subscribers they
have. No evidence was presented as to
how the actual rate would be determined.
Glovertown Cable also
testified about the changing nature of the cable television industry and the
impact of changing technologies on the industry; in particular with respect to
increased competition from direct to home (satellite) providers. While the Board recognizes that these
business issues are real and important, they are not salient to rate making and
the legislative mandate of the Board.
The Applicant testified
that the “per subscriber” rate would result in a cross subsidization in the
cable industry, where a cable company with very few pole attachments per
subscriber would pay for more poles than they were using whereas a cable
company with a higher number of pole attachments per subscriber would pay for
fewer poles than they were using. The
Applicant submitted that the “per subscriber” rate is not in line with the concept
of generally accepted sound public utility practice, where the characteristic
that influences the cost of providing a service should be the characteristic
that determines the charge for that service.
The Applicant also
stated that electrical utilities in other jurisdictions in Canada were also
using a “per pole” rental rate for attachments. In response to an undertaking, the Applicant filed with the Board
a summary of results of a survey of nine Canadian electric utilities conducted
in 1996. This survey indicated that all
nine respondents were using “per pole” attachment rates varying from
$9.00/pole/year to $15.00/pole/year. In
4 cases the rate was set by a regulatory agency. Details on the actual rate methodologies were also provided. A recent decision of the CRTC which set a
per pole rate for cable television operators with municipal electric utilities
in Ontario was also referenced in testimony by the Applicant.
In
reviewing the evidence regarding the proposed compensation structure for pole attachments
for Glovertown Cable, the Board notes Glovertown Cable’s objection to the “per
pole” rate structure. However, no
evidence was put forth to demonstrate that the “per pole” rate structure was
not reasonable. The Board notes that
similar “per pole” rate structures are currently in place in most jurisdictions
in Canada and that there was no evidence to suggest that a “per subscriber”
rate structure for pole attachments has been considered or is in use in any
other jurisdiction.
Section 53 (1) of the
Act directs that a public utility having conduits, poles, wires or similar
equipment shall, for reasonable compensation, permit that use by a licensed
cable television system. Given that the
utility has to provide the access requested, the only test the Board need apply
in assessing the compensation is that it is reasonable. In the pre-filed testimony of the Applicant
at page 8, the Board was informed that the proposed rate of $1.145 per pole per
month is less than the rate of $1.2675 per pole per month that currently
applies to Glovertown Cable under P.U. 8 (1996).
The Board finds that
the compensation structure proposed by the Applicant is reasonable and is based
on generally accepted sound utility practice.
As part of its
application the Applicant requests that it be given the right to disconnect the
electrical service it provides to Glovertown Cable if any amount of rental
payments are outstanding for a continuous period of six months or more. This right could not be exercised if
Glovertown Cable gives notice of intention to have the matter submitted to
mediation or arbitration. The authority
is part of the existing agreement with each of the Other Cable Operators as
approved by Order P.U. 1 (1997-98).
Glovertown Cable
objects to granting the Applicant’s request.
In his pre-filed testimony, Mr. Burry states that he is not aware of any
jurisdiction in Canada that allows a monopolistic utility to terminate electrical
power to a cable television company (even though the electricity bill is paid)
in the event that there is a dispute with respect to pole attachments.
The first question that
must be answered is whether the Board has jurisdiction under Section 53 (2) of
the Act to grant this remedy.
Glovertown Cable argued that Section 53 (2) gives the Board the
authority to prescribe the conditions and compensation for use by the cable
operator but that the remedy being sought is not a “condition” of use. It was submitted by Glovertown Cable that
the only “conditions” that the Board can order under Section 53(2) are those
that relate to physically occupying the pole.
Under Section 53 the “conditions” should be restricted to those
necessary to ensure that the use will not result in substantial detriment to
the service rendered by owners or other users of the equipment.
The Applicant argued that the Board
has jurisdiction under Section 54 (4) of the Act to impose a condition on
Glovertown Cable’s access to the Applicant’s poles that would relieve the
utility of the obligation to supply electrical energy to the facility of
Glovertown Cable in the event of non-payment.
Whether the Board has
jurisdiction to include this right of termination in an Order issued under
Section 53 (2) is an important one. In
dealing with this question the Board has to look to the legislation. Section 53 (2) of the Act states:
In cases of failure to agree upon the use, or the conditions or compensation for the use, a public utility or a person or corporation interested may apply to the board, and if after investigation the board considers that public convenience and necessity requires the use, and that it would not result in a substantial detriment to the service rendered by the owners or other uses of the equipment, it shall by order direct that the use be permitted and prescribe conditions and compensation for the use, and the use so ordered shall be permitted and conditions and compensations so prescribed shall be the lawful conditions and compensation to be observed, followed and paid.
Glovertown Cable
submits that this section of the Act ought to be given the very narrow
interpretation outlined above. However, the Board does not believe that this
would be in keeping with the Interpretation Act (1990) R.S.N. c.
I-11 or the Public Utilities Act by which this Board is
constituted. According to section 16 of the Interpretation Act :
Every Act and every regulation and every provision of an Act or
regulation shall be considered remedial and shall receive the liberal
construction and interpretation that best ensures the attainment of the objects
of the Act, regulation, or provision according to its true meaning.
Section 118(1) of the Public
Utilities Act contains language similar to that in s. 16 of the Interpretation
Act. Therefore, the Board concludes that s. 53(2) (and indeed all
relevant sections of the legislation) must be interpreted liberally and not
narrowly. Based on this, the Board finds that the use of the word “conditions”
in s. 53(2) should not be confined to merely the way in which the wires are
physically attached to the pole. Rather, the Board concludes that this phrase
should be interpreted more broadly to include establishing the remedy available
to Newfoundland Power in the event of non-payment of the attachment fee.
It should also be noted that s. 118(2) of the Public
Utilities Act states that:
The board created has, in addition to the powers specified in this Act, all additional, implied and incidental powers which may be appropriate or necessary to carry out all of the powers specified in this Act.
Section 53(2) of the Public
Utilities Act clearly empowers the Board to set the level of
compensation that the utility can charge for the use of the utility’s poles.
Applying the rules of statutory construction outlined above, it is only
reasonable to conclude that implied with the authority to set compensation is
also the authority to stipulate the remedy in the event of non-payment.
For these reasons, the
Board finds that it does have the jurisdiction to grant the Applicant the type
of remedy being sought. However, this does not end the matter. Simply because
the Board has the jurisdiction to grant this remedy, this does not mean that
the Board must grant the remedy.
As Counsel for the Applicant noted, s. 54(4) of
the Public Utilities Act allows the Board to relieve the company
of the obligation to supply electricity on terms and conditions that the Board
considers appropriate and in the public interest. Having found that it does
have the jurisdiction, the Board must now consider whether it is appropriate to
exercise its discretion in these circumstances.
As noted, before the Board can relieve the
Applicant from its obligation to provide electricity, the Board must be satisfied
that it is in the public interest to do so. The Board has in the past approved
a policy for disconnection of electrical services in the event of non-payment for
those services. There is a good public interest reason for granting
that remedy in those circumstances. In particular, a utility would not be long
in business if it were obligated to supply electricity where the customer
refused to pay for that electricity.
In the present situation, the Board does not
find that there is a good public interest reason for granting this type of
remedy. Non-payment of a pole attachment fee by cable companies will not so
dramatically affect the utility so as to threaten its viability. In addition, the Board notes that the
parties have indicated that this remedy would not be used until after the
matter proceeded through arbitration in accordance with the Arbitration
Act (1990) R.S.N. c. A-14.
According to s. 15 of that Act, the award of the arbitrator can be filed
with the Court and be enforced like a Court Order. Therefore, the Applicant
will have available to it other means of enforcing payment.
For these reasons, the Board will not relieve
the Applicant of its obligation to continue to supply power in the event of
non-payment of the pole attachment fee.
IT IS THEREFORE ORDERED THAT:
1. The rate that the Applicant shall charge Glovertown Cable for the use of the Applicant’s poles shall be calculated in accordance with the Formula as attached as Schedules 3 and 4 of Schedule “A” of the application (the “Rates”).
2. The Applicant is not discharged from its obligation to supply Glovertown Cable with electricity in the event of non-payment of the amounts calculated in accordance with the Formula.
3. The parties shall, within three weeks from the date herein, file with the Board an agreement reflecting the decisions of the Board as set out in this Order (the “Agreement”). The Rates shall become effective on the date that the Board approves of the content of the Agreement, or such other date as the Board may deem appropriate.
4. The costs of this hearing shall be borne equally between the parties.
DATED at St. John’s, Newfoundland this 1st day of May 2000.
________________________________
Raymond A. Pollett,
Commissioner.
______________________________
Gary
R. Vey, R.P.A.,
Commissioner.
Darlene
Whalen, M.A.Sc., P.Eng.,
Commissioner.
_____________________________
G. Cheryl Blundon,
Director of Corporate Services and
Board Secretary