LAWSON LUNDELL - British Columbia Utilities Commission · LAWSON LUNDELL LI.p BARRISTERS & SOLICITORS July 27,2007 VIA EMAIL: Commission.secretary @bcuc.com British Columbia Utilities

LAWSON LUNDELL LI.p B A R R I S T E R S & S O L I C I T O R S

July 27,2007

VIA EMAIL: Commission.secretary @bcuc.com

British Columbia Utilities Commission P.O. Box 250 600 - 900 Howe Street Vancouver, B.C. V6Z 2N3

DIRECT LINE: (604) 631-9183 csandersonOlawonlundell.com

Attention: Mr. Robert J. Pellatt, Commission Secretary

Dear Sirs and Mesdames:

R E Terasen Energy Marketing Inc. Application for a License to Market Natural Gas Project NO. 3698467

Pursuant to Order No. G-83-07, please find enclosed the Written Final Submission of the following members of the Gas Marketer Group:

CEG Energy Options Inc. Energy Savings B.C. ("ESBC") Summitt Energy BC LP Superior Energy Management Universal Energy Corp. Wholesale Energy Group

Yours very truly,

LAWSON LUNDELL LLP

Chris W. Sanderson, Q.C.

CWSIcrd Enclosure

The British Columbia Utilities Commission Project Number: 3698467

IN THE MATTER OF

Terasen Energy Marketing Inc. ("TEM") Application for a Licence to Market Natural Gas Project No. 3698467

WRITTEN FINAL SUBMISSION OF:

CEG Energy Options Inc. Energy Savings B.C. ("ESBC")

Summitt Energy BC LP Superior Energy Management

Universal Energy Corp. Wholesale Energy Group

Collectively the "Gas Marketer Group" ("GMG")

Final Submission of the Gas Marketer Group Submitted July 27,2007

1 The Facts and Historical Background

1.1 Background to the Application

On May OR, 2007, Terasen Energy Marketing Inc. ("TEM) applied for a licence to market

natural gas (the "Application") under the Commodity Unbundling Program (the "CUP"). By

Order G-68-07 dated June 14, 2007, the Commission established a written public hearing for a

review of the Application and stated that:

In the hearing, the Commission will consider whether the existing [Terasen Gas Inc.] TGI Code of Conduct and Transfer Pricing Policy are satisfactory to address the situation that would be created if TEM is granted a licence to market natural gas. (page 2)

By letter dated July 4, 2007, the Commission agreed with the submissions of Terasen Gas Inc.

("TGI") that a review of the TGI Code of Conduct (the "COC" or "TGI Code of Conduct") and

Transfer Pricing Policy (the " T P P or "Transfer Pricing Policy") is outside the scope of the

present proceeding, but added:

... the Commission ... does consider that the effects of the COC and TPP on the relationship between TEM and TGI are relevant to the proceeding. While TGI states that it is not and will not be providing services to TEM, the COC provisions related to matters such as access to customer information would still apply. The addition of Section 71.1 is a relatively recent change to the Utilities Commission Act, and the review of TEM's application for a Gas Marketer Licence pursuant to this Section will likely need to consider whether the current COC and TPP adequately address the relationship between TEM and TGI to support the licence application. (page 2).

In IR 11.1, (Exhibit A2) the Commission requested that TEM provide a legal opinion as to the

jurisdiction of the Commission to refuse a Gas Marketer Licence to TEM based on having the

name "Terasen" in its corporate name. In response, TEM provided the legal opinion of Fasken

Martineat1 DuMoulin LLP dated July 5, 2007 (the "Fasken Letter").

In a letter dated July 17,2007, CEG Energy Options Inc. on behalf of the Gas Marketer Group

(the "GMG) requested that the Amended Regulatory Timetable as set out in Order G-71-07 be

revised to allow Intervenor Written Final Submissions to be filed by July 27, 2007 in order that

Terasen Gas CPCN ADolication for Commodity ~nbundliig'for Residential Customers Project No. 3698421

Page 2 of 30


the GMG may retain legal counsel to conduct a review of the jurisdictional issues raised by TEM

in the Fasken Letter. The Commission granted the GMG's request in Order G-83-07 dated July

19,2007. The GMG then retained Lawson Lundell LLP to conduct this review.

The following are the Final Written Submissions of the GMG. To the extent the Submissions

address jurisdictional issues they have been drafted on the GMG's behalf by Lawson Lundell

LLP. The Fasken Letter is not directly addressed until the end of these submissions, as the GMG

submits that the true jurisdictional question is whether or not the Commission has the power to

determine whether or not to issue a licence to TEM and the Fasken Letter does not squarely

address this question.

1.2 Description of GMG and its Members

The GMG was formed to facilitate an efficient regulatory process and will together provide its

final submission in accordance with the Commission prescribed process for the Application. For

the purposes of these Final Written Submissions, the GMG is comprised of the following

members:

CEG Energy Options Inc. ("CEG)

Energy Savings B.C. ("ESBC)

Summitt Energy BC LP ("Summitt")

Superior Energy Management ("SEM)

Universal Energy Corporation ("Universal")

Wholesale Energy Group ("WEG)

Each member retains their right to file and intervene independently during the course of this

hearing.

CEG is in its 20' year of supplying natural gas and related transportation and storage

management services to commercial, institutional, and industrial clients in western Canada.

With the introduction of the Terasen Customer Choice Program, CEG is active in serving

Terasen Gas CPCN Application for Commodity Unbundling for Residential Customers Project No. 3698421

Page 3 of 30

Final Submission of the Gas Marketer Group Submined July 27,2007

1 residential customers in the Province of B.C. CEG is a wholly owned subsidiary of SemCanada

2 Energy Company.

3

4 ESBC is an active participant in the residential and commercial unbundling program marketing

5 natural gas products in British Columbia. As a member company of the Energy Savings Income

6 Fund (SIF.UN-TSX), the Energy Savings group of companies provide natural gas and electricity

7 commodity supply products to over 1.5 million customer equivalents operating in 9 jurisdictions

8 in North America -- notably Quebec, Ontario, Manitoba, Alberta, British Columbia, Illinois,

9 Indiana, Texas and New York. ESBC has also undertaken a comprehensive review of a number

10 of other jurisdictions in concert with its corporate growth strategy. This experience in various

11 North American markets informs ESBC's views on regulatory matters such as this Application.

12

13 Summitt is a subsidiary of Summitt Energy Holdings LP ("SEHLP). SEHLP is a 100%

14 Canadian owned organization in the energy industry. SEHLP formed Summitt to actively

15 market natural gas to the residential market in the province of British Columbia. In addition to

16 marketing in British Columbia, SEHLP conducts energy marketing practices in Ontario

17 (Summitt Energy LP) and Quebec (Summitt Energy Quebec LP). SEHLP markets fixed price

18 option contracts to residential, commercial, and industrial markets for gas andlor electricity

19 supply for terms of 1 to 5 years.

20

21 SEM is a wholly owned subsidiary of Superior Plus Income Fund (the "Fund"). The Fund is a

diversified business trust. The Fund's trust units and convertible debentures trade on the Toronto

Stock Exchange. The Fund holds 100% of Superior Plus LP, a limited partnership formed

between Superior Plus Inc., as general partner and the Fund as limited partner. Superior Plus is

focused on stability of distributions with value growth and has four Canadian based operating

divisions: Superior Propane is Canada's largest distributor of propane, related products and

services; ERCO Worldwide is a leading supplier of chemicals and technology to the pulp and

paper industries, a regional Midwest supplier of chloralkali products and the third largest

producer of potassium products in North America; Winroc is the seventh largest distributor of

walls and ceiling construction products in North America; and SEM provides fixed price natural

Terasen Gas CPCN ADDlication lor Commodity ~nbundlingfor Residential Customen Project No. 3698421

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Final Submission of the Gas Marketer Gmup Submitted July 27.2007

gas supply services in British Columbia, Ontario and Quebec and fixed price electricity supply

services in Ontario.

Universal is a company of Universal Energy Group, a publicly traded company on the Toronto

Stock Exchange under the symbol "UEG". Universal sells electricity and natural gas in Ontario

and natural gas to residential and commercial customers in British Columbia and Michigan.

Universal commenced operations on February 25, 2005 and in a short period has amassed a

customer-equivalent base in excess of 250,000. The principals of the organization have more

than 100 years of combined experience in the energy industry and are responsible for providing

service to over two million consumers. Universal's strategy is to provide a secure energy supply

at fixed prices to guarantee customers a stable long term rate.

WEG is a privately controlled Canadian corporation that markets fixed price natural gas and

electricity contracts to residential and commercial customers in British Columbia and Ontario.

WEG is a subsidiary of SemCanada Energy Company ("SCEC") which provides service options

that cover the entire energy value chain including wholesale gas origination, retail gas marketing,

producer aggregation and asset management.

2 Overall Position and Identification of Issues

In general, the GMG enthusiastically supports the CUP and the recent enhancements that have

been made to support the program. In the GMG's view, the market opening has been a

significant success for retail markets under the current market design.

Notwithstanding the GMG's support of CUP, the GMG has concerns respecting the Application.

Accordingly, in these written submissions, the GMG addresses the following issues:

1. Should the Commission issue a gas marketer licence to TEM, an affiliated entity of TGI, where the name "Terasen" is common to both and likely to cause confusion in customers' minds concerning the relationship between the two companies?

2. If a gas marketer licence is granted to TEM, are the current TGI Code of Conduct and Transfer Pricing Policy and Code of Conduct for Gas Marketers adequate to address the relationship between TGI and TEM?


Page 5 of 30

Final Submission of the Gas Marketer Group Submitted July 27.2007

3 History of open access to B.C.'s Natural Gas Markets

3.1 Access to the Non-Core Market

Prior to 1987, all gas was supplied to end use customers in British Columbia by monopoly

service providers on a bundled basis. In 1987, Inland Natural Gas Ltd., the predecessor company

to TGI, pioneered open access in this province by applying to establish transportation service

rates for its industrial and large commercial customers. In a series of decisions following 1987,

the Commission established rules under which open access could occur.

During that period, the Commission considered whether direct access should be provided to what

came to be known as "core market" customers. These were customers in the residential and

small commercial sectors who could be expected to have fewer alternatives and less market

sophistication than the major customers to whom open access was given commencing in 1987.

3.2 Access to the Core Market

The introduction of commodity unbundling for the residential and commercial customer classes

in the TGI service area has evolved through a number of stages. The unbundling program began

on November 5, 1998 with Letter No. L-79-98 which requested TGI (then called BC Gas Utility

Inc.) to prepare a proforma unbundling tariff to provide both customer classes with the option of

transportation service. The development of an appropriate business model delayed the project

and the Marketing Unbundling Group ("MUG) was formed as a collaborative stakeholder group

to investigate full unbundling. MUG submitted a report in August 1999 that outlined the

implementation plan for a November 1, 2001 introduction date but this start-up date was later

postponed to the following year when the proposed business model was unacceptable to

marketers.

The Commission determined at this point that amendments to the Act were necessary to provide

for better control of marketers in the BC marketplace and legislative changes were proposed.

These amendments would require gas marketers that serve low volume customers to be licensed,

which would include posting a security deposit or bond before being allowed to participate in the


Page 6 of 30

Final Submission of the Gas Marketer Group Submitted Julv 27.2007

1 program. The objective was to avert problems encountered in other provinces when

2 misinformation was distributed to consumers and financially unstable marketers failed, leaving

3 their customers without gas supply.

4

5 The Commission held a stakeholder meeting on September 20, 2001, where most participants

6 agreed that it was not cost effective to continue with further development without assurances that

7 legislative changes would be made. The proposed business model remained an issue as marketers

expressed concern with the supply balancing requirement and the one-year contract limitation

with consumers. In their view, these were major hurdles that would prevent marketers from

participating in unbundled service. At this point, the Commission formally suspended the

program by Letter L-36-01 with the provision to revisit the initiative when the Commission had

the necessary licensing and enforcement powers.

With the introduction of the B.C. Provincial Government Policy "Energy for Our Future: A Plan

for BC" dated November 25, 2002 (the "2002 Energy Plan"), a stronger emphasis was placed on

commodity unbundling for residential and commercial customers. Policy Action No. 19 of the

2002 Energy Plan stated that:

For three years, natural gas suppliers, ratepayers and BC Utilities Commission have been working to extend direct sales to residential and small commercial customers. New tracking software will allow customer bills to identify from whom natural gas was purchased and what it cost. Although gas brokers and marketers have succes.~fully shown that they can provide a customized array of low cost services, some jurisdictions (e.g. Ontario and Alberta) have required licensing and bonding to protect consumers from misleading marketing practices. The Utilities Commission Act will be amended in spring 2003 to allow direct natural gas sales to low volume customers, and to require the licensing of marketers who serve those customers. The commission will establish the rules, including posting of a security deposit, to obtain a gas marketing licence.

30 The Commission instructed TGI in Letter L-49-02 dated December 13, 2002 to resume work on

31 the project with the objective of making the commodity unbundling option available for

32 November 2004. TGI then issued its Commodity Unbundling and Customer Choice Report

33 dated February 28, 2003, which introduced the Essential Services Model and the Stable Rate

34 Option for residential customers. This business model separates midstream resources from the

Terasen Gas CPCN Application for Commoditv Unbundlino for Residential Customers Paoe 7 of 30 Project ~d 3698421 -

Final Submission of the Gas Marketer Group Submined J U I ~ 27,2007

natural gas commodity cost so that commercial customers have choice over the supplier for the

commodity component of gas service.

In Letter L-14-03 dated April 16, 2003, the Commission directed that unbundling for small

volume customers should be implemented in two phases. Commercial customers were to have

an unbundled option effective November 2004 (Phase 1) with unbundling to be provided to

residential customers in the second phase at some time in the future (Phase 2). The Commission

directed TGI to proceed with commercial unbundling generally as described in the March 28,

2003 filing. In addition, the Commission directed the provision of a Stable Rate Option for

residential customers and approved a deferral account in the amount of $1,050,000 to allow

further development of the implementation plan, design and approval phases. TGI implemented

the proposed commodity unbundling service for small and large commercial customers. Process

changes and system development was completed allowing eligible customers to begin enrolling

in the program in May 2004. Gas flowed to customers who elected a gas marketer to provide the

commodity on November 1,2004.

TGI outlined its proposed Business Rules based on the Essential Services Model in its May 6,

2003 letter to the Commission and conducted consultation sessions with all interested parties. On

May 22, 2003 a Commission-led workshop was held with all stakeholders. After receiving

comments from this session, the Commission finalized the Business Rules in Letter L-25-03

dated June 6.2003.

In the Terasen Gas Commodity Unbundling Application dated October 27, 2003, TGI sought

approval for essentially three major elements; tariff amendments (including the Notice of

Appointment of Marketer and the Commodity Unbundling Agreement that are components of

Rate Schedule 36), the Code of Conduct for Gas Marketers, and the Customer Education

Program. Following a Commission workshop, Order G-90-03 dated January 9, 2004 approved

the application, including TGI's December 4, 2003 revisions to the application. Order G-90-03

also approved the Code of Conduct for Gas Marketers and the Rules for Gas Marketers.

Page 8 of 30 Terasen Gas CPCN ADDliCatiOn for Commodity ~nbundlin'g'for Residential Customers Project No. 3698421


In Commission Order G-66-05 dated July 7, 2005, the commission approved deferral account

funding for TGI to complete the review and validation of the business model rules for the

Residential Unbundling Program, as well as the timeline leading to a Certificate of Public

Convenience and Necessity ("CPCN) application by March 2006. In Commission Order G-

110-05 dated October 31, 2005, additional funding was approved to complete the scoping and

business systems analysis required to enable the filing of a CPCN application for the Residential

Unbundling Program by March 2006. Work on the Scoping Phase of Residential Unbundling

commenced in late November 2005. The primary focus of this work involved a review of

existing processes and systems used by the Commercial Unbundling program with the aim of

identifying improvements and changes needed to support a Residential Unbundling program, as

well as the existing Commercial Unbundling program. This review was completed in early

March 2006 and resulted in TGI filing an application for the approval of a CPCN for the

Commodity Unbundling Project for Residential Customers on April 13,2006. Following an oral

public hearing, the Commission granted the CPCN in Order C-6-06 dated August 14, 2006. In

that Order, the Commission approved the Residential Unbundling Business Model and Business

Rules and revised (for Residential Unbundling) Code of Conduct for Gas Marketers (subject to

some modifications set out in the Order). The Commission did not rule on the issues raised in

this proceeding relating to utility affiliates participating in the competitive marketplace.

3.3 The RMDUM Guidelines and the Commission Code of Conduct Principles

The development of a Code of Conduct and Rules specific to TGI took place against the

backdrop of a decade long review by the Commission of the general principles under which

incumbent utilities may carry on business in unregulated markets downstream of the utility

meter. In the course of this review, the Commission published the Retail Markets Downstream

of the Utility Meter Guidelines ("RMDUM Guidelines"). Throughout the course of the

development of the RMDUM Guidelines, the role of incumbent utilities and the use of their

names were prominent considerations.

As an initial step, the Commission held a workshop on October 16, 1996, at which submissions

by a number of groups were made. Commission Staff issued a position paper on December 16,


Page 9 of 30


1996 (the "Staff Position Paper") which reviewed the traditional role of utilities and emerging

pressures for changes in this role, provided Staff's interpretation of the Commission's

jurisdiction with respect to utility or utility-affiliated NRB participation in downstream markets,

and summarized the issues and concerns regarding utility participation which had been presented

to the Commission. The Staff Position Paper also proposed a set of principles and guidelines for

the Commission to use to assess individual utility proposals to determine which should be

pursued using stand-alone NRBs and which could be pursued either by the utility directly or

through a related NRB. With respect to the issue of the use of the corporate or utility name by

NRBs, the Staff Commission Paper noted the following at p. 12:

With respect to the issue of the use o f the corporate or utility name by the NRBs, most of the utilities argued that the name was owned by the shareholders who had a right to use it as they wished. This differs from the recommendations of BC Gas' consultant, Stone and Webster, and the current position o f the BCUC based on that report. The contractors' groups argued that NRBs should not be allowed to use the corporate name since the goodwill associated with the name was acquired under the privilege of the utility's monopoly to sell and distribute energy under tariff rates and faed prices. As a result they maintained that the goodwill associated with the name is paid for by consumers and that the use ofthe corporate name by a NRB constitutes subsidization.

In April 1997, following a comment period, the Commission issued the RMDUM Guidelines,

which summarize the submissions made with respect to the Staff Position Paper and contain the

findings of the Commission with respect to the participation of utilities and their NRBs in the

retail market downstream of the utility meter.

The Commission stated in the RMDUM Guidelines, at sections 5.2 and 5.3, that at the time a

utility brings forward any application to use utility assets or services in the provision of

unregulated goods and services in the downstream retail market, the Commission will require the

utility to also bring forward for approval a proposed transfer pricing policy and a code of conduct

for the relationship between the utility and its NRBs.

With regard to the use of the utility name by an NRB, the Commission noted that this had been

the subject of much debate:


Page 10 of 30

Final Submission of the Gas Marketer Group Submined July 27,2007

Many suggestions were received with respect to the spec$c elements which should be included in the code of conduct. Much of this debate centred around the use of the utility name by NRBs. (RMDUM Guidelines, section 5.3)

The Commission then indicated that the use of the utility name by a related NRB was also of

concern to the Commission:

The Commission is concerned that the use of the utility name by related-NRBs could interfere with the Commission's responsibility to protect ratepayers. The Commission will likely have to rule on this matter on a case by case basis considering the related-NRB function, the potential impact on ratepayeras (including confusion between regulated and non-regulated services) and the services provided by the utility at rates to be determined by the Commission. (RMDUM Guidelines, section 5.3)

The Commission therefore established Code of Conduct principles. For present purposes, the

most important of these principles are principles 2 , 3 and 7, which provide as follows:

2) No regulated company personnel will state or imply that favoured treatment will be available to customers of the company as a result of using any service of an NRB. In addition, no regulated company personnel will condone or acquiesce in any other person stating or implying that favoured treatment will be available to customers of the company as a result of using any service of an NRB.

24 3) No regulated company personnel will preferentially direct customers seeking 25 competitively offered services to an NRB. If a customer, or a potential customer,

requests from the regulated company information about products or services offered by an NRB or its competitors in downstream markets, the regulated company may provide such information, including a directory of retailers of the product or service, but shall not promote any specific retailer in preference to any other retailer.

7) Use of the utility name by a related NRB will require approval by the Commission to ensure that its use will not interfere with the Commission's ability to protect ratepayers.

The TGI Code of Conduct and TGI Transfer Pricing Policy

p~p~-~


Page 11 of 30

Final Submission of the Gas Marketer Gmup Submitted July 27, 2007

On December 3, 1997, the Commission approved and accepted for filing the TGI Code of

Conduct and Transfer Pricing Policy, both dated August 1997, for the provision of utility

resources and services. The TGI Code of Conduct governs the relationship between TGI (then

BC Gas Utility Ltd.) and NRBs for the provision of utility resources. The TGI Transfer Pricing

Policy addresses the pricing of resources and services provided by TGI to NRBs and divisions of

the utility providing unregulated products or services.

Section 9 of the TGI Code of Conduct provides:

BC Gas Utility Ltd. agrees that newly established NRBs engaging in RMDM activities will not use the Utility's name as the primary identifier within British Columbia, and will not use the Utility name in a manner that indicates that Utility resources will support the NRB.

3.5 The Code of Conduct for Gas Marketers

In Order G-90-03 dated January 9,2004, the Commission approved the original Code of Conduct

for Gas Marketers. By Order G-45-07, the Commission approved revisions to the Code of

Conduct for Gas Marketers (as revised, the "Code of Conduct for Gas Marketers"). The purpose

of the Code of Conduct for Gas Marketers, as stated in its introduction, is to "foster and uphold a

sense of responsibility towards the Consumer and towards the general public by all those

engaged in Marketing of Gas to Low Volume Consumers participating in the Commodity

Unbundling Service in the Province of British Columbia", and is to be "applied in spirit as well

as to the letter, bearing in mind the varying degrees of knowledge, experience and discriminatory

ability of Consumers".

3.6 Rules for Gas Marketers

In Order G-90-03 dated January 9,2004, the Commission approved the Rules for Gas Marketers.

The Rules for Gas Marketers were developed pursuant to s. 71.1 (10) of the Act to assist the

administration of Gas Marketer licensing. Rule 6.0 of the Rules for Gas Marketers requires as

follows:

Terasen Gas CPCN Application for Commodity Unbundling for Residential Customen Page 12 of 30 Project No. 3698421


Each public utility that has an approved gas unbundled commodity service tariff must, in co-operation with Gas marketer.^, develop a standard information booklet for its service area which outlines the procedures for commodity purchase and discloses potential benefits and risks. A Gas marketer must distribute the standard information booklet prepared by the public utility to all prospective clients (and include a reference to the booklet in their Notice of Appointment of Marketer). The public utility will make the booklet available in both hard copy and electronic form.

3.7 Enactment of Section 71.1 of the UCA

Consistent with Policy Action No. 19 of the 2002 Energy Plan, the Act was amended in 2003 by

the Utilities Commission Amendment Act, 2003, S.B.C. 2003 ("Bill 40") to, inter alia, add

section 71.1 to the Act. With the introduction of section 71.1, the Legislature conferred on the

Commission an unfettered discretion to determine to whom a licence may be granted and on

what conditions. Subsection 71.1(6) provides:

(6) The Commission may (a) on application, issue a gas marketer licence to any person who is not a public

utility, (b) impose, in respect of any gas marketer licence issued by the commission, terms

and conditions that the commission considers appropriate, (c) amend any of the terms and conditions imposed in respect of a gas marketer

licence, and (d) suspend or cancel a gas marketer licence.

Furthermore, the Commission is granted a broad discretion to make rules in subsection 71.1(10),

which provides as follows:

(10) The Commission may make the following rules: (c) respecting the imposition of terms and conditions on gas marketer licences;

Finally, subsection 71.1(4) indicates that, in conferring this unfettered discretion on the

Commission, the legislature was specifically concerned with regulation of the name in which the

gas marketer was to be licensed. Subsection 71.1(4) provides:

(4) A gas marketer must not carry on or offer to carry on business as a gas marketer in a name other than the name in which it is licensed unless authorized to do so in the licence.

Terasen Gas CPCN App catlon for Comrnod~h, Unbundllnq lor Resident a! C,stomers Page 13 of 30 Project ~ 6 . 3698421 .


3.8 The Development and Use of the Terasen Name

Prior to April 25, 2003, Terasen Inc. was called BC Gas Inc. and Terasen Gas Inc. was called

BC Gas Utility Ltd. BC Gas Inc. was the holding company that directly owned the natural gas

distribution utility and other energy related businesses. It was formed on July 1, 1993 when the

BC Gas group of companies was reorganized to separate the company's businesses regulated by

the Commission from the company's other businesses. Prior to the reorganization, the gas

distribution utility, BC Gas Utility Ltd. was known as BC Gas Inc.

On or about April 25, 2003, BC Gas Inc. (the holding company) changed its name to Terasen

Inc. and BC Gas Utility Ltd. changed its name to Terasen Gas Inc. The change of name was

undertaken to reflect the expanding ambitions of the companies. However, throughout the

history of both the BC Gas and the Terasen names, the group's primary interface with the public

was at the utility level and the goodwill associated with both the BC Gas and Terasen names

developed in the regulated environment.

4 The Issues

GMG submits that the issues are:

1. Should the Commission issue a gas marketer licence to TEM, an affiliated entity of TGI, where the name "Terasen" is common to both and likely to cause confusion in customers' minds concerning the relationship between the two companies?

2. If a gas marketer licence is granted to TEM, are the current TGI Code of Conduct and Transfer Pricing Policy and Code of Conduct for Gas Marketers adequate to address the relationship between TGI and TEM?

Argument


2521 3.9943O.CZW.2944426.2

Page 14 of 30


.1 Should the Commission issue a gas marketer licence to TEM, an affiliated entity of TGI, where the name "Terasen" is common to both and likely to cause confusion in customers' minds concerning the relationship between the two companies?

5.1.1 Overview of the Regulatory Scheme Governing Core Market Access

The GMG respectfully submits that this Commission has the jurisdiction and indeed the

obligation to consider the appropriateness of the name of any entity that applies to it for a gas

marketer licence. In appropriate circumstances, the Commission may refuse to issue a licence on

the basis of the name of an applicant or alternatively may place terms and conditions on the use

of the name by a gas marketer to which it does issue a licence. To argue to the contrary is to

ignore the plain meaning of the words of section 71.1, the purpose and context of Act as a whole

and the evolution of open markets in the natural gas business in British Columbia over the past

20 years. This Part will further develop the legal and policy basis for the position. Part 6 of this

submission elaborates some of the supporting legal arguments in response to the Fasken Letter.

The 2002 Energy Plan explicitly identified the provincial governments' objectives of

implementing a residential and commercial unbundling program. In response to that policy

objective, the Commission used its powers under Part 3 of the Act to require Terasen to design

and implement the residential and commercial unbundling program. At the same time, the

Commission developed the Code of Conduct for Gas Marketers and Rules for Gas Marketers that

would be necessary to protect consumers and develop an efficient market. The challenge for the

Commission was, as Terasen points out, that the Commission has no direct jurisdiction over gas

marketers and thus obtaining their compliance to appropriate behaviour lay outside the ambit of

the Commission's authority.

In response to this lack of direct authority over gas marketers, the Legislature enacted section

71.1 as part of the legislative amendments in 2003 resulting from the energy plan. It is important

to note that these amendments were not required to extend the jurisdiction of the Commission to

require open access or otherwise make determinations affecting gas utilities such as Terasen that

were subject to its jurisdiction. Rather they were necessary exclusively for the purpose of

providing the Commission with control over who could and could not participate in the open


Page 15 of 30


access marketplace and, the terms and conditions under which those who could participate

should operate.

Thus, the legislative and regulatory scheme in British Columbia reflects the conviction that by

enabling competition in the retail marketplace, customers of incumbent utilities will benefit

through lower prices for the natural gas commodity provided that gas marketers are licenced to

ensure that they carry on the business appropriately.

5.1.2 The Licensing Power of the Commission

TEM does not appear to quarrel with the proposition that all gas marketers must be licensed and

indeed TEM has applied for just such a licence. Implicit in its submissions however is the

proposition that in determining whether to license a gas marketer, the Commission is precluded

from considering the name of the applicant. TEM provides no support whatever, either through

the Fasken Letter, or in its submissions, for that very surprising assertion. The series of

decisions of the Commission with respect to the open access policy, the enactments of the

Legislature and common sense all confirm the relevance of a marketer's name in determining

whether it is an appropriate candidate for a licence.

In any event, the suggestion that the name of the proposed licensee is not relevant when the

Commission comes to make the determination is completely answered by the words of section

71.1(4), which expressly prohibits a marketer carrying on its business under any other name than

that under which it was licensed. If the name was not relevant, this section would be wholly

unnecessary.

5.1.3 The Commission's Concerns with Respect to Local Distribution Utilities in the Marketplace

The Commission's concerns with respect to the role that incumbent utilities should be permitted

Terasen Gas CPCN Application for Commodity Unbundling for Residential Customen Project No. 3698421

Page 16 of 30

Final Submission of the Gas Marketer Gmup Submitted July 27,2007

to play as markets open up has been prominent since 1987. As summarized earlier in these

submissions, since the mid 19903s, the Commission has been encouraging utilities to separate

their non-regulated businesses from their regulated ones, expressed concern with respect to

corporate names and taken whatever steps it could to make it clear that it wished to avoid any

confusion in utility's customers minds with respect to the role that the utility was playing in the

supply of competitive markets. The Commission's concems appear to have been two-fold.

First, to ensure that assets the cost of which are charged to ratepayers are not being used to the

benefit of a non-regulated affiliate. Second, to ensure that the utility was not able to use its

control of infrastructure or its access to customers to inhibit the ability of others to compete in

direct access markets. The inappropriate use of the utility's name can raise both concems.

5.1.4 Use of the Goodwill Associated with the Terasen Name

The name "Terasen" is indistinguishable from the business of TGI. As set out above, the

goodwill in the name BC Gas was developed by the utility and then passed from the utility to its

corporate parent. The name Terasen is similarly a brand which is being used indistinguishably

by Terasen Inc. and TGI. and other members of the Terasen family to create a brand that will

resonate with all of Terasen's customers. The fact that the copyright to the name may have been

transferred to Terasen Inc. is completely irrelevant. The incontrovertible fact remains that TGI's

customer's will all know that TEM is affiliated with the incumbent utility that has supplied them

their natural gas and transportation for many years and are very unlikely to distinguish the

corporate identity of the two companies.

Thus, it seems plain that TEM will benefit substantially from the goodwill that has been built up

in the Terasen name without providing any compensation, as proposed at least, to TGI This

directly violates the provisions of both the Code of Conduct for Gas Marketers and TGI's own

Code of Conduct. There can be no doubt that this violation is a relevant consideration in

considering whether a licence ought to be issued to TEM.


Page 17 of 30


5.1.5 Inhibiting Growth of the Market

The use of Terasen in TEM's name also raises the second concern associated with utility names.

That is, use of the Terasen name can be expected to inhibit the growth of a competitive market.

It has long been recognized by the Commission that the incumbent utility enjoys name

recognition with its customers and that name recognition comes from the utility relationship that

it has had with those customers over many years. It would be entirely natural for the customers

to assume that TEM had all of the franchise rights enjoyed by TGI. That perception can

reasonably be assumed to make customers reluctant to reside the same faith in direct marketers

as they would TEM. The illusory distinction between TEM and other marketers may thus

provide TEM with an unfair advantage and make the establishment of a competitive retail market

difficult to achieve. The difficulties created by TEM's involvement in the market under that

name in this respect have two aspects. First, it will cause customer's to be reluctant to switch to

new marketers. But second, it may very well cause new marketers to be reluctant to either enter

the market in the first place or stay in it once here. In determining whether or not to enter or stay

in a new market, gas marketers must assess whether they can overcome the significant

advantages enjoyed by the incumbent utility. This is particularly so in B.C., where the only

market to which the marketers have access is served by one utility.

The Commission seemed to express this concern in IR. 10.1 and 10.1.1 (Exhibit A-2). In IR 10.1

the Commission asked:

Since Gas Marketers can leave a market just as fast as they enter one when they perceive that one Gas Marketer has unfair exclusive advantages, has TEM investigated a residential unbundling market with a similar structure to the one that exists in BC where the corporate name of the host utility and its nonregulated business are similar?

In IR 10.1.1 the Commission asked TEM:

What effect is the approval of the Licence for TEM expected to have on the number of other marketers that exist in the BC market? Please explain the basis for the response.

Terasen Gas CPCN Application for Commodity Unbundling for Residential Customen Project No. 3698421

25213.99430.CZW.2944426.2

Page 18 of 30

Final Submission of the Gas Marketer Group Submined July 27.2007

TEM does not answer the question by providing evidence, but instead points to the fact that there

are a large number of marketers in place. The question is whether the existing marketers will

leave or fail to enter the market. TEM can point to no effort it has made to find out the answer to

this question, either by making an informed assessment of the B.C. market or by looking to other

jurisdictions.

In that regard, trust in the government commitment to a competitive market and the regulatory

market model design is a critical decision making criteria for a business when it is making

investment decisions or evaluating business strategy. In BC's market model, TGI was given the

pivotal role of sponsor, educator, enrolling and billing agent, and confirmation source-all

distinctly branded with the Terasen brand and logo to lend credibility to the program-to set it

up for success.

There was support among marketers for the model framework that put TGI in the fundamental

support role of CUP because TGI was neutral and would be viewed in the market as the trusted

utility. The entry into the market of TEM given the omnipresence of its utility affiliate in CUP

definitely favours TEM.

Gas marketers in good faith have been supporting and complying with the requirements of the

Terasen Gas' Unbundling Program and the Commission including the requirement that

marketers hand out education booklets with the Terasen logo and branding to all customers. In

essence, marketers have been handing out advertising material that promotes TEM - their

competitor. The GMG respectfully submits that it is absurd and unfair for gas marketers to be

required to promote the services of a competitor over their own services.

Given the strength of section 9 of the TGI Code of Conduct, marketers did not reasonably expect

a utility affiliate to enter the unregulated retail market. Had they so expected, they would have

insisted that the customer education material not be branded by TGI, but rather by the

Commission-an impartial third party. Most certainly, marketers would not have agreed to hand

out material that would provide advertising of and promote a competitor.

Terasen Gas CPCN Application for Commodity Unbundling for Residential Customers Page 19 of 30 Project No. 3698421

Final Submission of the Gas Maheter Group Submined JUIV 27. 2007

The marketers in the market now have entered and invested heavily in this market based on the

framework established in the unbundling program. That framework did not include having the

affiliate use the same name as TGI who is responsible for the Customer Education program.

There is no other jurisdiction with retail choice that requires competitor companies to hand out

branded educational material that distinguishes the utility affiliate above all others.

Existing marketers may be forced to re-evaluate the prudence of remaining in this market. New

entrants will definitely factor this into their business decision as to whether to invest in this

market or not, and it is not a favourable market attribute.

In short, the Legislature has provided the Commission in Part 3 of the Act with the obligation to

regulate public utilities that provide service to natural gas markets in a way that provides just and

reasonable rates for customers. It has further provided the Commission in Part 5 of the UCA

with the authority to determine who can participate in direct markets and on what conditions.

The combination of these provisions renders it beyond doubt that the Commission can and in

appropriate circumstances must consider whether the name of a proposed licencee will impair

the development of a competitive market for the supply of natural gas into the core market.

Where the Commission concludes that it will, it must either decline to grant the licence or

impose conditions which alleviate the concern.

5.1.6 Confusion in the Marketplace

The GMG has submitted that customers would be confused by TEM's entry into the

marketplace. While there will always be some doubt about what will or will not confuse

consumers, the GMG submits that a useful expression of an appropriate test was recently

articulated by a Georgia State regulator in the following words:

Whether the resemblance [between trade names] is so great as to deceive the ordinary customer acting with the caution usually exercised in such transaction so that he may mistake one for the other.

Terasen Gas CPCN Application for Commodity Unbundling for Residential customers Project No. 3698421

Page 20 of 30


(Complaint o f PanCanadian Energy Services Inc. et al. against Atlanta Gas Light Company and Atlanta Gas Light Services, Inc., Docket No. 9156-U (1998) citing Prosser, the Law of Torts, 130 at pp. 957-58 (4Lh ed. 1971), a copy of which is attached.)

In that case, the Georgia Public Service Commission applied the test and concluded that

confusion was caused in the minds of customers by the similarity in the trade names used by the

distribution company, Atlanta Gas Light Company, and its gas marketer affiliate, Atlanta Gas

Light Services, Inc. Thus, the gas marketer company was precluded from using the name

Atlanta Gas Light Services, Inc. as long as that confusion exists.

Applying that definition in this case leads clearly to the conclusion that confusion is likely if not

inevitable if TEM is permitted to use the Terasen brand. The ordinary customer of TGI cannot

be expected to distinguish between Terasen Inc., TGI and TEM. As far as the customer is

concerned, they are all "Terasen".

The perspective of TGI's customers developed by design, not chance. When BC Gas changed its

name to Terasen, its then CEO, John Reid, explained the Company's motivation in the following

words:

Some people found the BC Gas name confusing and many people believed we were a Crown Corporation or tied to the provincial government. This change signals to investor.7 and customers that we are one company sharing our skills and expertise. (BC Gas Inc. Terasen Inc. News Release via Canada Newswire dated April 25,2003)

Moreover, the Commission itself has acknowledged that TGI's current brand impact is

significant in comparison to the gas marketers who are attempting to develop brand and product

awareness:

The Commission Panel is of the view that successful launching o f residential unbundling (customer choice for commodity supply) should be based upon a market with a "playing field" which is as level as possible and which at the outset gives no participant an undue advantage. The Commission Panel considers that TGI's current brand impact is significant in comparison to the Gas Marketers who are attempting to develop brand and product awareness. (Terasen Gas Inc., An Application for Approval of a CPCN for the Residential Commodity Unbundling Project, Order C-6-06 at p.39 (August 14,2006))


Page 21 of 30


What is more, TEM's use of the name Terasen does not comply with the TGI Code of Conduct

or the Commission's Code of Conduct for Gas Marketers.

With regard to the TGI Code of Conduct, section 9 provides explicitly:

BC Gas Utility Ltd. agrees that newly established NRBs engaging in RMDM activities will not use the Utility's name as the primary identifier within British Columbia ...

In its final written submission on page 6, TEM asserts that:

TEM is not in contravention of the TGI Code of Conduct with respect to use of the Utility's name. TEM is not using the name of the Utility [Terasen Gas Inc.] as the primary identifier within B.C. and will not use the Utility name in a manner that indicates Utilify resources will support TEM.

The GMG completely rejects this contention. TEM's assertion is fundamentally inconsistent

with the premise under which the parties were discussing unbundling at the time the TGI Code of

Conduct was approved. Section 9 of the TGI Code of Conduct was clearly intended to prohibit

NRBs from using a name which might cause it to be confused with the utility. TGI's renewed

intention to do so is a significant development that has rekindled an old debate. While TEM has

expressed dismay that its Application is being put through a "lengthy and onerous regulatory

review process" (Exhibit B-3, p. I), in fact is the abrupt change of course that has made this

process necessary.

There can be no credible argument that any word other than "Terasen" is the primary brand

identifier for the Terasen group of companies. "Gas" by itself is not a primary brand name that

differentiates a company's brand. It is the capitalized short-form term for natural gas which is

not a corporate brand.

Throughout its sales and marketing documentation TEM uses Terasen for its branding and

advertising as a primary identifier. Examples from the sales material include:

- Page 6 of the sales and marketing package provided in the Application, - Terasen Gas CPCN Application for Commodity Unbundling for Residential customers Project No. 3698421

Page 22 of 30

Final Submission of the Gas Marketer Group Submined Juiv 27.2007

o "Today, Terasen is please to offer you for a limited time only a competitive price of $X.XXper gigajoule.. . "

- Page 1 of the sales and marketing package provided in the Application,

o "The following document provides and outline of the practices and procedures Terasen Energy Marketing ("Terasen") will be utilizing ... "

- Page 3 of the sales and marketing package provided in the Application,

o "Commodity Charges Midstream-this tenn refers to charges we pay other companies who store, transport, and help manage the gas delivered to your home." [Bolding and underlining added for emphasis].

Given this is TEM material, the inference must imply an association with TGI that it has said it

does not have.

Thus, TEM has been using the name 'Terasen', which is the common name of the utility, as a

primary identifier.

Using the same logo, brand, and the common name as TGI will undoubtedly create confusion

with customers. TGI has branded CUP, has been very publicly educating the public about the

program, bills customers, and sends out confirmation letters. The Terasen name is omnipresent

with the customer in important aspects of this campaign. Now TEM wants to use the same

primary identifier as TGI.

In response to IRs 6.0, 8.0, 11.4 and 12.0 in Exhibit B-4, TEM states they will clearly distinguish

the two names TGI and TEM through their marketing and communication efforts. It is not

evident that the customer will be able to distinguish TEM from TGI given the sales script and

training materials provided by TEM. Throughout the sales and training material provided by

TEM, references to either "Gas Inc." or "Energy Marketing" are dropped. For example, on page

3, point 2 of the "The Sales Call" document in the third sentence: "Terasen is offering you a new

product.. ." it is not clear which entity will be providing the new product. Dropping the name

"Energy Marketing" serves to underscore how confusing it will be for customers.

Terasen Gas CPCN Application for CornmodiQ Unbundling for Residential Customers Project No. 3698421

Page 23 of 30


1 Furthermore, TEM failed to gather the necessary evidence that would prove that customers could

2 distinguish between Terasen Inc., TGI, and TEM In TEM's response to IR 8.1 (Exhibit B-4),,

3 page 5, TEM states: "TEM does not have marketing surveys investigating this issue."

4 5.1.7 Summary of Position 5

6 Based on this analysis, the GMG submits that:

8 1. The commission should take into account both TEM's affiliation with TGI and its use 9 of the word "Terasen" in its name when considering issuing a licence to TEM; and

10 11 2. Based on the considerations discussed above the Commission should only issue a 12 licence to TEM on condition that it not use in its name the word "Terasen" or any 13 other word that invokes the goodwill associated with TGI or its predecessor. 14

15 5.2 If a gas marketer licence is granted to TEM, are the current TGI Code of Conduct 16 and Transfer Policy and Code of Conduct for Gas Marketers adequate to address the 17 relationship between TGI and TEM?

18 5.2.1 The existing TGI Code of Conduct and Transfer Policy and Code of Conduct for 19 Gas Marketers 20

21 In the alternative, the GMG respectfully submits that if TEM is issued a licence either in its

22 current name or in any other name, the current TGI Code of Conduct and Transfer Pricing Policy

23 and Code of Conduct for Gas Marketers are not adequate to ensure that its entrance into the

24 residential unbundling marketplace will not provide it with an undue advantage to the prejudice

25 of TGI's ratepayers and to the development of a competitive market.

26 27 The existing Code of Conduct was created 10 years before unbundling at the small volume

28 consumer level. TGI was made the administrator of the Code at that time. There were no

29 unregulated affiliates of TGI in the competitive market at that time. Given that the environment

30 has changed so much, the GMG feels strongly that the Code should be strengthened to ensure

31 that ratepayers are not subsidizing unregulated affiliates and that there is no undue advantage

32 afforded to the marketing affiliate given the entry of unaffiliated marketers. At a fundamental

33 level, the entry of an unregulated TGI affiliate means that it may now be inappropriate for TGI to



administer the Code. Other jurisdictions have now drawn from their experience and developed

sophisticated and robust codes of conduct, which codes of conduct could serve as precedents for

the review sought by the GMG.

The GMG would like to see the Code and TPP reviewed before a gas marketer license is granted.

In a letter dated June 27,2007 TGI declared:

Terasen Gas has ceased the provision of services to TEM, and on a go-forward basis Terasen Gas will not be providing any utility resources to TEM, which means the Terasen Gas COC and TPP will have no relevance to TEM since Terasen Gas will not be providing any services.

Terasen Gas is of the view that it is inappropriate to review any of its policies, including the Terasen Gas COC and TPP in a proceeding relating to an application made by another entity.

Furthermore, Terasen Gas is of the view that there is no need to review its COC and TPP at this time as these policies were recently reviewed as part of the Terasen Gas (BC Gas Utility Ltd. at the time) 2003 Revenue Requirements proceeding.

Finally, since the COC and TPP, as stated by the Commission in Order No. G-68-07, "defines the relationship hetween TGI and TEM.for the provision of utility resources... " (emphasis added) and Terasen Gas will no longer be providing utility resources to TEM, there is no reason that any such information requests need to be asked of Terasen Gas. The Terasen Gas COC and TPP are irrelevant to the application of TEM for a natural Gas Marketer Licence as there will be no utility resources provided to TEM when it is a licenced Gas Marketer, and therefore there is no basis for information requests to TGI as part of the review of the TEM application for a Gas Marketer Licence.

GMG has concerns regarding both the content and the compliance model.

First, it is impossible to definitively declare that the first statement will always hold with respect

to services provided, and in fact, TEM recognized that impossibility in a response to an IR

(Exhibit B-7, Response to Request GMG-TEM-11). It is not reasonable to anticipate all the

ways that the market and regulatory environment can change. Thus, we need to ensure that the

regulations and codes adapt.



Second, the review of the TGI Code of Conduct took place in advance of Terasen Inc. creating a

subsidiary to market natural gas. GMG submits that the TGI Code of Conduct must contain the

necessary tenets to address affiliate concerns and the creative ways in which affiliates begin to

use the utility as the market matures. Importantly, while the TGI Code of Conduct may have

been reasonable for large sophisticated buyers of natural gas, it is not clear that it fully addresses

the issues relating to dealing with smaller customers.

Third, Terasen Gas incorrectly stated that it will not provide utility resources to TEM. A

resource is defined as "A person, asset, material, or capital which can be used to accomplish a

goal." (http:llwww.investonvords.com/4217lresource.html) In response to IR 2.1, TEM notes

that it uses office space belonging to Terasen Inc., shares a common IT platform with TGI, and

financial support from Terasen Inc.. TEM also uses the executive team through its Board of

Directors and TEM has been staffed through former TGI employees that worked on the

development and implementation of CUP. In other jurisdictions, this type of swapping of

employees comes under strict governance with signed confidentiality agreements that come with

termination clauses for failure to comply. The existing TGI Code of Conduct is simply not

sufficiently detailed to cover these sorts of situations.

Over time codes of conduct in relation to the utility-affiliate relationship need to be reviewed, as

does the oversight function, as the market matures. This is particularly true when there are major

market structural changes as have just occurred with the Residential Unbundling Program and

the entry of an affiliate of TGI to the marketing of natural gas.

In summary, there are several points of note in relation to shortcomings:

TGI management of the TGI Code of Conduct instead of the Commission.

Ability of TEM to acquire customer information through future provision of services such as the Stable Rate Option.

The transfer of strategic information through employees working jointly on projects that have occurred in the past, and may arise in the future.


Page 26 of 30

Final Submission of the Gas Mahetar Group Submitted July 27.2007

The transfer of strategic information through common senior executives and common members of the Boards of Directors.

The compliance of current employees to retention of strategic information of marketers and TGI during their employment at TGI.

TEM is receiving advertising and marketing paid for by the ratepayers of TGI for which it is not clear that a critical review of the value attributed to shareholders.

There exists no filed or publicly available information indicating that a compliance officer, compliance plan and third party audit requirements are in place to allow for regular reviews of the relationship between the utility and unregulated affiliate.

The TGI Code of Conduct does not address the specific requirements of utility affiliates to protect the public in its communication programs.

Changes in the market warrant changes in the regulations that accommodate the market. GMG

submits that the review should take place now in light of the fact that the utility, through its

affiliate, is entering the market, and the market was implemented after the TGI Code of Conduct

was reviewed.

5.2.2 Summary

The GMG respectfully submits that the Commission should review the TGI Code of Conduct

and Transfer Pricing Policy if an unregulated affiliate of TGI is permitted to enter the market.

The current rules were not developed with that possibility in mind and are not sufficiently robust

to regulate that situation. While the problem is greatly exacerbated if Terasen's name is used by

a licenced marketer, the GMG believes that revisiting TGI's Code of Conduct and Transfer

Pricing Policy is appropriate whatever name its affiliate uses in the marketplace.

6 Legal Authority of Commission

6.1 Introduction

TEM's jurisdictional submissions rely heavily on a lengthy opinion submitted on its behalf by

Terasen Gas CPCh Application for Cornrnod h Unolmdl~na for Residenllal C~storners Page 27 of 30 Project NO. 3698421 -

Final Submission of the Gas Marketer Group Submiitad July 27.2007

Fasken Martineau. With great respect, the GMG would prefer to characterize the "opinion" as an

argument and have asked Lawson Lundell LLP to respond to it as such to the extent it appears

relevant to the submission made above. Lawson Lundell LLP's submission appear in the next

section.

6.2 Lawson Lundell LLP Submissions

We begin by observing that much of what is said in the opinion is unexceptional and we take no

issue with it. In particular, we agree with its adoption of most of the earlier Boughton Yang

Anderson opinion issued to the Commission. We also agree with its argument that the focus of

the Act and thus of the Commission's jurisdiction is on the interest of ratepayers. Thus, we

accept the analysis of the Act without section 71.1 until the very last paragraph of that part of the

letter at page 13. The concluding statement contained in that paragraph is:

"For clarity, our conclusion respecting the jurisdiction of the BCUC extends to there being no jurisdiction to regulate the name that is used by TEM in its business activities. "

With respect that paragraph is a non sequitur or at least begs the central question. It is clear that

Part 3 of the Act does not apply to TEM or other direct marketers. It was the absence of that

jurisdiction that lead the Commission to preclude open access until it had some jurisdiction over

marketers. However, the Commission does have jurisdiction over TGI and can make rules

governing the use of TGI's assets and the determination of its revenues. This jurisdiction can

include taking steps to discourage the participation of TGI's affiliates in relevant businesses if

the Commission has concluded that such participation poses a threat to the interests of ratepayers

of TGI, either in terms of the prices those ratepayers must pay or in terms of the variety of

products from which they may choose.

The extent of the Commission's indirect jurisdiction over TEM through TGI was rendered moot

by the passage of section 71.1. The Fasken Letter spent a great deal of time dealing with

Commission Rules and Orders but of course it is the Act not the Commission's previous actions

under it that define the Commission's jurisdiction. The Fasken Letter submits that there is no


Page 28 of 30


express jurisdiction in the Commission to refuse issue a licence to an applicant because of it

name. That is true but there does not have to be. There is no express jurisdiction in the

Commission to refuse to issue a licence for any reason. However, there is express jurisdiction to

determine whether to issue a licence or not and no express limitation on its discretion in that

regard. Thus, the Commission does not need to imply powers to regulate the issuance of licences

on the basis of the public interest. Its jurisdiction is express.

Of course, as the Fasken Letter points out, the Supreme Court of Canada has recently confirmed

in Atco Gas and Pipelines Ltd. v. Alberta (Energy and Utilities Board), 2006 SCC 4 that the

Commission's jurisdiction to protect the public interest is not infinitely broad. It must exercise its

authority for the purposes of the Act. But those purposes as we have shown above are directly

implicated by allowing TEM to use the "Terasen" name. Ratepayers will be confused by use of

the name with the result that retail competition may not be as effective in generating a multi-

participant market in which prices are minimized as would otherwise exist. TEM may acquire

the benefit of goodwill developed by TGI without compensating it or its ratepayers. These are all

intra jurisdictional considerations that the Commission can have in mind when determining

whether to issue a licence and, if so, on what terms.

For these reason we do not accept the conclusion reached in the Fasken Letter at page 17. We

also note with respect to that conclusion that there is no discussion of section 71.1 (4) which as

discussed above expressly provides a limitation on names, nor of the Commission's powers to

impose condition under section 71.1 (6). It our view that these sections provide the Commission

with ample jurisdiction to take the steps necessary to ensure a competitive marketplace including

declining to licence an inappropriately named applicant or conditioning the licence on changing

the applicant's name.

Furthermore, Fasken makes no reference in its Letter to section 9 of the TGI Code of Conduct.

As a matter of interpretation, it is our view that the existing section 9 of the TGI Code of

Conduct was intended to prohibit any use of the word "Terasen" by a non-regulated affiliate of

TGI.


Page 29 of 30


7 Conclusion

In Conclusion, the GMG submits that the Commission has the jurisdiction to, and indeed should,

take into account both TEM's affiliation with TGI and its use of the word 'Terasen" in its name

when considering issuing a licence to TEM. The GMG respectfully submits that the

Commission should only issue a licence to TEM on condition that it not use in its name the word

"Terasen" or any other word that invokes the goodwill associated with TGI or its predecessor. In

any event, the GMG submits that it is both appropriate and necessary, given the time that has

elapsed since the rules were initially developed and the experience that has been gained since

then, for the Commission to review the TGI Code of Conduct and Transfer Pricing Policy if an

unregulated affiliate of TGI is permitted to enter the market.


Documents

LAWSON LUNDELL - British Columbia Utilities Commission · LAWSON LUNDELL LI.p BARRISTERS & SOLICITORS July 27,2007 VIA EMAIL: Commission.secretary @bcuc.com British Columbia Utilities