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| Sara Blake |
The British Columbia Lieutenant Governor in Council issued an Order in Council directing the Utilities Commission to relieve B.C. Hydro of its obligation to supply electricity to cryptocurrency mining projects for a period of 18 months – which the Commission promptly did, by order.
On judicial review, the direction was upheld by the B.C. Supreme Court in Conifex Timber Inc. v. British Columbia (Lieutenant Governor in Council), [2024] B.C.J. No. 174.
The petitioner is a forestry company that wants to diversify its operations by developing high-performance computing data centres for cryptocurrency mining. Prior to the direction, the petitioner’s data centre projects were at the front of B.C. Hydro’s interconnection queue. After the direction, they were removed from the queue.
The electricity usage of cryptocurrency mining is extraordinary — far greater than other large industrial projects. One of the economic reasons for the Order in Council was the prospect that devoting such a large proportion of the available electrical power supply to one industry would leave less energy for other uses which might result in increased costs to all other residential and industrial customers. The judge found, on evidence, that cryptocurrency mining centres have unique electricity consumption characteristics. They require vast amounts of power around the clock to permit high-performance computers and cooling systems to operate.
The Utilities Commission Act authorizes the Lieutenant Governor in Council to issue a direction to the Utilities Commission with respect to the exercise of the powers and performance of its duties, including, without limitation, a direction requiring it to exercise a power or perform a duty, or refrain from doing either, as specified in the direction.
The petitioner argued that the Order in Council discriminated between customers on the basis of the intended use of electricity and that the Act did not authorize this discrimination. The Act prohibits “undue discrimination.” It requires B.C. Hydro to supply electricity to all who apply for connection, are reasonably entitled to it and agree to pay the rates established by the commission. However, the judge upheld the validity of the Order in Council because the Act authorizes the commission to set different rates for different classes of customers based on the costs of service, which can include unique electricity consumption characteristics. He found that discrimination on this basis is not “undue.” Also, the Order in Council is consistent with the purposes of the Act concerning stewardship of energy resources and ensuring that affordable sources of energy are available to all. The power to issue directions recognizes that ultimate responsibility for energy policy vests in government.
The Order in Council imposed only a pause for 18 months. The judge ruled that a permanent order would require legislation.
The petitioner alleged procedural unfairness — that the decision was made without a hearing. The Act authorizes the commission to relieve a public utility of the duty to supply service but only “after a hearing and for proper cause.” The judge ruled that the Cabinet direction had the effect of relieving the commission from this duty to hold a hearing because the Act says that the Commission must comply with the direction “despite” any other provision of the Act.
The petitioner argued that the government did not comply with its duty to consult Indigenous peoples, in this case, the Tsay Keh Dene Nation, with whom the petitioner said it intends to collaborate in its cryptocurrency mining projects. The judge ruled that the petitioner lacked standing to raise this issue, noting that there was no evidence from the First Nation. In any event, the judge found that a purpose of the pause imposed by Order in Council was to allow time for consultation with Indigenous peoples and other stakeholders.
This case does not raise any new administrative law issues. The court applied a well-established law respecting discrimination by regulatory action. What is new is the application in this developing circumstance.
As to the standard of review, the main issue was whether the Order in Council was authorized. That is a question of statutory interpretation. On consent of the parties, the judge applied the Vavilov reasonableness standard of review, preferring it to the Katz standard applicable to the validity of regulations Canada (Minister of Citizenship and Immigration) v. Vavilov, [2019] S.C.J. No. 65). I have previously discussed this issue. And it is the subject of two appeals under reserve at the Supreme Court of Canada. So, I will not address it here.
Sara Blake is the author of Administrative Law in Canada, 7th edition, LexisNexis Canada. Her practice is restricted to clients who exercise statutory and regulatory powers.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients, Law360 Canada, LexisNexis Canada or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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