Quebec energy board commissioners have suffered major back-to-back legal and political losses after the Court of Appeal overturned a lower court decision that held they performed quasi-judicial functions and the provincial government passed a sweeping and controversial reform that fundamentally weakens the regulatory powers of the Régie de l’énergie.
The Quebec government invoked closure in the wee hours of a weekend morning to fast-track a contentious energy bill that will introduce widespread changes to the way the province’s energy sector operates, giving Hydro-Québec free rein to increase its electricity production, with the utility expected to invest some $200 billion by 2025. Bill 69, introduced in June 2024 but passed with the addition of 52 amendments at the last minute without public consultation, allows Hydro-Québec to bypass tendering rules when awarding certain contracts.
But most alarmingly for critics, the new law curbs the independent oversight imparted by the Régie de l’énergie, an economic regulatory administrative tribunal that oversees the energy sector in Quebec. The Régie, established in 1997, had up until the passage of Bill 69 the power to set the rates and conditions of services for Quebec electricity and natural gas consumers after holding public hearings. Under Bill 69, the provincial government has given itself the right to impose an annual cap on residential rates on the Régie, and that spells trouble for small and medium-sized businesses (SMEs), according to the Canadian Federation of Independent Business (CFIB). “The politicization of electricity rates” means that SMEs will be subsidizing lower electricity costs for other consumers, maintains the business group.
Bill 69 in effect standardizes and implements the exception the provincial government already decreed this year. Earlier this spring, the Quebec government overturned by decree an energy board decision to increase electricity rates for residential customers by 3.6 per cent and reduced it to three per cent. Environmental groups have filed a motion before Superior Court to challenge the decree, arguing that it does not respect the Régie’s exclusive jurisdiction to set electricity rates.
Michael Sabia, the head of Hydro-Québec, raised the ire of critics even more when he stated at a parliamentary commission that he was “more comfortable” with decisions issued by a democratically elected government than those made by “an unelected group of technocrats at the Régie.” Sabia announced he will resign following his appointment as Clerk of the Privacy Council and Secretary to the Cabinet of the Government of Canada.
With its decree and Bill 69, the provincial government is reverting to the “politicization of electricity rates” that the creation of the Régie was intended to eliminate, said Sylvain Audette, a professor at the prestigious business school HEC Montréal and associate member of the Energy Sector Management Research Chair. A rigorous public regulatory process is essential if rates are to be set on the basis of real costs and if rational, transparent decisions are to be made about Quebec’s energy future, added Audette.
“This is very dangerous because it is important for rates to reflect the true costs for each category of consumer, and for there to be a public debate with an independent body like the Régie like everywhere else in the world,” noted Audette. “Democracy is often based on a fair balance between these three powers, the legislature, the executive and the judiciary. Bill 69 basically transfers these powers to the minister, and above all to Mr. Sabia, Hydro-Québec’s president.”
But that is not the only setback the energy board’s commissioners faced. At the tail end of May, or barely two weeks after the passage of Bill 69, the Quebec Court of Appeal held that energy boards are not purely quasi-judicial in nature even though some of their functions may be adjudicative. “What is interesting about the decision is the comments about the nature of energy boards, and while they are very careful not to be definitive on the point, they say these boards involve giving policy advice to government, and that copper fastens them as, if not part of the executive, certainly as instruments of government policy or for achieving government policy,” said Paul Daly, Research Chair in Administrative Law and Governance at the University of Ottawa.
The “unusual” case, as Daly describes it, stems after a Régie commissioner was the subject of an ethics complaint, which was dismissed. In spite of the favourable decision, Lise Duquette brought an application for a declaratory judgment and for judicial review based on s. 23 of the Quebec Charter, arguing that the Régie’s commissioners exercise adjudicative functions and should therefore benefit from a high degree of judicial independence, allowing them to perform their duties independently of the executive branch of the state.
In October 2023, Quebec Superior Court Justice Nancy Bonsaint held that the Régie performs quasi-judicial functions, which entails the application of the institutional guarantees of independence and impartiality set out in s. 23 of the Quebec Charter. The trial judge also concluded that the disciplinary process set out in the Regulation respecting the ethics and professional conduct of public office holders infringes on the independence of the commissioners.
Lower court ruling overturned
The Quebec Appeal Court overturned the decision, holding that the trial judge committed an error in finding that s. 40 of the Regulation allows Régie commissioners to be removed on general or unspecified grounds, which would be contrary to the guarantee of security they enjoy. The disciplinary process in fact provided for under the Regulation, as well as the appointment decree and the code of ethics for commissioners, offers “serious guarantees against arbitrariness and adequately protects” commissioners, held the Appeal Court in a per curium decision in Procureur général du Québec c. Duquette, 2025 QCCA 616.
The Appeal Court also expressed reservations over the trial judge’s conclusion that the Régie could be characterized as a “tribunal” within the meaning of s. 56(1) of the Quebec Charter because it exercises quasi-judicial functions, which would trigger the application of the guarantee of independence set out in s. 23 of the Quebec Charter. The Appeal Court did not rule out the possibility that the Régie exercises certain quasi-judicial functions, but it did not agree with the reasons of the trial judge. “The Régie de l’énergie is a veritable creature of the administrative state,” held the Appeal Court. “It is not a court of law.”
The Appeal Court underlined that the Supreme Court of Canada in Ocean Port Hotel Ltd. v. British Columbia (General Manager, Liquor Control and Licensing Branch), 2001 SCC 52 held that administrative tribunals and agencies “are not constitutionally separate from the executive” and that they are “in fact created precisely” for the purpose of implementing government policy.
“In this context, even if such bodies perform, in certain cases, certain functions that can be described as quasi-judicial, it is in principle up to the State to determine the degree of independence of these bodies from itself in order to offer a certain protection to the public,” held the Appeal Court.
The Régie does have some characteristics of an adjudicative function such as its procedure for holding public hearings, but just because a power is exercised in open court does not necessarily mean that it is quasi-judicial in nature, held the Appeal Court. The Régie is an economic regulator, and “in many respects,” the act of setting rates is closer to a regulatory act than to a quasi-judicial act, added the Appeal Court.
“What makes this case, or makes the observations in this case, significant and of general importance and interest is that we are at a moment in history where the alignment between energy regulators and government on questions of policy relating to the energy transition are becoming very difficult,” said Daly. “There is a potential tension between the needs of government who want to make sure that policies are being furthered, and the regulator having to be independent in making decisions based on the facts and evidence that are put before them.”
André Joli-Coeur, a Quebec City lawyer who represented Duquette the commissioner, asserts that the “ruling has no significant impact on the current state of our situation.” Joli-Coeur said the Appeal Court decision was “based strictly on federal law and not on the Quebec Charter.” The Appeal Court, added Joli-Coeur, relied on an SCC decision based on a judgment from British Columbia that does not have the equivalent of ss. 23 and 56 of the Quebec Charter, which establish the importance of the courts, particularly quasi-judicial courts.
Audette is befuddled by the Appeal Court decision. While not a lawyer, Audette has taught around the world and has been teaching for the past decade a course titled “Regulation and pricing in the energy sector.” He points out that in jurisdictions across Canada, the United States and Europe, energy boards are bestowed with powers that are quasi-judicial.
“The judiciary is a kind of watchdog against the executive and monopolies, and in the case of the energy sector, we’re dealing with companies that are monopolies so we can’t give them carte blanche,” said Audette. “There must be a system of independent, executive decision-making; the executive cannot make these decisions. If the Régie renders a decision, it has to have the power to sanction it, to rule against the rate application, to adjust it, and that’s how it works everywhere in the world.”
Independent energy boards exist to ensure that the interests of consumers, industry and electricity providers are balanced over the long run, based on careful consideration of economic evidence, said Daly. “These are decisions which have been taken out of the political realm and given to technocratic experts in order that appropriate long-term decisions are taken about the province’s energy future,” said Daly. Bill 69 will now the change that dynamic, which the Quebec national assembly is “certainly” entitled to do, he added. “But whether it is an opportune legislative decision is, in my view, very much in question,” said Daly.
RELATED:
This story was originally published in Law360 Canada.
Leave a Reply