Calgary Board of Education v. The Queen

Calgary Board of Education v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2012-01-08
Neutral citation
2012 TCC 7
File numbers
2007-3806(GST)G
Judges and Taxing Officers
Gaston Jorré
Subjects
Part IX of the Excise Tax Act (GST)
Decision Content
Docket: 2007-3806(GST)G
BETWEEN:
CALGARY BOARD OF EDUCATION,
appellant,
and
HER MAJESTY THE QUEEN,
respondent.
____________________________________________________________________
Appeal heard on common evidence with the appeal of
Boardwalk Equities Inc. (2007-3723(GST)G)
on August 19 and 20, 2010, at Calgary, Alberta.
Before: The Honourable Justice Gaston Jorré
Appearances:
Counsel for the appellant:
Salvatore Mirandola
Jean-Philippe Couture
Counsel for the respondent:
Kathleen T. Lyons
JUDGMENT
For the reasons set out in the attached reasons for judgment, the appeal from the assessment made under the Excise Tax Act for the period from January 1, 2001 to February 28, 2002, notice of which is dated June 6, 2003, is dismissed with costs.
Signed at Ottawa, Ontario, this 8th day of January 2012.
“Gaston Jorré”
Jorré J.
Docket: 2007-3723(GST)G
BETWEEN:
BOARDWALK EQUITIES INC.,
appellant,
and
HER MAJESTY THE QUEEN,
respondent.
____________________________________________________________________
Appeal heard on common evidence with the appeal of
Calgary Board of Education (2007-3806(GST)G)
on August 19 and 20, 2010, at Calgary, Alberta.
Before: The Honourable Justice Gaston Jorré
Appearances:
Counsel for the appellant:
Salvatore Mirandola
Jean-Philippe Couture
Counsel for the respondent:
Kathleen T. Lyons
JUDGMENT
For the reasons set out in the attached reasons for judgment, the appeal from the assessment made under the Excise Tax Act for the period from January 1 to December 31, 2001, notice of which is dated July 8, 2003, is dismissed with costs.
Signed at Ottawa, Ontario, this 8th day of January 2012.
“Gaston Jorré”
Jorré J.
Citation: 2012 TCC 7
Date: 20120108
Dockets: 2007-3806(GST)G
2007-3723(GST)G
BETWEEN:
CALGARY BOARD OF EDUCATION,
BOARDWALK EQUITIES INC.,
appellants,
and
HER MAJESTY THE QUEEN,
respondent.
REASONS FOR JUDGMENT
Jorré J.
Introduction
[1] At the beginning of 2001, energy prices in Alberta had risen significantly.
[2] On the one hand, the deregulation of the electricity market had led to significant increases in the price of electricity. On the other hand, demand for natural gas was very high and natural gas prices paid by customers in Alberta in January 2001 were roughly three times what they had been a year earlier.[1]
[3] The Alberta government wanted to help. It took measures to improve the operation of the electricity market.
[4] It also took a number of measures to reduce the immediate impact of high energy prices on customers. One of the measures was a program of electricity rebates; another was a program of heating fuel rebates.[2] There was also a $300 energy tax refund paid to each adult.
[5] The scale of these measures was quite significant; for residential customers the electricity rebate was $40 a month for a year and the natural gas rebate was $150 a month for a period of four months, a total of $1,080.[3]
[6] Non-residential customers such as the appellants could also receive rebates although they were calculated on the basis of use, unlike the flat rate provided to residential customers.
[7] The issue in these appeals is whether or not the appellants’ goods and services tax (GST) should be computed on the gross amount that their suppliers billed for electricity or gas, as the respondent contends, or whether it should be computed on the price of the energy used after deducting the amount of the rebate, as the appellants contend.[4]
The Facts
Agreed Partial Statement of Facts/Joint Book of Documents
[8] There is no significant dispute as to the underlying facts.[5] Most of the evidence in the present cases was put in by agreement. The parties provided a Joint Book of Documents as well as an Agreed Partial Statement of Facts.
[9] In addition, Terry Holmes, Director of Rural Utilities, Alberta Agriculture and Rural Development[6] testified and portions of the transcript of the examination for discovery of Grant Breen of the Calgary Board of Education were read in.
[10] The parties advised me that there are no issues of quantum.[7] The Agreed Partial Statement of Facts states:
Province of Alberta Rebate Programs ― Introduction
1. In December 2000, the Province of Alberta (“Alberta”) announced energy rebate programs, for the provision of grants and credits for the benefit of and to assist Albertans, in respect of their consumption of energy, for heating and lighting of homes or other premises. The grants were for natural gas (“gas”), propane or other heating fuels for the period January 1, 2001 to April 30, 2001 (“relevant time”). The credits were for electricity for all of 2001 (“relevant time”). The GST claim periods in this action are the same as the relevant times.
2. Alberta introduced the grants and credits (“rebates”) for the relevant times to protect, shield and provide relief to Albertans from the sharp climb and increases in energy prices.
3. All residential and most non-residential consumers (“consumers”) were eligible to receive some form of rebate during the relevant times.
4. Alberta had the choice of providing the rebates directly to the consumers or provide the rebates to the energy suppliers for the benefit of consumers.
5. Issuing cheques directly to consumers would have been administratively unwieldy and time consuming for Alberta, in that Alberta would have had to construct a system and gather consumption and rate class information. Since the suppliers already had a system to contact all customers, and records of their energy consumption, using the suppliers’ billings systems saved the need to create a system. In most cases, for 2001 Alberta chose to provide the rebates to the energy suppliers. The energy suppliers then applied the rebates to consumers’ monthly bills sent by the energy suppliers such as Atco Gas (“Atco”) and Enmax for electricity (“Enmax”) and other energy suppliers (“suppliers”), so as to provide immediate assistance to Albertans.
6. An application process was necessary in less common situations ― for example, if consumers of energy for heating premises did not receive bills from the energy suppliers or having received a bill were not given a rebate on the bills; if the consumers purchased propane or other heating fuels, or wanted a review of the amount of the gas rebate on their bill or an alternate gas rebate to what they had been provided; or if the gas supplier billing system was not available. In these types of situations, consumers could complete a form and apply directly to Alberta for the gas rebates or an adjustment to the gas rebates. If the consumer provided the supporting information, Alberta then provided cheques directly to the consumer for the rebates.[8]
7. The suppliers participated in the process of providing rebates without any written agreement or formal arrangement with Alberta. Alberta’s view was that delivering the rebates in this manner enabled the suppliers to maintain good customer relations at a time of rising energy costs.
8. The rebates were distributed, with the participation of the suppliers, by applying the rebates on the gas bills. In the case of the electricity rebates, the Balancing Pool Allocation Regulation provided that electricity suppliers were to distribute the rebates by including the rebates on the electricity bills.
9. The rebates were provided to suppliers and applied to consumers’ energy bills.
10. During the relevant times, Alberta had no obligation to provide gas or electricity to consumers.
Gas Rebate Program and Rebates
11. Alberta had an opportunity, with rising royalties, to soften the impact on consumers during a period of unprecedented high gas bills. An existing regulation was amended to allow for the provision of rebates (that is, gas grants). The gas rebate program operated between January 1, 2001 to April 30, 2001. Rebates totalling $1.1 billion were provided to Albertans during the relevant time. The gas rebates were funded from royalty revenues.
12. Initially, residential consumers were to receive a rebate of $50 per month. The rebate amount was then increased to $150 per month on their gas bills during the relevant time regardless of how or from whom they purchased gas.
13. Non-residential consumers received a rebate, based on actual consumption of gas, of $6 per gigajoule (“GJ”) to a maximum of 5,000/GJ or $30,000 per month on their gas bills during the relevant time regardless of the rate they paid to their supplier under contract or default supplier. Commercial consumers of a “residential building” received a rebate, based on consumption of gas, of $6 per GJ.
14. Consumers of propane or heating fuels were eligible to receive an equivalent consumption-based rebate upon application to Alberta.
Administration of Gas Rebate Program and Rebates
15. In 2001 there were approximately 110 gas suppliers. The process for the provision of gas rebates was that the gas suppliers would bill consumers according to their normal billing practices. Some bills were based on actual consumption, if the meter was read, and others were estimates.
16. Except for the rare instances, as described at paragraph 22 of this document, in 2001 gas suppliers did not provide Alberta with an estimate of the rebates that they would apply to consumers’ bills. For non-residential consumers, the rebates were calculated and provided based on the amount of consumption of energy that was actually shown on the bills to consumers. The amount of the rebate was applied on the bills generated from the gas supplier’s billing systems. Bills were sent to consumers according to the gas supplier’s billing practices, and with whatever consumer payment date was that gas supplier’s practice. The time span between billing and payment ranged from 21 to 35 days, depending on the supplier.
17. Gas suppliers then provided Alberta with a request for the amount of the rebates that they had actually applied to their consumers’ bills. Suppliers could send their request for the amounts of the rebates to Alberta as soon as they had finished their billing processes, or at anytime after.
18. After reviewing the request, Alberta then provided the gas suppliers the amounts of the actual rebates as reflected on consumers’ bills. In most cases, Alberta provided the amounts for the rebates to the gas suppliers by direct deposit to the gas suppliers’ bank account on or the day before the consumers’ bills were due. However, if a gas supplier was late in making its request to Alberta for the rebate, the direct deposit amounts would have been made after the consumer’s due date for the bill. It was the consumer, not Alberta, that was responsible for paying interest and penalties to the gas supplier on any amounts outstanding on the bill after the due date.
19. In the case of residential consumers, a flat rebate amount of $150 per month was applied to consumers’ bills. However, the same process for tallying the rebates, requests by the suppliers to Alberta for the rebate amounts, and the direct deposit of the amounts of the rebates, by Alberta, on or the day before the consumers’ bills were due was also followed, as the requests were relative to a billing cycle.
20. The rebate amounts provided by Alberta to the gas suppliers were not required to be segregated.
21. Smaller gas suppliers normally were on monthly billing — that is, they only did one bill run per month. Larger gas suppliers did cycle billing — that is, they ran bills for a portion of their customers each day. Most of the larger suppliers do 20 to 21 cycles per month. The grouping of consumers in a specific cycle is associated with the schedule for meter reading. For example, everyone that normally has their meter read on the 3rd of the month would be on the same billing cycle. Generally, a billing cycle would be composed of a blend of residential, commercial and industrial customers.
22. In rare instances, Alberta provided rebate amounts to suppliers for rebates based on estimates. This occurred when Alberta was dealing with smaller suppliers that had challenges with administering the rebate program. If a small supplier was unable to provide the actual month consumption in time to meet deadlines for this information, Alberta would estimate consumption based on prior months’ actuals and rebate amounts would be provided to suppliers on that basis. This actual amount would be reconciled prior to the provision of the next month’s rebate amount and the appropriate adjustment applied. In the end, Alberta ensured that the correct amount was provided to each supplier. The suppliers in these appeals are not small suppliers.
23. At the end of the rebate programs, there were reconciliations by Alberta with all gas suppliers, as follows, and any shortfall or excess was paid or reimbursed. All suppliers, except Atco, provided Alberta with a data extract from their billing systems and Alberta reconciled that information to the information it had as to the amounts of the rebates that Alberta had provided to suppliers. Atco, as a large supplier, was audited so as to confirm that all of the rebate amounts provided to Atco by Alberta had been applied to consumers as rebates on consumers’ bills.
Electricity Rebate Program and Rebates
24. The electricity rebate program operated in 2001. The restructuring of the electricity industry, prior to 2001, was to foster a competitive retail market for electricity by allowing that market to be responsive to changes in supply and demand, resulting in more competitive prices and more choices of electricity suppliers to consumers. The Power Pool Council administers the Balancing Pool (“BP”). The BP was established in 1999 as a financial account to receive and disburse funds arising from the transition to a competitive generation market on behalf of electricity consumers.
25. A significant component of that transition was the public auction of the Power Purchase Arrangements (“PPAs”), for the rights to purchase future generation of electricity. The PPAs were created to provide greater competition. The PPAs were sold at public auctions to bidders, energy suppliers and BP participants, in August and December 2000. The $2.1 billion net proceeds from the auctions were placed in the BP.
26. Legislation set out the roles and responsibilities of electricity suppliers and of the BP in respect of the distribution of the electricity rebates (that is, BP credits) for and to consumers. In 2001, the rebates were provided by the Power Pool Council from the BP to electricity suppliers and then applied to consumers’ bills using the billing operations of electricity suppliers. Electricity suppliers were required by the Balancing Pool to apply the rebates on the electricity bills sent to consumers. These rebates were intended to provide assistance to consumers in a period of high prices.
27. The rebate amounts provided by Alberta to the electricity suppliers were not required to be segregated.
28. In 2001, electricity rebates totalling $2.1 billion were distributed to Albertans. The high electricity pool prices led to a quicker delivery of the rebates from the BP to provide assistance to consumers.
29. Residential consumers received a rebate of $40 per month on their electricity bills, during the relevant time, based on consumption of 650 kilowatt hours per month for an average household.
30. Non-residential consumers (industrial, commercial, consumer groups and businesses) received a rebate each month, during the relevant time, on the electricity bills based on the total actual eligible consumption. The rebate was calculated by multiplying 3.6 cents per kilowatt hour by the consumers’ actual eligible consumption. Farmers received rebates as residential and non‑residential consumers of electricity.
Administration of Electricity Rebate Program and Rebates
31. In 2001, electricity suppliers were to calculate the rebates for consumers monthly and then apply the rebates on the electricity bills sent to consumers each month. The amounts of the monthly rebates were based on the actual eligible monthly consumption of electricity consumed.
32. Data was to be submitted by the suppliers to the BP on or before the 7th business day of each month. Suppliers with residential consumers had to provide the prior month’s actual eligible consumption. All suppliers, regardless of the type of consumer, had to report any adjustments to rebate amounts allocated in prior months as soon as practicable. Adjustments had to align with the amounts applied to consumers’ bills.
33. In the fall of 2001, a supplier was to forecast for the remaining months of 2001 for the monthly allocation for residential consumers and the monthly eligible consumption allocation for non-residential consumers. Had a supplier been provided with rebates based on forecasts, a one-time adjustment would be made to align rebate amounts from forecasts to the actual eligible consumption.
Price Deregulation and Rate
34. In 2001 Alberta consumers could purchase gas from a supplier under a contract that typically provides the gas at a fixed price per GJ for a specified period, or it can be a variable rate. Consumers that did not choose to purchase gas under a contract were provided gas at the default rate (the so‑called “regulated rate”). In 2001, this default rate was determined under a methodology approved by the Energy and Utilities Board (EUB) but the rate reflected market forces. The methodology is to provide consistency amongst suppliers. The suppliers would seek approval from the EUB. EUB would ensure the suppliers followed the methodology. Rebates were applied to consumers’ bills whether they purchased gas under a contract from a supplier at a fixed or variable rate or from a default supplier under the default rate.
35. The Electric Utilities Act was enacted in May 1995. It established the power pool, the new spot market and the legislative hedges. Electricity generated throughout Alberta goes into the Power Pool. This restructuring of the electricity industry was to foster a competitive retail market for electricity by allowing that market to be responsive to changes in supply and demand, resulting in more competitive prices and more choices of electricity suppliers to consumers. A system of “legislative hedges” maintained the regulated price regime for the vast majority of customers until the hedges expired on December 31, 2000. The hedging was to maintain regulated pricing for regulated generation existing in 1995 — a specific volume of generation capacity — and share the regulated price of electricity among the distribution utilities according to its proportionate share. That is, if a distribution utility served a percentage of the provincial load, it would be entitled to its proportionate percentage at the regulated price of electricity. In 2001 consumers were then exposed to prices determined in the wholesale market.
36. On January 1, 2001 electricity consumers who had not chosen to sign a contract with an electricity supplier were automatically moved to the Regulated Rate Option (“RRO”); the electrical service would continue with the existing energy supplier. In 2001, all RRO suppliers were required to charge 11 cents per kilowatt per hour on their electricity bills for RRO customers. If it subsequently turned out that the RRO had a deficit or surplus as it relates to the 11 cents, because they were buying electricity in the competitive market, they could apply to the EUB, after October 2001, to seek approval to collect or be reimbursed from their customers for the difference in the amounts. The RRO was based on each energy supplier’s purchasing strategy and the price would vary with the market price.
Calgary Board of Education (“CBE”)
37. CBE is the school board for the City of Calgary and a public service body within the meaning of section 259 of Part IX of the Excise Tax Act.
38. CBE claimed, and was allowed, a public service body rebate of 68% of the tax payable with respect to the supplies of gas and electricity (“energy”) that it acquired during the relevant times.
39. At the relevant times, CBE was a non-residential consumer of energy.
40. At the relevant time, CBE had entered into a written agreement with Atco that was similar to the agreement CBE had with Enmax. Under the agreement, CBE was liable to pay Atco for the price of the gas supplied by Atco to CBE based on the quantity of energy consumed.
41. CBE received monthly invoices from Atco detailing various charges some of which include the cost for the delivery of the gas, the cost for the gas based on the quantity consumed in the billing period, the gas rates and municipal franchise fee. The invoice also showed the Alberta Government Natural Gas Rebate adjustment arising from the Alberta Government Natural Gas Rebate program, that was calculated and based on the actual quantity of gas consumed.
42. In December 2000, CBE entered into a written agreement, the Electricity Services Agreement (“Agreement”), with Enmax effective January 1, 2001. Pursuant to the Agreement:
(i) CBE chose Enmax for the provision of the supply of electricity services effective January 1, 2001;
(ii) Enmax agreed to supply and CBE agreed to purchase electricity from Enmax;
(iii) CBE received monthly invoices from Enmax detailing various charges, including the cost of electricity based on the quantity consumed in a particular billing cycle, and the system access charge, distribution access charge, and municipal consent and access fee for the electricity supplied to CBE during the relevant time;
(iv) the price of the supply of electricity is determined by amounts agreed to between CBE and Enmax per kilowatt hour during peak and off peak periods based on quantities consumed;
(v) CBE was liable to pay Enmax the price for supplies of electricity supplied by Enmax to CBE based on the quantity of electricity consumed.
43. The invoices from Enmax also showed the Alberta Non-Residential Electricity Rebate, provided each month, was calculated and based on the actual amount of electricity consumed.
44. GST of 7% was calculated on the amount on the value of the charges on the invoices that CBE each received from the energy suppliers. GST was calculated on the cost of gas, the cost to distribute the gas and a municipal consent charge, before the energy rebates were applied. CBE paid the invoices.
45. CBE sought to obtain refunds of GST from the Minister of National Revenue for the portion of GST it claims it paid in error relating to the amounts of GST attributable to the amounts of the rebates.
46. CBE would contact the suppliers directly, not Alberta, if there was a concern with respect to the payment of the invoice. The suppliers would pursue CBE if there was a concern with the agreement or the invoice or the energy supplied.
47. At the relevant times, Alberta:
a) did not get involved, nor insist, in any way which energy suppliers CBE could select;
b) was not responsible for ordering gas and electricity supplies on behalf of CBE from Atco or Enmax;
c) was not a party to the agreements between CBE and Atco or CBE and Enmax regarding any gas or electricity supply;
d) did not co-sign any of the gas or electricity accounts that CBE had with Atco or Enmax; and
e) was not responsible for any services on the invoices sent by Atco or Enmax to CBE.
48. If consumers had a problem with their agreement with an energy supplier or invoice with an energy supplier, Alberta did not get involved in the relationship between the supplier and the consumer for the supply of energy. Alberta had a Program Office that assisted and responded to consumer inquiries related to rebate issues. Alberta was contacted directly by a number of consumers seeking explanations of the rebate programs.
Boardwalk Equities Inc. (“Boardwalk”)
49. Boardwalk owns buildings and rents multi-family residential units in those buildings; there are from 40 to 100 plus rental units in each of the buildings in the complexes.
50. In 2001, Boardwalk:
a) Operated 17,000 residential rental units in Alberta and 9,000 in two other provinces, and owned townhouse projects that were rented for a minimum of one month and most units were on long‑term leases.
b) May have been responsible for the energy supplies for the rental units in each residential complex or the tenant may have been responsible, and Boardwalk may have been responsible for arranging for energy to be turned back on when a unit is vacated without the tenant paying the energy suppliers.
c) Arranged for the supply of energy for the common areas for all of the building complexes.
d) Rented a portion of the residential complexes as a commercial space.
e) Was a non-residential consumer of gas (that is, a commercial consumer of energy for residential buildings containing rental units for gas) under the gas rebate program.
f) Was a non-residential consumer of electricity and in isolated situations a residential consumer of electricity under the electricity rebate program.
51. Boardwalk chose the suppliers for the supply of gas and supply of electricity at the relevant times.
52. The suppliers agreed to supply and Boardwalk agreed to purchase gas and electricity from the respective suppliers of energy.
53. At the relevant times, Boardwalk had entered into agreements with Atco for gas, Enmax for electricity and other suppliers of energy and agreed to pay and be liable to pay the suppliers for the supplies of energy based on the quantity of energy consumed.
54. The price of the supply of gas was determined by the price, fixed or variable, per GJ as agreed between Boardwalk and the gas suppliers based on the actual quantity of gas consumed by Boardwalk.
55. The price of the supply of electricity was determined by the price per kilowatt hour during peak and off peak periods as agreed to between Boardwalk and the electricity suppliers based on the actual quantity of electricity consumed by Boardwalk.
56. Under agreements between Boardwalk and the gas suppliers and electricity suppliers, Boardwalk was liable to pay the price for the supplies of electricity and gas supplied by Boardwalk.
57. Boardwalk received monthly bills from gas suppliers detailing various charges, some of which include the cost for the delivery of the gas, the cost for the gas based on the actual quantity consumed in the billing period, the gas rates and municipal franchise fee. The bill also shows the Alberta Government Natural Gas Rebate adjustment arising from the Alberta Government Natural Gas Rebate program. This was calculated and based on the actual quantity of gas consumed for non-residential consumers.
58. Boardwalk received monthly bills from the electricity suppliers detailing various charges. These included the cost of electricity based on the actual quantity consumed in a particular billing cycle, and the system access charge, distribution access charge, and municipal consent and access fee for the electricity supplied to Boardwalk during the relevant time. The bills from the electricity suppliers show the Alberta Non-Residential Electricity Rebate that was provided each month, was calculated and based on the actual amount of electricity consumed as a non‑residential consumer. One bill shows a rebate of $40, as a flat fee, other bills show rebates as variable amounts as a residential consumer.
59. GST of 7% was calculated on the amount on the value of the charges on the bills that Boardwalk received from each of the gas and electricity suppliers. For gas, GST was calculated on the cost of gas, the cost to deliver the gas and a municipal franchise fee/charge, before the gas rebates were applied. For electricity, GST was calculated on various charges some of which include the energy charge, distributions charge and Municipal Consent and Access Fee before the electricity rebates were applied. Boardwalk paid the bills.
60. Boardwalk sought to obtain refunds from the Minister for the portion of GST it claims it paid in error relating to the amounts of GST attributable to the amounts of the rebates.
61. Boardwalk would contact the suppliers directly, if there was a concern with respect to the agreements or the bills or the energy supplied.
62. At the relevant times, Alberta:
a) did not get involved, nor insist, in any way which energy suppliers Boardwalk could select;
b) was not responsible for ordering gas and electricity supplies on behalf of Boardwalk from energy suppliers;
c) was not a party to the agreements between Boardwalk and energy suppliers regarding any gas or electricity supply;
d) did not co-sign any of the gas or electricity accounts that Boardwalk had with the energy suppliers; and
e) was not responsible for any services on the invoices sent by the energy suppliers to Boardwalk.
63. In 2001 there were no written or other trust agreements between or among Alberta, BP, and the energy suppliers in respect of the provision of any of the gas and electricity rebates in issue.
64. In 2001 there were no written or other agency agreements between or among Alberta, BP, the energy suppliers of consumers in respect of the provisions of any of the gas and electricity rebates in issue.
65. Other than the agreements referred to at paragraphs 40, 42 and 53 of this document, there were no other agreements (specifically, no written or other trust or agency agreements) that CBE or Boardwalk had entered into in 2001.
66. At the end of the rebate programs, there were reconciliations as between all gas suppliers and Alberta and any shortfall or excess was provided . . . to each other.
[11] The natural gas rebate was funded by the province from general revenues.[9]
[12] As indicated above at paragraphs 24 and 25 of the Agreed Partial Statement of Facts, auctions of the power purchase arrangements yielded some $2.1 billion which was placed in the balancing pool and was the source of funds for the electricity rebates.
[13] In order to generate the $2.1 billion, the successful bidders must have believed that in the deregulated market, they would be able to sell the electricity for prices in excess of the total of the amounts bid at the auction plus the cost of the electricity pursuant to the power purchase arrangements.[10]
Testimony of Mr. Holmes
[14] Much of the testimony of Mr. Holmes confirmed facts already in the Agreed Partial Statement of Facts.
[15] Mr. Holmes helped design the natural gas rebate program and its administration. He also had some knowledge of the electricity rebate program but not to the same degree as with respect to the gas rebate program.
[16] Mr. Holmes explained that the gas heating fuel rebate program was put in place very quickly and that the province could not have organized and operated in a timely way a system where all the rebate beneficiaries applied for the rebate and then received a cheque from the government. Setting up an application and refund system would have been too slow in providing relief to customers.[11]
[17] As a result, the government sought an administratively efficient way to deliver the gas rebate and made the arrangements with the gas suppliers. There were no written agreements with the gas suppliers.[12]
Read-ins from the Discovery of Mr. Breen
[18] Mr. Breen was the nominee of the Calgary Board of Education. He agreed that under the agreements for supply of the energy in issue here the Board was liable to pay the invoiced amounts for gas or electricity and the province had no obligation to pay for the supplies on behalf of the Board.
[19] The appellant also read in some qualifications by counsel to the effect that it was the Board’s position that the rebate reduced the value of the consideration and that if the Board had not paid its bill the energy supplier would only have gone after the Board for the net amount due after the rebate was deducted from the bill.
Issues
[20] In their notices of appeal the appellants framed the legal issues as follows:
For the supply of the electricity:
(i) Does the value of the consideration for the supply to the Appellant include the reduction on the invoices to reflect the Balancing Pool credit?
(ii) Is the Balancing Pool credit consideration paid by the Government of Alberta for a supply?
If (i) or (ii), or either of them, are answered in the affirmative, the result will be that the consideration payable by the Applicant was reduced and GST should have applied on that reduced amount.
For the supply of the natural gas:
(iii) Does the value of the consideration for the supply to the Appel1ant include the amount of the reduction on the invoices to reflect the Grant?
(iv) Is the Grant consideration paid by the Government of Alberta for a supply?
If (iii) or (iv), or either of them, are answered in the affirmative, the result will be that the consideration payable by the Applicant was reduced and GST should have applied on that reduced amount.[13]
[21] In her amended replies the respondent framed the issues as follows:
The issues to be decided are whether, for GST purposes, the Energy Rebates:
(a) reduce the consideration the Appellant was liable to pay under the agreements to the Gas Suppliers or the Electricity Retailers for the Gas Supplied and the Electricity Supplied?
(b) constitute consideration paid by Alberta for supplies?[14]
[22] The parties’ view of the issues evolved somewhat by the time the trial began.
Analysis
[23] It is useful to begin by examining the situation of the appellants apart from the Alberta government rebate program.
[24] It is quite clear that the two appellants entered into contractual agreements with the suppliers of energy, be it gas or electricity, and those agreements provided that:
(a) the price of the energy supplied was
(i) the price for each unit of energy determined in accordance with the contractual agreement
(ii) multiplied by the quantity of energy consumed
(b) and the appellants agreed to pay and were liable to pay the suppliers that price for the amount of electricity supplied.[15]
GST Legislation
[25] The basic charging section, subsection 165(1) in Part IX of the Excise Tax Act (hereinafter, the “GST”[16]), provides:
Subject to this Part, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply.
[Emphasis added.]
At the relevant time, the rate was 7%.
[26] The following definitions contained in subsection 123(1) of the GST are also relevant:
In section 121, this Part and Schedules V to X,
. . .
“consideration” includes any amount that is payable for a supply by operation of law;
. . .
“recipient” of a supply of property or a service means
(a) where consideration for the supply is payable under an agreement for the supply, the person who is liable under the agreement to pay that consideration,
(b) where paragraph (a) does not apply and consideration is payable for the supply, the person who is liable to pay that consideration, and
(c) where no consideration is payable for the supply,
(i) in the case of a supply of property by way of sale, the person to whom the property is delivered or made available,
(ii) in the case of a supply of property otherwise than by way of sale, the person to whom possession or use of the property is given or made available, and
(iii) in the case of a supply of a service, the person to whom the service is rendered,
and any reference to a person to whom a supply is made shall be read as a reference to the recipient of the supply;
. . .
“service” means anything other than
(a) property,
(b) money, and
(c) anything that is supplied to an employer by a person who is or agrees to become an employee of the employer in the course of or in relation to the office or employment of that person;
. . .
“supply” means, subject to sections 133 and 134, the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, rental, lease, gift or disposition;
[Emphasis added.][17]
Situation in the Absence of the Rebate Programs
[27] In the absence of the rebate programs there can be no dispute that in providing energy, whether in the form of gas or electricity, the energy suppliers are making a supply to the appellants and the consideration for the supply is the price provided for under the contracts multiplied by the number of units of energy supply. The consequence is that the GST will be payable on the entire consideration paid by the appellants.
[28] Do the rebate programs change this?
Legal Framework of the Rebate Programs
[29] The legal framework of the two rebate programs is important and I will reproduce below certain portions of the relevant Alberta law.
[30] With respect to gas rebates,
(a) section 13 of the Government Organization Act of Alberta, R.S.A. 2000, chapter G-10, provides:
13(1) A Minister may make grants if
(a) the Minister is authorized to do so by regulations under this section, and
(b) there is authority available in a supply vote for the purpose for which the grant is to be made.
(2) The Lieutenant Governor in Council may make regulations applicable to a Minister
(a) authorizing the Minister to make grants;
(b) respecting the purposes for which grants may be made;
. . .
(m) authorizing the Minister to enter into an agreement with respect to any matter relating to the payment of a grant.
(3) A regulation made under subsection (2) may be specific or general in its application.
(4) Notwithstanding subsection (2)(g), the Minister may impose further conditions not prescribed in the regulations on the making of a particular grant.
(b) the Transportation and Utilities Grants Regulation (Alberta Regulation 355/1986) provides:
1 The Minister is hereby authorized to make grants in accordance with this Regulation.
Agreement
2 The Minister is authorized to enter into an agreement with respect to any matter relating to the payment of a grant and the Minister may require any applicant for a grant under this Regulation to enter into an agreement with respect to any matter relating to the payment of the grant.
3 Repealed.
Purpose of grant
4 A grant recipient under this Regulation shall use the grant only
(a) for those purposes described in the Schedule under which the grant was made,
(b) for those purposes for which the application for the grant was made, or
(c) where the original application for a grant or the purposes for which the grant is made have been varied by the Minister and the applicant for a grant, for those varied purposes.
Evidence of use of grant
5 A grant recipient shall, at the times that the Minister may require, produce evidence satisfactory to the Minister of the manner in which the grant was used, is being used or will be used and in the case of a person or organization that receives a grant in trust for a grant recipient the person, organization or grant recipient shall, at the times that the Minister may require, produce evidence satisfactory to the Minister of the manner in which the grant was used, is being used or will be used.
Payment
6(1) The Minister may provide for the payment of a grant in a lump sum or by way of installments and may prescribe the time or times at which the grant is to be paid.
(2) The Minister may pay the grant to the grant recipient or may pay the grant in trust to a person or organization for the intended grant recipient.
. . .
SCHEDULE 10
GRANTS IN RESPECT OF HEATING COSTS
1(1) The Minister may make grants for the purpose of alleviating the impact on consumers of increased natural gas, propane and heating oil prices in Alberta.
(2) The Minister may make a grant under this section to a consumer directly or to another person for the benefit of a consumer.
(3) Subject to subsection (4), the Minister may not make grants under this section in respe