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Enbridge Gas Inc. et al.
Headnote
Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107), s. 5.1 -- the Filers request relief from the requirements under section 3.2 of NI 52-107 that financial statements be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises to permit the Filer to prepare its financial statements in accordance with U.S. GAAP.
Applicable Legislative Provisions
National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, s. 5.
Citation: Re Enbridge Pipelines Inc., 2023 ABASC 3
January 4, 2023
IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF ENBRIDGE GAS INC., ENBRIDGE PIPELINES INC. AND WESTCOAST ENERGY INC. (the Filers)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application (the Application) from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption (the Exemption Sought) from the requirements under section 3.2 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107) that the financial statements of the Filers (a) be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises (Canadian GAAP) and (b) disclose an unreserved statement of compliance with IFRS in the case of annual financial statements and an unreserved statement of compliance with IAS 34 in the case of an interim financial report.
The Exemption Sought is similar to the exemption granted to the Filers on May 25, 2018 in Re Enbridge Gas Distribution Inc., 2018 ABASC 81 and on May 25, 2018 in Re Westcoast Energy Inc., 2018 ABASC 82 (collectively, the U.S. GAAP Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for this application;
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland and Labrador (the Passport Jurisdictions), and
(c) this decision is the decision of the Principal Regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
In this decision:
(a) unless otherwise defined herein, terms defined in National Instrument 14-101 Definitions, MI 11-102 or NI 52-107 have the same meaning; and
(b) rate-regulated activities has the meaning ascribed thereto in the Chartered Professional Accountants of Canada Handbook (Handbook).
Representations
This decision is based on the following facts represented by the Filers:
1. Enbridge Inc. (EI), Enbridge Pipelines Inc. and Westcoast Energy Inc. are continued under the Canada Business Corporations Act and each of their head offices is located in Calgary, Alberta.
2. Enbridge Gas Inc. is governed by the Business Corporations Act (Ontario) and its head office is located in North York, Ontario.
3. Each of the Filers is a reporting issuer or equivalent in the Jurisdictions and each of the Passport Jurisdictions and is not in default of securities legislation in any jurisdiction in Canada.
4. Each of the Filers currently prepares and files its financial statements for annual and interim periods in accordance with U.S. GAAP, relying on the U.S. GAAP Relief.
5. Each of the Filers has rate-regulated activities.
6. Each of the Filers are indirect wholly-owned subsidiaries of EI.
7. The financial statements of each of the Filers are consolidated into the financial statements of EI.
8. EI is an SEC issuer and relies on section 3.7 of NI 52-107 to file financial statements prepared in accordance with U.S. GAAP.
9. None of the Filers is currently an SEC issuer.
10. Were any of the Filers SEC issuers, they would be permitted by section 3.7 of NI 52-107 to file their financial statements prepared in accordance with U.S. GAAP.
11. The U.S. GAAP Relief provided that it would cease to apply to the Filers on the earliest of: (a) January 1, 2024; (b) if the Filer ceased to have activities subject to rate regulation, the first day of the Filer's financial year that commenced after the Filer ceased to have activities subject to rate regulation; and (c) the effective date prescribed by the International Accounting Standards Board (IASB) for the mandatory application of a standard within IFRS specific to entities with activities subject to rate regulation. Accordingly, in the absence of further relief provided by Canadian securities regulators, the Filers would become subject to Canadian GAAP no later than January 1, 2024. Canadian GAAP includes IFRS as incorporated into the Handbook.
12. In January 2021, the IASB published the Exposure Draft -- Regulatory Assets and Regulatory Liabilities, which introduces a proposed standard of accounting for regulatory assets and liabilities applicable to entities with rate-regulated activities. The issuance by the IASB of a standard within IFRS for entities with rate-regulated activities (a Mandatory Rate-regulated Standard) would have resulted in the expiry of the U.S. GAAP Relief, giving rise to the obligation of the Filers to commence financial statement preparation and reporting in accordance with IFRS pursuant to NI 52-107.
13. It is not yet known when the IASB will finalize and implement such a standard and the Filers will require sufficient time to: (a) interpret and implement such standard and transition from financial statement preparation and reporting in accordance with U.S. GAAP to IFRS; and (b) interpret and reconcile the implications on the customer rate setting process resulting from the implementation.
Decision
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that:
(a) the U.S. GAAP Relief is revoked;
(b) the Exemption Sought is granted to each Filer in respect of such Filer's financial statements required to be filed on or after the date of this decision, provided that the Filer prepares those financial statements in accordance with U.S. GAAP; and
(c) the Exemption Sought will terminate in respect of each Filer on the earliest of the following:
(i) January 1, 2027;
(ii) if the Filer ceases to have rate-regulated activities, the first day of the Filer's financial year that commences after the Filer ceases to have rate-regulated activities; and
(iii) the first day of the Filer's financial year that commences on or following the later of:
A. the effective date prescribed by the IASB for a Mandatory Rate-regulated Standard; and
B. two years after the IASB publishes the final version of a Mandatory Rate-regulated Standard.
For the Commission:
"Tom Cotter"Vice-Chair"Kari Horn"Vice-ChairOSC File #: 2022/0545