On April 7, 2026, the British Columbia Court of Appeal (the “BCCA”) held that a local government corporation created for the provision of a service (an “LGC”) is a distinct corporate entity from its parent municipality or regional district and is therefore subject to distinct regulation. The BCCA’s decision, reported as Richmond (City) v British Columbia (Utilities Commission), 2026 BCCA 139, holds that energy-providing LGCs owned and operated by municipalities and regional districts are not exempt from the oversight of the British Columbia Utilities Commission under the Utilities Commission Act, RSBC 1996, c 473 (the “UCA“) despite the exclusion of local governments from the definition of “public utility”. The Court found that even though LGCs are controlled exclusively by local governments they are not one and the same as a local government.

Background and Analysis

In 2019, the Utilities Commission established an inquiry into the regulation of municipal energy utilities. In 2022, the Commission released its final report, finding that the exclusion of local governments in the UCA from the definition of “public utility” did not exempt LGCs from regulation, as LGCs are a separate and distinct entity from the local governments. The Commission characterized LGCs as a legal entity that has as its shareholder a local government, which is separate from the local government itself.

However, the Commission went on to decide that wholly owned and wholly operated municipal LGCs should nonetheless be eligible for a s. 88(3) “class of persons” exemption from application of the UCA, subject to an annual requirement that they report information required by the Commission in the manner and form specified by the Commission. Section 88(3) of the UCA allows the Commission to “exempt a person, class of persons, equipment or facilities from the application of all or any of the provisions of the [UCA]” with the advance approval of the minister responsible for the administration of the Hydro and Power Authority Act, R.S.B.C. 1996, c. 212.

Two municipalities, City of Richmond and City of North Vancouver, and their respective LGCs, Lulu Island Energy Company Ltd. and Lonsdale Energy Corporation, took issue with being made subject to the regulatory authority of the Commission and its requirement for reporting. They argued before the BCCA that LGCs which are wholly owned and wholly operated by local governments are excluded from the definition of “public utility” in the UCA because they are effectively an extension of the local government. Under section 1(1) of the UCA, a public utility is defined as a corporation that provides electricity, natural gas, and telecommunication services to the public for compensation but it specifically excludes “a municipality or regional district in respect of services provided by the municipality or regional district within its own boundaries”. The appellants argued that once the s. 1(1) definition of a public utility is read in its “entire context”, including the Community Charter, it is readily apparent the UCA’s “municipal exclusion includes services provided by local government irrespective of the means through which the local government acts”. This would include services delivered through a wholly owned and wholly operated LGC.

FortisBC and BC Hydro resisted this appeal and took the opposite position, arguing that the exclusion under the definition of public utility did not include LGCs. The BCCA agreed. The Court looked first to the definition of “municipality” set out in the Interpretation Act, as follows:

“municipality means, as applicable,

(a) the corporation into which the residents of an area are incorporated as a municipality under the Local Government Act, the Vancouver Charter or any other Act, or

(b) the geographic area of the municipal corporation.”

The BCCA held that LGCs clearly did not meet this definition.

The municipal appellants argued, however, that this construction was too narrow, as it reflects undue focus on corporate form and fails to consider the term more broadly as representative of everything a modern municipality entails, including: broadened powers under the Community Charter, increased flexibility in meeting the needs of constituents, and the ability to deliver services directly and indirectly. Specifically, the appellants noted that the UCA is agnostic to the corporate structure of the service provider and is instead focused on utility services delivered by a municipality in its own boundaries.

The BCCA rejected this argument, stating that the issue is not about the scope of municipal powers under the Community Charter, but is instead related only to the scope of the regulatory jurisdiction of the Commission. Furthermore, the Court highlighted s. 121(1) of the UCA, which states that the Community Charter does not supersede the UCA and cannot “impair a power conferred on the Commission”. As such, the BCCA dismissed the appellants’ arguments and held that municipalities and regional districts are factually distinct corporate entities from their LGCs. 

Key Takeaway for Local Governments

The benefit of this decision is that it provides clarity regarding the regulatory regime for local governments that have or may endeavour to create their own utility corporations. While the decision deals specifically with local government utility corporations, the finding that wholly owned and wholly operated local government corporations are distinct legal personalities from the municipalities themselves may have implications for the regulation of other such LGCs engaged in housing, transportation, economic development, and other matters.

Josh Krusell

Josh Krusell is the Managing Partner of Litigation with SMS. He regularly acts on behalf of local governments in complex liability actions, construction and insurance claims, contractual and regulatory disputes, administrative proceedings, and land use and injunction-related matters.