BC Supreme Court upholds temporary “freeze” on cryptocurrency interconnections

The Supreme Court of British Columbia recently released an important decision considering the validity of government directions to the British Columbia Utilities Commission (BCUC): Conifex Timber Inc. v British Columbia (Lieutenant Governor in Council).¹ Under review was an Order in Council (OIC) requiring the BCUC to allow BC Hydro to halt cryptocurrency interconnections for 18 months (until June 28, 2024).² In a decision with impacts beyond cryptocurrency operations, Justice Tammen dismissed Conifex’s challenge of the OIC, concluding that the suspension of cryptocurrency interconnections was lawful. 

The BC government’s use of OICs to intervene in matters that would otherwise be subject to BCUC oversight is not uncommon, and has been controversial at times. Despite upholding the OIC in this case, the court left the door open to future challenges of similar OICs, including on the basis of discrimination arguments and the BC government’s reconciliation obligations to Indigenous peoples.  

Factual background

On December 21, 2022, the Lieutenant Governor in Council (LGIC) issued the Direction to the British Columbia Utilities Commission Respecting Cryptocurrency Mining Projects (Direction), with the required BCUC order following one week later.³ The Direction suspended BC Hydro’s obligation to supply electricity service to new low-voltage and high-voltage cryptocurrency projects, including projects already in BC Hydro’s interconnection queue and subject to system impact study agreements.  While the Utilities Commission Act (UCA)⁴ normally requires the provision of electric and other utility services without discrimination or undue delay, s. 3 of the UCA expressly permits the LGIC to provide direction to the BCUC in carrying out its statutory duties and powers, including to direct the BCUC to refrain from performing those duties or exercising those powers.  

At the time the Direction was made, Conifex had two data centre projects in BC Hydro’s interconnection queue. The Direction immediately suspended both. Conifex challenged the Direction on three bases: (i) it was an unlawful exercise of the LGIC’s authority, (ii) it was procedurally unfair due to a lack of hearing, and (iii) it was contrary to the provincial Declaration on the Rights of Indigenous Peoples Act (DRIPA)⁵ due to a planned partnership with the Tsay Keh Dene First Nation.

The decision

Much of the court’s analysis focused on whether the Direction was within the LGIC’s lawful authority. Importantly, the judge agreed with Conifex that directions to the BCUC are subject to both the “express constraint” of the statute – s. 3 of the UCA provides that directions may only be issued “with respect to the exercise of the powers and the performance of the duties of the [BCUC]”⁶ – and the “implied constraint” of being consistent with the object and purpose of the statutory scheme. Falling outside either constraint would provide a basis for striking down the Direction. This analysis relied on the common law definition of “undue discrimination.”

However, in the judge’s view, the Direction was both within the purview of the BCUC and consistent with the object and purpose of the UCA. While avoiding differential treatment except where justified based on a cost-of-service model is one purpose of the UCA, it is not the only one – and other UCA provisions recognize that “ultimate responsibility for energy policy in the province rests in government.”⁷ In making its decision, the LGIC was entitled to consider these broader policy issues, beyond what the BCUC may lawfully consider.⁸ The judge qualified this analysis, noting that while the LGIC could impose a pause, a “complete moratorium” would indeed require legislative change (at what point a pause becomes a moratorium was not addressed).

The judge also rejected Conifex’s argument that the Direction constituted undue discrimination – largely due to the unique characteristics of cryptocurrency mining operations (i.e., vast, round-the-clock power consumption) as compared to other customer classes. This consumption profile provided a legitimate basis for the differential treatment mandated in the Direction. 

Finally, the judge rejected Conifex’s procedural fairness and DRIPA arguments. While a hearing is normally required to engage in discrimination as mandated by the Direction, s. 3 OICs are expressly permitted to depart from the usual UCA requirements – including requirements to hold hearings. With respect to DRIPA, the judge held that Conifex lacked standing to seek review on behalf of the Tsay Keh Dene Nation. The nation was not a party to the litigation, and Conifex had failed to lead detailed evidence about the partnership. 

Implications for challenging future LGIC directions to the BCUC

While the Direction in this case impacts only a relatively small group (predominantly cryptocurrency mining operators), the court’s treatment of s. 3 UCA directives has far broader implications. This sort of government intervention at the BCUC, which is otherwise an independent regulator, is not uncommon, and has been directed at a wide range of subjects – including promoting electrification,⁹ establishing customer relief funds,¹⁰ and allowances for cost recovery.¹¹ Section 3 directives can be controversial, but until this case, had not been subject to comprehensive court review. 

Despite upholding the Direction on the facts of this case, the judge plainly left the door open to future s. 3 directive challenges. In particular, Justice Tammen “[left] for another day the very interesting question of whether the wording of s. 3 of the UCA permits discrimination by cabinet on the broad level advocated by the LGIC,”¹² noting that most of the case law in this area involves materially different statutory schemes that would likely be of limited utility to interpreting the direction power in the UCA.