Most municipalities calculate sewage rates based on water consumption. This is likely based on the idea that what goes in must come out, but that is not always the case. Not all of the water taken will enter the sewage system, like when it is used for activities such as watering lawns and gardens. On the other hand, other waste products enter the system in addition to water, which increases the amount processed by the municipality.

People often argue that basing sewage rates on water consumption is not fair. The Court has found that even when a property owner can prove that the amount of waste leaving the property is less than the water being consumed, it is still reasonable for a municipality to make the policy decision to charge based on water consumption.

In the Ontario case of Nylene Canada Inc. v Corporation of the Town of Arnprior (2017), the polymer manufacturing facility of Nylene attempted to hold the town of Arnprior liable for the difference between the amount it charged the company and the actual volume of wastewater discharged.

Nylene claimed that it had been overcharged since 2005 after it installed a deduct meter, which told the company it was discharging 7.5 to 9 million fewer gallons of water per year than what the town had been charging based on water consumption. It claimed that this was a violation of section 394(1)(c) of the Municipal Act, 2001, which prohibits the imposition of a fee or charge based on the use, consumption or purchase of a service other than one provided by the municipality.

The Town’s defence was that it was neither possible nor practical to accurately measure wastewater discharge, calling this a matter of administrative efficiency. Arnprior based its charges on a 2004 study which made recommendations to assist municipalities in meeting their obligation to move toward a financially sustainable drinking water and wastewater system.

The Court found that Arnprior was not in violation of s394(1)(c) because the Town itself provided the wastewater services and did not impose a charge external to its relationship with the ratepayer. It also found that Arnprior suffered a slight loss on the amount charged for wastewater services each year until 2014. The Court considered that the Town had made a reasonable attempt to estimate the costs of wastewater services and that it had not made a profit from these charges. The Court stated that the fees were not arbitrary given the direct correlation between the amount charged and the cost of operating wastewater services.

The Court also referenced case law to state that policy decisions attract immunity along with courses of action based on such policies provided that the decision-making process was rational and made in good faith. The Court noted that decisions associated with economic, political and social considerations are policy decisions and are to be decided by the government rather than courts.

Nylene brought this decision to the Ontario Court of Appeal who dismissed the appeal on September 12, 2017. On May 31, 2018 the Supreme Court of Canada refused leave to appeal.