Alberta's Ambitious Renewable Electricity Program: The Long-Awaited and Eagerly-Anticipated Details Unveiled

Allison Sears and Vincent Light - 

Almost a year after Alberta Premier Notley first announced her Climate Leadership Plan in bold but extraordinarily broad strokes, the details of how she hopes to achieve a target of 30% renewables on Alberta’s grid by 2030 are finally taking shape.

Coincident with the first reading of Bill 27 - Renewable Electricity Act in the Alberta Legislature, Environment Minister Shannon Phillips and Mr. Mike Law, the VP of Renewables Development and Sustainability at the Alberta Electric System Operator (AESO), each gave presentations at the Canadian Wind Energy Association (CanWEA) annual conference (auspiciously held in Calgary this year) revealing aspects of Alberta’s Renewable Electricity Program (REP). 

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Carbon Emissions and the Canadian Electricity Sector

Jason Kroft, Allison Sears and Jonathan Drance - 

In most countries, the electricity sector is a major source of carbon emissions, at least to the extent its major fuel sources are fossil fuels.  Canada and the United States make an interesting and instructive contrast, given the abundance of hydropower in Canada and the vastly less significant role that fossil fuels, particularly coal, play in Canada’s electricity sector.

In the United States, the electricity sector is the primary source of carbon emissions, accounting for roughly 33% of all annual emissions.  In Canada, the electricity sector accounts for just over 10% of all carbon emissions, lagging well behind the oil and gas and transportation sectors in particular.  The following table sets out the carbon emissions in Canada by sector, measured in millions of tons (Mt), as at the base year (2005) and the target year (2020) for measuring carbon emissions under the Copenhagen Accord.

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Court finds municipality acted in bad faith, orders municipality to enter good faith negotiations with wind turbine developer

A recent Ontario Divisional Court decision, wpd Sumac Ridge Wind Inc. v. Kawartha Lakes (City), represents an important precedent for project developers who are facing opposition from municipalities. The court held that a municipality’s attempt to prevent the development of a provincially approved wind turbine project by passing a resolution that prevented its completion was both ultra vires and an act of “bad faith”. The resolution was accordingly quashed.

Background

Ontario’s Ministry of the Environment had granted wpd Sumac Ridge Wind Inc. a Renewable Energy Approval to construct five wind turbines within the City of Kawartha Lakes. In order for wpd to construct the turbines, the company needed to access and upgrade certain municipal roads. However, Kawartha Lakes was opposed to the project and, even though the Ministry had approved it, passed a resolution that said:  "… any request by Wpd … for use of … [the road in question] … to support [the] proposed wind turbine development [will] be refused…."  The resolution had the effect of preventing the project’s construction. In response, wpd brought an application for judicial review.

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Restoring an OEB rate ruling, the SCC reaffirms discretion of Canadian tribunals and holds that regulators are not required to allow utilities to pass on costs of collective agreements

 Glenn Zacher, Patrick Duffy and James Wilson - 

On September 25, 2015, the Supreme Court of Canada released a 6-1 decision that has far-reaching implications for provincial energy tribunals and administrative tribunals generally, and which may also impact collective bargaining between regulated entities and their unions.

The case, Ontario (Energy Board) v. Ontario Power Generation Inc., 2015 SCC 44, arose from the decision of the Ontario Energy Board (OEB) not to allow Ontario Power Generation (OPG) to recover through rates $145 million in compensation costs paid to its unionized workers under their collective agreements. The Supreme Court’s ruling focused on two important issues: (i) the scope of the OEB’s discretion to set just and reasonable rates and (ii) the right of tribunals to participate in appeals of their own decisions. 

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Ostrander Point Wind Project Returns to the Environmental Review Tribunal

Paul Neville and James Wilson -

On April 20, 2015, the Court of Appeal for Ontario released its decision in Prince Edward County Field Naturalists v. Ostrander Point GP Inc. As previously reported (on appeal to the Divisional Court) the case concerns a decision of the Environmental Review Tribunal (Tribunal) to revoke a Renewable Energy Approval (REA) granted by the Ministry of the Environment (MOE) to Ostrander Point GP Inc. (Ostrander), permitting Ostrander to construct nine wind turbines (the Project) at Ostrander Point, about fifteen kilometres south of Picton, Ontario.

The Tribunal revoked the REA on the basis of submissions by the Prince Edward County Field of Naturalists (PECFN) that the Project would seriously and irreversibly harm a species of turtle called the Blanding’s turtle.

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OPA awards 500 new FIT 3 renewable energy contracts

P. Jason Kroft and Tamir Birk -

On July 30, the Ontario Power Authority (OPA) awarded 500 renewable energy contracts, representing 123.5 megawatts of power, under its Feed-in Tariff (FIT) program. According to the OPA, these contracts represent enough energy to power approximately 15,000 homes.

“The FIT contracts we are about to offer represent significant investment in Ontario and in our electricity system. They show that the transformation of our electricity system to be cleaner and more sustainable is well on its way,” said OPA CEO Colin Andersen.

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IESO launches phase 1 of energy storage procurement

Glenn Zacher & Micheal Nilevsky -

On March 12, 2014, the IESO issued an RFP to procure 35 MW of energy storage resources.  This procurement follows on the commitment made by the government in the long-term energy plan and the Minister of Energy’s more recent request to the IESO and the OPA. The Minister requested that the IESO and OPA design a process to procure 50 MW of energy storage by the end of 2014 and conduct an independent study assessing the value of energy storage for Ontario as well as review the regulatory barriers to storage’s participation in the Ontario electricity market. 

The IESO and the OPA collaborated in designing a framework for the procurement of 50 MW of storage, which they submitted to the Minister at the end of January.  The recent RFP relates to Phase I which will be led by the IESO and which will seek to procure up to 35 MW of regulation service and/or reactive support and voltage control from grid energy storage facility operators.  Phase II will be launched later this year and will procure the balance of the 50 MW. This second phase will be led by the OPA and will focus on meeting future capacity needs and may include considerations for remote communities. 

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Ontario Large Renewables Procurement Update

Matt Cameron & Karl Bjurstrom -

At the first day of Ontario’s 5th Feed-in-Tariff and Renewable Energy Forum on March 17th, 2014, Shawn Cronkwright, the Ontario Power Authority’s director of renewables procurement, presented capacity targets for large renewables by technology for the years 2014 and 2015:

 

Wind

Solar

Bioenergy

Hydro

2014

300 MW

140 MW

50 MW

50 MW

2015

300 MW

140 MW

50 MW

45 MW

In reviewing key feedback from municipal meetings, to avoid multiple developers simultaneously engaging in projects which may never proceed, it was suggested that community engagement be moved to the Request-for-Proposal (RFP) stage as opposed to the Request-for-Quote (RFQ) stage. As an alternative, feedback suggested that a municipal support resolution similar to the FIT program be applied and that developers be required to prepare community engagement plans. With respect to the RFP, feedback from municipal meetings suggested that decommissioning bonds be required to ensure municipalities not be left with costs at the end of a contract.

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Ostrander Point Wind Project gets Green Light from Ontario Divisional Court

Patrick Duffy and  David Spence -

On February 20, 2014 the Divisional Court released its decision in Ostrander Point GP Inc. v. Prince Edward County Field Naturalists. The case concerned three appeals from a decision of the Environmental Review Tribunal (Tribunal). The Tribunal’s decision addressed an appeal of the Ministry of the Environment’s (MOE) decision to grant a Renewable Energy Approval (REA) to Ostrander Point GP Inc. (Ostrander) to construct nine wind turbines (the Project) on a site known as Ostrander Point, about fifteen kilometres south of Picton, Ontario. The Tribunal allowed the appeal and decided to revoke the REA, agreeing with the Prince Edward County Field of Naturalists’ (PECFN) position that the Project would seriously and irreversibly harm a species of turtle called the Blanding’s turtle.

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Alberta and China enter into a Cooperation Agreement

Shawn Smith and Jeff Hershenfield -

In the fourth quarter of 2013, the province of Alberta and China entered into a non-binding cooperation agreement to increase energy trade between the respective jurisdictions. The agreement explicitly acknowledges Alberta’s major role in global resource development and China’s growing need for a reliable, competitive and sustainable supply of energy.

The agreement sets forth five guiding principles intended to facilitate its successful implementation. These include:

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2014 will be a very busy year for Quebec's energy sector

Erik Richer La Flèche -

As I discussed in an earlier post, Quebec’s Minister of Natural Resources struck a committee and issued a consultation paper last summer as part of a process expected to result with a new energy policy for Quebec. The public consultation process was completed last October and the commission’s report is expected in early 2014. Barring any early elections, a new policy should be released later in 2014.

As outlined in my previous post, the government’s objectives are ambitious and require significant capital. While it is highly unlikely that any policy objective would be dropped by the current government, it will be interesting to see the priority and the resource allocation assigned to each objective.

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2014 Energy M&A Trends in Canada

Glenn Cameron, Susan Hutton, Keith Miller, Cameron Anderson and Brandon Mewhort -

Whether measured by volume or aggregate value, 2013 was a weaker year for energy-related M&A than 2012, continuing a four-year decline in activity in the sector. There was a noteworthy lack of public company M&A in 2013 and nothing to match the marquee deals of 2012: PETRONAS’ $6B acquisition of Progress Energy or CNOOC Limited’s $20B acquisition of Nexen. In spite of that, 2013 still saw a significant number of large and complex transactions, including Suncor’s sale of its conventional natural gas properties for $1B to Centrica and Qatar Petroleum, Progress/PETRONAS’ $1.5B acquisition of Talisman Energy’s Farrell Creek and Cyprus properties and Exxon Mobil/Imperial Oil’s $750M acquisition of part of ConocoPhillips’ non-producing Clyden oil sands acreage.

Reasons for the decline in M&A activity in 2013 included the following:

  • Asian investors paused to digest what they bought after five years of significant investment in the Canadian energy sector, particularly in the oil sands.
     
  • Changes to Industry Canada’s State Owned Entity (SOE) guidelines announced in December 2012 under the Investment Canada Act, coupled with the failure of two transactions to pass “national security” reviews, have chilled foreign investment by SOEs.
     
  • Increased uncertainty about whether regulatory approvals would be obtained for pipelines and other projects needed to expand the capacity to transport Canadian crude oil and natural gas to the U.S. and to provide access to offshore markets contributed to investors’ concerns about the future prospects for Canadian production.

In addition to the absence of major acquisitions, 2013 also saw a decline in financing activity by oil and gas issuers. While a select few were able to raise the equity they required, many others could not – at least until Q4 when a spike in oil and gas-related capital markets activity occurred. The numbers of oil and gas issuers on the TSX and TSXV, the number of financings by those issuers and the aggregate equity capital raised to the end of Q3 of this past year were all significantly lower than over the same period in 2012.

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Ministry of Energy releases its new Long-Term Energy Plan

Melissa John and Michael Nilevsky -

On December 2, 2013, Ontario’s Ministry of Energy released its new Long-Term Energy Plan, Achieving Balance (the Plan or Achieving Balance). The Plan balances five principles that will guide future decisions: cost effectiveness, reliability, clean energy, community engagement, and an emphasis on conservation and demand management before building new generation. Compared to the previous plan, the government states that Achieving Balance is expected to reduce projected cost increases by $16 billion in the near term (2013-2017), and $70 billion by 2030.

Stikeman Elliott LLP will conduct a comprehensive analysis of Achieving Balance in the near future. For now, the following are key highlights of the Plan, as outlined by the Ministry of Energy:

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EPA introduces contentious revised Carbon Pollution Standards for new power plants

P. Jason Kroft and Monique Alicandri -

As we have done previously in this blog, we will highlight from time to time U.S. and foreign developments of potential interest in the regulation of greenhouse gases. While there has been relatively little activity in recent months at the Canadian federal government level in the area of climate change policy, such is not the case south of our border.

On September 20, 2013 the U.S. Environmental Protection Agency announced newly revised pollution standards for new power plants. Currently, there are no American limits at the national level on the amount of carbon pollution new power plants can emit. The proposed rules seek to address this regulatory shortfall and replace a contentious 2012 EPA proposal which received more than 2.5 million comments.

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FIT 3.0 draft documentation released

Annie Pyke -

The draft of version 3.0 of the FIT Rules, FIT Contract and related documentation have been posted to the Ontario Power Authority’s website. The draft documentation reflects the directions issued by the Ministry of Energy to the OPA on June 12, 2013 and August 16, 2013, including amending the FIT Rules and FIT Contract such that FIT Contracts will only be available for “Small FIT Projects” (i.e. projects of 500 kW or less) and changes to the minimum domestic content requirements in order to comply with the World Trade Organization ruling (see our previous posts here and here). The proposed amendments to the minimum domestic content levels allow suppliers to achieve their minimum requirement by utilizing Ontario-based labour for construction and consulting, areas which are not subject to WTO scrutiny. In addition, FIT 3.0 contemplates that contracts may be awarded for projects to be constructed on as yet unbuilt buildings.

All interested parties are invited to comment on the draft FIT 3.0 documents and the OPA will be accepting comments (in the prescribed form provided by the OPA on their website) until September 20, 2013. It is expected that the final FIT 3.0 documents will be released October 7, 2013 and that the first FIT 3.0 application window will be open from November 4 – December 20, 2013.

Cancellation of BC power deals by BC Hydro: Cleaning house or policy shift?

Rachel V. Hutton -

The challenges of bringing smaller-scale energy projects to fruition are not in debate.  But the BC Government’s August 30 announcement that BC Hydro will cancel as many as 10 electricity purchase contracts (and defer up to nine more) is raising eyebrows in the BC energy sector. 
 
An optimistic take on this news is that the endangered projects are those least likely to prove viable.  If true, then this move by BC Hydro to jettison “dead weight” can be viewed as efficient, sensible, and potentially to the benefit of projects with hallmarks of feasibility:  credible management, sound financing/ownership and good prospects for overcoming environmental, First Nations and other approval hurdles.  Moreover, BC Energy and Mines Minister Bill Bennett confirmed that the 19 projects in question have not met their contractual obligations and none are yet in “serious construction mode”. 

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Recommendations on Siting Energy Infrastructure Released

Patrick Duffy and Vicky Simon -

On May 6, 2013, Ontario Minister of Energy Bob Chiarelli directed the Ontario Power Authority (OPA) and the Independent Electricity System Operator (IESO) to consult with stakeholders across the province and jointly develop recommendations for a new integrated regional energy planning process which would focus on improving how large energy infrastructure projects are sited in the Province. Among other matters, the Minister sought recommendations on how to improve the involvement of municipalities and Aboriginal communities in the development of regional energy plans.

Stakeholders were consulted both in-person and on-line during June and July, including First Nations and Métis, municipalities, local electricity distribution companies, energy stakeholders and the general public. Feedback from stakeholders indicated a need for increased transparency in planning, procurement and siting of facilities, education as to who makes which decisions and meaningful early involvement in the planning process before procurement and siting decisions are made. First Nations and Métis representatives indicated the need for in-person consultation early in the planning process, which would not however supersede the duty to consult. A review of how other jurisdictions make energy infrastructure siting decisions was also undertaken.

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Could this be the beginning of the end of cheap electricity in Quebec?

Erik Richer La Flèche -

Last month, Quebec launched a public consultation process on energy issues and struck a commission co-chaired by a university physics professor and a retired Hydro-Quebec planning vice-president to consider new energy policy. The commission will hold public hearings across Quebec from September 4 to October 9, and is expected to deliver a report in late 2013 or early 2014.

Clues as to the commission’s goals and priorities are contained in the consultation paper that was published as an aid to the process (available in both French and English). The document is engaging and informative, and describes in plain language the current energy situation.

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Ontario begins long-term energy plan review

James Klein & Tamir Birk -

On July 10, Ontario Minister of Energy Bob Chiarelli launched a formal review of the province’s Long-Term Energy Plan  by releasing a discussion guide and calling on Ontarians to join the conversation. “It’s critical that we plan Ontario’s energy future with input and advice from every corner of the province,” he said. The discussion guide poses questions relating to several topics including Ontario’s mix of energy sources, energy conservation policies and new, “intelligent” technologies that change the way power is generated, delivered and consumed. The review will be based on a consultation process with the public, municipalities, the energy sector and Aboriginal communities and leaders.

Starting July 10 through to September 9, the public can participate by completing a short online survey, submitting a formal comment through the Environmental Registry or attending one of many public open house sessions being held in communities throughout the province. An updated Long-Term Energy Plan is expected to be released this fall.

OPA offers 951 new small Feed-in Tariff contracts

Annie Pyke and Tamir Birk -

On July 3rd, the Ontario Power Authority awarded 951 new Small Feed-in Tariff renewable energy contracts, representing 146.5 megawatts of energy, representing enough energy to power over 21,000 homes. Of the successful applications, over 98% had received municipal council support resolutions.

The contracts awarded include 219 projects with Aboriginal participation and 136 projects with community participation. The vast majority of contracts are for solar projects, with sixteen bioenergy and one waterpower contract offered.

The list of contracts offered is available on the OPA FIT website.
 

Four reasons why Quebec should resurrect Hydro-Québec International

Erik Richer La Flèche -

Quebec’s efforts in the energy sector are guided by its energy policy. The current policy covers 2006 to 2015. Quebec is putting its final touches on the next reiteration to be released fall 2013. A consultative process will follow.

Early indications are that the government is thinking of resurrecting Hydro-Québec International (HQI), the former wholly-owned subsidiary of Hydro-Québec.

This is an excellent idea.

Quebec’s electricity sector represents more than 5% of its GDP and is anchored by Hydro-Québec, a large vertically integrated stated-owned utility. During the 1980s and 1990s HQI was active on the world stage, first as a complement to the international activities of Quebec’s engineering sector, and then as a full-fledged developer, owner and operator of production and transmission facilities, primarily in emerging markets.

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Ontario Minister of Energy announces changes to FIT program rules; will comply with WTO ruling on domestic content

Christian Brands -

On May 30th, 2013, Ontario Energy Minister Bob Chiarelli announced the much anticipated changes the current Liberal government is making to Ontario’s Feed-in-Tariff (FIT) program. Speaking at CanSIA Solar Ontario Conference, Chiarelli confirmed that they will  replace the controversial approval process for Large FIT projects (+ 500KW) with a new competitive procurement process and provide municipalities with a greater role in locating projects in their communities.

In addition, the Minister announced OPA procurement targets for the next 4 years and the introduction of a roof top solar pilot program for unconstructed buildings.

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Ontario Intends To Improve Energy Planning Process

Michael Nilevsky -

On May 6, 2012, Ontario’s Minister of Energy, Bob Chiarelli, sent a letter to both the Ontario Power Authority (OPA) and the Independent Electricity System Operator (IESO) requesting that both organizations work together to develop recommendations for a new integrated regional energy planning process. Ontario’s new government is hoping to improve the way in which large energy projects are planned, sited and built across the province and hopes that these two entities can provide recommendations that will help Ontario build energy infrastructure through a process that will have formal inputs from municipalities, Aboriginal communities, other stakeholders in the development process and the energy sector. The OPA and the IESO are expected to report back to the Minister with their recommendations by August 1, 2013. The Minister has specifically requested that the report contain details on how to “implement regional energy plans, including: suggested consultations, required policy and regulatory changes, as well as implementation timelines.”

The full details of the request can be found here. Stay tuned to this blog as well will continue to provide updates as this story develops.

Canada loses WTO appeal regarding Ontario's Feed-in Tariff (FIT) program

Susan Hutton and Eric Bremermann -

As an update to our previous post, the World Trade Organization (WTO) has released its official ruling on Canada’s Appeal regarding Ontario’s Green Energy Act and its Feed-in Tariff (FIT) program. On Monday May 6, the WTO Appellate Body upheld the complaints from the European Union (EU) and Japan, stating that Ontario’s Feed-in Tariff (FIT) program discriminates against foreign suppliers of equipment and components for renewable energy facilities by requiring minimum thresholds for domestic content levels, and is not saved as government procurement.

To quickly summarize the claim, the EU and Japan first appealed to the WTO in 2011 claiming that the FIT program violated three WTO conventions: Article III:4 of the General Agreement on Tariffs and Trade; Article 2.1 of the Trade-Related Investment Measures Agreement; and Articles 3.1(b) and 3.2 of the Subsidies and Countervailing Measures Agreement (SCM). Specifically, Japan and the EU argued that the domestic content rules under the FIT program treat imported products less favourably than domestic ones and therefore violate the “national treatment” obligations under the General Agreement on Tariffs and Trade (GATT) and Trade-Related Investment Measures Agreement (TRIM). The complainants also argued that the programs constituted actionable subsidies under the SCM. The initial decision, released in December 2012, found the FIT program contravened GATT and TRIM but that the complainants had failed to show the program constituted a subsidy as defined in the SCM. Canada appealed the decision in February 2013 but in its May 6 report the WTO Appellate Body dismissed the appeal.

What this means for the Ontario’s Green Energy Act is yet to be determined. “As this is the first time Canada has received a WTO panel ruling arising solely from provincial policy or legislation, we will work with the Ontario government in order to respond to the decision,” said a Department of Foreign Affairs and International Trade spokeswoman. However, in formal terms, the WTO decision is not-binding on Ontario. The province plans to the review the ruling in consultation with the federal government before the next steps are determined.

Auditor General releases special report on cancelled gas plant in Mississauga

Andrew Sullivan -

On April 15, 2013, the Office of the Auditor General of Ontario (AGO) released its highly anticipated special report (the Report) on the Ontario government’s decision to cancel and relocate the Greenfield South Power Plant. The proposed 280 MW gas plant had been under construction for nearly six months when it was cancelled in late 2011 and subsequently relocated from Mississauga to Sarnia.

The decision is estimated to have cost approximately $275 million according to the Report. The gross cost is estimated to have been as high as $351 million when considering the cancellation and relocation costs in isolation. However, the AGO attributes a $76 million savings in association with the relocated plant's lower electricity prices and delayed construction schedule that better matches Ontario's electricity demand forecast. Of the $275 million, the AGO estimates that $190 million is being paid by Ontario taxpayers with the balance being paid by electricity ratepayers.

Among the key findings, the Report states that the decision to cancel the plant during construction weakened the Ontario Power Authority’s bargaining power and likely resulted in higher costs due to concessions made to the developer to halt construction.

Feed-in Tariff Contract Update

On March 22, 2013, the Ontario Power Authority (OPA) posted an amendment to the Feed-in Tariff (FIT) Contract. Specifically, the OPA has amended Exhibit C of the FIT contract which deals with the domestic content requirements. In the new contract (version 2.1.1), Table 1, Activity #11 (On-Shore Wind Turbine Towers) has been amended to allow for a mutually exclusive option for wind tower raw materials. The new domestic content option reads as follows:
 

“All steel that was formed and shaped into steel tower sections, if any, was processed into steel plates in a steel mill in Ontario; and

All steel for rebar for concrete tower sections, if any, must have been rolled or extruded in a steel mill in Ontario. Aggregate materials used in concrete tower sections, if any, must be sourced and mixed in Ontario, and the Portland cement used in the concrete tower sections, if any, must have been manufactured in Ontario.

The foundation of a tower is not considered part of the tower for the purposes of this Designated Activity 11.”

A link to a comparison of the new contract to version 2.1 can be found here
 

Proposed amendments to the application of the Planning Act (Ontario) to renewable energy projects

Maggie Chien and Annie Pyke -

On February 20, 2013, Bill 2 (Restoring Powers to Municipalities Act, 2013) was introduced by the Opposition House Leader, Jim Wilson (Simcoe-Grey) and given First Reading. Bill 2 proposes to reverse the exemptions granted to renewable energy undertakings from the normal application of the Planning Act, including provincial policy statements, provincial plans, official plans, demolition control by-laws, zoning by-laws and developments permit regulations and by-laws.

There could be significant impacts from the proposed amendments should Bill 2 become law. Municipalities opposing renewable energy undertakings would have the authority to refuse the planning approvals of such undertakings through various planning instruments. Additionally, Bill 2 does not presently contain any transitioning provisions to account for undertakings currently going through the approvals process. Leasing arrangements would also be affected as Bill 2 would repeal the current Planning Act exemptions for leases greater than 21 years applicable to renewable energy undertakings. The increased uncertainty with respect to the approvals required for development and operation could also impact the availability of financing for renewable energy projects.

A similar private members’ bill, Bill 29 (An Act to amend the Planning Act with respect to renewable energy undertakings) was introduced in April 2010 but was not carried past First Reading due to a prorogation of the provincial legislature. Although private members’ bills do not often receive Third Reading and Royal Assent, we will be keeping a close eye on the development of Bill 2 going forward.

WTO rules against Ontario's FIT Program

Michael Nilevsky -

As an update to our first news release found here, the World Trade Organization (WTO) has officially announced its ruling on the domestic content requirements of Ontario’s Feed-In Tarriff (FIT) program. Much like the interim report, the final ruling finds that the FIT program violates the WTO rules that forbid treating domestic suppliers and products differently from foreign ones.

To quickly summarize the claim, the EU and Japan first appealed to the WTO in 2011 claiming that the FIT program violated three WTO conventions: General Agreement on Tariffs and Trade (GATT); Trade-Related Investment Measures Agreement (TRIM); and the Subsidies and Countervailing Measures Agreement (SCM). As outlined in the WTO’s 160 page decision, the three member panel has found that the FIT program discriminates against foreign suppliers of equipment and components for renewable energy facilities under GATT and TRIM, but not under SCM.
 

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Report Recommends Shake-up of Ontario's Distribution Sector

Patrick Duffy and Andrew Sullivan -

The Ontario Distribution Sector Review Panel (ODSRP) has released its highly anticipated report on the status and future of the Province’s distribution sector. Established in April of this year, the ODSRP’s was asked by the provincial government to make recommendations to improve efficiencies in the sector with the aim of reducing the financial cost of electricity distribution for electricity consumers. The three person panel was composed of David McFadden, Floyd Laughren and Murray Elston, as chair.

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OPA Announces FIT Window

On December 14, 2012, the Ontario Power Authority (OPA) will begin accepting SmallFIT applications (for projects between 10 and 500kW). The OPA plans to award 200MW worth of contracts during this window, 100MW of which will be allocated to capacity set aside aboriginal and community participation projects. There has been no indication of how long this application window will be open.

The OPA is reminding applicants to carefully review the new FIT program documents that have been revised in accordance with the November 23, 2012 and December 11, 2012 directives from the Minister of Energy. More information and the revised FIT version 2.1 documents will be available by the OPA as of December 14, 2012, as well.

For interested stakeholders, the OPA will is hosting a web-conference on December 18, 2012 to review the revised FIT Program and answer questions. Further details on this web-conference will be posted on the FIT website.
 

Happy Holidays? Minister Bentley Announces Small FIT Window

At the CanSIA conference on December 4, 2012, Ontario’s Minister of Energy, Chris Bentley, announced the Ontario Power Authority (OPA) will start accepting applications for Small FIT on December 14, 2012. We understand that the window may be open for as little as thirty days. Additional details will be available on December 14, 2012. In preparation for the influx of applications, the OPA website will be shut down for maintenance on December 13, 2012 from 3:00pm until the opening of the application period.The positive news was welcomed by many in attendance but grumblings about vacation plans were heard soon afterward.

Minister of Energy issues directive to Ontario Power to continue FIT Program

Andrew Sullivan -

On November 23, 2012, the Minister of Energy (MOE) issued a directive to the Ontario Power Authority (OPA) to continue the Feed-in Tariff (FIT) and MicroFIT programs in furtherance of the directions issued on April 5 and July 11, 2012.

This latest directive follows the Land Use Working Group’s submission of recommendations regarding siting of ground-mounted solar projects on rural zoned lands with multiple primary uses and rural/agricultural zoned lands with abutting residential uses.

The following is a summary of the significant policies the MOE has directed the OPA to implement.

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Draft rules and contract for the Industrial Electricity Incentive program released

Kyle Lamothe -

On November 22, 2012, the Ontario Power Authority released the draft Program Rules for Stream 1 of the Industrial Electricity Incentive program, a few days after it released a draft contract. The program was announced in June 2012 and is aimed at creating new jobs in the industrial sector by providing reduced pricing on electricity to qualifying participants.

The program is being launched in two streams. Stream 1 is open to companies who are looking to open new operations in Ontario, while Stream 1 is intended for existing companies in Ontario who will expand and build a new industrial facility. For both streams, the industrial activity must be in the manufacturing or mining, quarrying, and oil and gas extraction sectors.

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Ontario Court dismisses offshore wind damages claim

Michael Nilevsky -

Trillium Power Wind Corporation (TPWC), the Toronto-based developer interested in building offshore wind turbines in Lake Ontario, is appealing a decision of the Superior Court of Ontario after a judge ruled in favor of the defendant, the province of Ontario, to strike TPWC’s statement of claim.

On October 5, 2012, the Ontario Superior Court of Justice delivered its decision with respect to Trillium Power Wind Corporation v. Ontario (Natural Resources) by striking out the action brought by TPWC against the Ontario government seeking $2.5 billion in damages in relation to the province’s February 2011 moratorium on offshore wind farms.

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Ontario's FIT domestic content requirements under fire

Michael Nilevsky and Andrew Sullivan -

According to a leaked confidential World Trade Organization (WTO) interim ruling, a three member panel has sided with Japan and the European Union (EU) on their challenge of Ontario’s domestic content requirements under its Feed-in-Tariff (FIT) Program. In order to qualify for FIT, renewable energy projects must include a minimum quota of Ontario goods and services. Wind projects over 10kW require a minimum domestic content level of 25% prior to January 2012 and 50% for projects with a milestone date for commercial operation on or after January 1, 2012. In the case of solar projects, as of January 1, 2011, 60% of the goods and services must come from Ontario for projects over 10kW.

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Skypower judicial review dismissed

Andrew Sullivan -

On September 10, 2012, the Divisional Court released its decision dismissing SkyPower group of companies’ (Skypower) application for judicial review of Ontario’s new Feed-In-Tariff (FIT) rules.

Skypower sought a number of declarations concerning the Ontario Power Authority’s (OPA) and Ministry of Energy’s (MoE) decision not to process FIT applications submitted before April 5, 2012 (FIT 1 Applications) in accordance with FIT rules version 1.5.1 (FIT 1). Skypower had 66 applications submitted under FIT 1 awaiting review and a further 52 applications that had been screened by the OPA and not offered a contract. On April 6, 2012, upon a MoE directive, the OPA released new draft rules for FIT applications that were finalized on August 10, 2012 (FIT 2). The new FIT 2 rules applied to Skypower’s 118 applications (Existing Applications) that were submitted under FIT 1. Skypower argued that as a consequence of these changes, virtually all of its Existing Applications would be ineligible for a FIT contract. It contended this result was unfair and unreasonable.

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Ontario distribution sector panel reviews submissions

Michael Nilevsky -

In April 2012, the Ontario government launched a comprehensive review of the province's electricity sector with the goal of exploring options to improve efficiencies. The Ontario Distribution Sector Review Panel (the Panel), led by Murray Elston, David McFadden and Floyd Laughren, was assembled to accept submissions from various stakeholders, including municipalities, local distribution companies (LDCs), the Electricity Distributors Association and other energy experts, in order to examine a range of issues including the potential for LDC consolidation. To be clear, the Panel’s mandate is to “provide advice and make recommendations to the Minister of Energy regarding issues related to Ontario’s electricity distribution sector and distribution models, including opportunities for consolidating distributors.”

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Federal government introduces regulations to progressively phase-out coal plants

Andrew Sullivan -

On September 5th, the federal environment minister announced final regulations designed to reduce emissions from coal-fired electricity facilities. The objective of the Reduction of Carbon Dioxide Emissions from Coal-Fired Generation of Electricity Regulations is to phase out high-emitting coal-fired generation and promote a transition towards lower or non-emitting types of generation.

The regulations will set performance standards for new coal-fired units and those that have reached the end of their useful life. Under the regulations, new units are those that start producing electricity on or after July 1, 2015. Units at the end of their useful life are those that have produced electricity for 50 years. Transitional rules apply to plants built before 1986. Performance standards will come into effect on July 1, 2015. However, regulated entities will be required to begin reporting emission levels two years in advance of that date.

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FIT 2.0 contract finalized

Matt Cameron -

Following the draft feed-in-tariff (FIT) contract released on April 5, 2012 (our commentary on the draft is available here), the Ontario Power Authority released the final form of the new FIT contract on August 10, 2012.  With this contract and the new rules released on the same day, Ontario has reformatted its FIT Program – FIT 2.0 – to give greater incentives to developments by or including aboriginal groups, community groups and education and health providers.

Applications for “small” FIT contracts, being projects which, subject to the voltage of their connection line, are under 500 kW, will be accepted between October 1, 2012 and November 30, 2012.  During that period, FIT applications made under the existing FIT Program framework may transition to the new FIT 2.0 regime.  For further discussion on the new FIT rules, see our blog post here.

Below is a summary of material points in the new contract:

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Final FIT 2.0 Rules Released

Lanette Wilkinson -

As described in greater detail in our April 9, 2012 and July 12, 2012 posts, in response to a direction by the Minister of Energy, the Ontario Power Authority (OPA), released drafts of version 2.0 of the Feed-in Tariff Program Rules (the Rules), Contract (the FIT Contract), and related documentation on April 5, 2012 for comment. On July 11, 2012, the Minister of Energy issued a further directive that mandated certain amendments to the Rules and FIT Contract. The final version 2.0 of the Rules was released by the OPA on August 10, 2012 and included several changes compared to the April 5, 2012 draft Rules (the Draft Rules). The OPA has also posted a list of frequently asked questions here.

Application Prioritization and Ranking

Priority Points

There have been several changes and clarifications to the “Priority Points” criteria, as follows:

  • Pre-existing applications submitted on or before July 4, 2011 are eligible for 1 Priority Point;
  • Pre-existing applications submitted on or after July 5, 2011 are eligible for ½ of a Priority Point;
  • The points available if applicants submit evidence of “Project Readiness” have been reduced from 2 to 1 Priority Points;
  • All local municipalities in which the Project is located must provide a resolution in the prescribed form to receive 2 Municipal Council Support Priority Points; and
  • Only Small FIT Projects that are located on First Nations lands and that have received the support of all Aboriginal communities resident on such lands, are eligible to receive 2 Aboriginal Support Resolution Priority Points.
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FIT 2.0 Program Documentation Released

The final version 2.0 of the FIT Rules, FIT Contract, and related project documentation have been posted to the OPA’s website.  The OPA has advised that it is expected that the small FIT application window will be open from October 1, 2012 until November 30, 2012 and that approximately 200 MW of small FIT contracts will be awarded under this first application window. See here for copies of the final FIT 2.0 documentation.

Panel orders TransAlta to return coal generation units to service

Brandon Mewhort and Aleksandra Rennebohm -

On July 23, 2012, TransCanada Corporation announced that it received a favorable ruling from an independent arbitration panel regarding its dispute with TransAlta Corporation over TransAlta’s force majeure and economic destruction claims.

In December 2010, TransAlta shutdown two coal-fired generation units at its Sundance power plant just west of Edmonton (the Units) after testing revealed problems with the boiler tubes. TransAlta declared that the Units could not be economically repaired and claimed force majeure and economic destruction. TransAlta issued a formal notice of termination of the Power Purchase Arrangement (PPA) with respect to the Units in February 2011. TransCanada rejected these claims and the matter was referred to the arbitration panel pursuant to the dispute resolution provisions of the PPA.

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Atikokan Power Generation Station to convert from coal to biomass

On July 19, 2012, it was announced that the Atikokan Power Generating Station will be converted to burn biomass instead of coal, creating one of the largest biomass-fueled electricity generating facilities in the world.

The conversion is part of the Ontario government’s plan to eliminate the use of coal for electricity generation by the end of 2014. OPG anticipates that the 200-megawatt plant will provide a stable source of clean and renewable energy in northern Ontario.

The $200 million conversion is slated for completion by the end of 2014.

Minister of Energy issues directive to Ontario Power to continue FIT Program

Annie Pyke -

On July 11, 2012, the Minister of Energy issued a directive to the Ontario Power Authority (OPA) providing further direction regarding the FIT 2.0 Rules and Contract. Among other items, this directive provides further details on the prioritization and ranking of applications, land use restrictions and project location, directs the OPA to design a new pilot stream for microFIT applicants with unconstructed buildings and also extends the voluntary withdrawal period for existing FIT Contract holders to September 30, 2012.

A brief summary of the main points of the directive follows.

Priority Points and Ranking

The directive provides that all projects that applied prior to July 4, 2011 automatically receive one priority point and those projects that applied on or after July 5, 2011 will receive half of a priority point. A FIT contract will only be awarded where the project has achieved at least one priority point.

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Health Canada announces wind turbine noise and health study

Patrick Duffy and Ian Noble -

Health Canada announced Tuesday that it will be conducting a study on the health effects of low frequency noise generated by wind turbines on people who live nearby.  

Researchers plan to study a sample of 2,000 dwellings near 8-12 wind turbine installations. The study will examine noise levels at variety of setback distances from less than 500 metres to greater than 5 kilometers. In addition to physical tests such as blood pressure and hormone levels, researchers will conduct face-to face interviews with participants and undertake extensive sound modelling.

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Renewable energy generator exempt from transmission licencing requirements

Glenn Zacher   -

In an interesting case that has been winding its way through the Ontario Energy Board (OEB), Grand Renewable Wind LP (GRWLP) ― which was formed for the purpose of owning and operating a 153 MW wind facility in Haldimand County ― was exempted from the obligation to obtain a transmitter’s licence for transmission connection facilities it intends to develop and operate to convey its wind generation and solar energy generated by a related company, Grand Renewable Solar LP (GRSLP).

In earlier section 81 and leave-to-construct proceedings (which we wrote about last December), Board Staff and other parties questioned GRWLP’s position that it was exempt from the obligation to obtain a transmission licence under Ontario Regulation 161/99 (O. Reg. 161/99), but the Board ruled that these were not the appropriate forums to decide the matter. However, in early May, the Board, on its own motion under sections 19(4) and 57 of the OEB Act, initiated proceedings to determine whether GRWLP was exempt.

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Export Transmission Tariff report finalized

Glenn Zacher -

In its 2010 Hydro One transmission rate decision, the Ontario Energy Board (Board) increased from $1/MWh to $2/MWh the Export Transmission Service (ETS) rate that was put in place as a “placeholder rate” at market opening and that has remained unchanged since then. The Board, however, directed that “a genuinely comprehensive study be undertaken [by the IESO] to identify a range of proposed rates and the pros and cons associated with each proposed rate in time for [Hydro One’s] next transmission rate application”. Over the past year, the IESO, with input from stakeholders, has been administering an ETS study. Recently, the IESO announced that the study was complete and had been delivered to Hydro One to be filed as part of its upcoming transmission rates case.

The ETS study identifies five export tariff options ― broadly representing the range of views expressed by stakeholders with respect to how export transmission costs should be allocated ― and assesses the options against generally accepted rate-making principles (consistency with neighbouring markets, simplicity, fairness and efficiency). The study also assesses the impact of the various options on Ontario consumers, Ontario producers and the IESO-market, as well as the impact on import/export levels, total bill price, export tariff revenue, production costs, carbon emissions and frequency and duration of surplus baseload generation (SBG). The five options considered in the study are:

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Ontario's new industrial electricity incentive program

Marshall Eidinger -

On June 12, 2012, the Ontario Ministry of Energy introduced the Industrial Electricity Incentive Program with the objective of creating new jobs in the industrial sector.

Effective January 2013, eligible companies could qualify for reduced electricity rates if they create new jobs and/or bring new investment to Ontario. New businesses entering the province would be able to receive contracts of up to 20 years for power at $55 per megawatt hour inclusive of transmission and delivery costs. Contracts of comparable length usually receive pricing of $75 per megawatt.

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OPA FIT 2.0 program prescribed forms posted

The OPA has posted draft prescribed forms for FIT 2.0 on its website. The OPA notes that the forms are for reference only and may be revised. No opportunity for public comment has been provided.

In a review of the draft FIT 2.0 Prescribed Forms, the following items are of note:

  1. The OPA has issued a Municipal Council Support Resolution, as well as a Municipal Council Blanket Support Resolution. The blanket resolution enables a municipality to declare its support for all projects located anywhere within the municipality for a period of twelve months after its adoption by Council. The municipality can offer its support for all or select technologies in issuing a Municipal Council Blanket Support Resolution. Unlike the Aboriginal Support Resolution, which is a general declaration of support for the application and the project, each of the municipal council support resolutions are stated to have the sole purpose of enabling the applicant to achieve priority points.
     
  2. The prescribed forms of Zoning Opinion and Zoning Certificate for Non-Rooftop Solar Facility do not provide additional clarity on the OPA’s interpretation of the land use restrictions on ground-mount solar PV under the FIT 2.0 Rules.
     
  3. Despite the flexibility afforded in the definition of “Economic Interest” for ownership interests other than equity in a corporation or a partnership interest in a partnership and for indirect as well as direct interests, which the OPA may determine in its sole and absolute discretion to constitute an “Economic Interest”, the prescribed forms of Aboriginal Participation Project Declaration and Education or Health Participation Project Declaration are best designed to address direct ownership of securities and partnership interests or units.

The OPA has not yet released any of the prescribed forms relating to the FIT 2.0 Contract, other than the prescribed form for the Consent of Co-op Member & Property Owner Declaration for Community Participation Project Declaration, which is in a substantially similar form to that required under the FIT 2.0 Rules.

Ontario Assessment Review Board rules wind farm does not affect property value

Patrick Duffy and Sean Gibson -

The Ontario Assessment Review Board has ruled that there is no evidence the presence of a wind farm affected the value of Ed and Gail Kenney’s waterfront property on the west end of Wolfe Island, a rural community located in the Township of Frontenac Islands on Lake Ontario.

The Municipal Assessment Property Assessment Corporation (MPAC) assessed the Kenney property at $357,000 for the 2009, 2010 and 2011 taxation years, a valuation that the Kenney’s objected to due to their proximity to the Wolfe Island Wind Project, the second largest wind farm in Canada, which has been in commercial operation since June 2009. The Kenney’s property is located within 1 km of three turbines, 2 km of 14 turbines and 3 km of 27 turbines. The Kenney’s argued that the existence of the wind farm reduced the value of their property because of the various nuisances or annoyances that it caused.

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FIT 2.0 draft contract released

Following the issuance of the Minister’s Directive to the Ontario Power Authority on April 5, the OPA released a draft of version 2.0 of the FIT contract, “FIT 2.0”.  The new FIT contract is intended to implement the recommendations made following the 2-year review of the program and is open for public comment until April 27, 2012.  See here for copies of the draft contract and for more information on how to provide feedback.

Some of the changes from the original FIT contract include:

Contract Changes

The OPA will no longer have any obligation to consent to reasonable changes in the facility features or specifications.  This may limit a supplier’s ability to change the connection point, feeder, transformer, site location, design or layout of the project after the application is made.

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FIT 2.0 draft rules released

Following the issuance of the Minister’s Directive to the Ontario Power Authority on April 5, the OPA released drafts of version 2.0 of the FIT Rules.  All interested parties are encouraged to review the proposed changes and submit comments. Comments will be accepted by the OPA until April 27, 2012.   See here for a copy of the draft FIT Rules and for more information on how to provide feedback.

The draft FIT Rules take a much more prescriptive approach to applications and application requirements, with multiple opportunities for the OPA to terminate applications at an early stage. A brief summary of certain proposed changes to the Rules follows.

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Layperson evidence on alleged health effects limited

Patrick Duffy and Sean Gibson -

The Environmental Review Tribunal (ERT) has released a decision limiting the ability of laypersons to testify about health effects allegedly caused by proximity to wind turbines without providing medical records/expert opinions to substantiate their testimony.

The issue arose in an appeal to the ERT by the Middlesex-Lambton Wind Action Group of a Renewable Energy Approval (REA) issued to Zephyr Farms Limited for a wind farm under the Environmental Protection Act In its appeal, the Appellant alleged that the proposed wind farm would negatively affect the health of the surrounding community. In pre-hearing disclosure, the Appellant listed numerous witnesses aiming to testify that they had suffered negative health effects caused by living in the vicinity of wind turbines. The Appellants provided no corresponding medical reports to substantiate, further explain, or allow professional medical scrutiny against, these statements.

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Court rejects application of the prudent investment test to collective bargaining agreements

Glenn Zacher and Patrick Duffy -

In two appeal decisions released this past week, the Ontario Divisional Court rejected the application of the “prudent investment test” to forecast costs under collective bargaining agreements negotiated between a utility and its unionized employees.  

The prudent investment test is a regulatory principle that was first articulated by Justice Brandeis of the United States Supreme Court in the 1923 decision of Southwestern Bell Telephone Co. v. Public Service Commission.  The purpose of the prudent investment test is to protect utility shareholders in respect of past investments in large capital projects that later prove to be unnecessary. Because of the long lead times for constructing infrastructure projects, courts and regulators have ruled that it would be unfair to utility shareholders to assess the prudence of the investment with the benefit of hindsight. Instead, managerial prudence is initially assumed and any subsequent challenges are assessed on the information available to a utility’s management at the time the investment was made.

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Expert panel endorses two new power lines between Edmonton and Calgary

A review panel appointed by the Alberta Conservative government has concluded that it is reasonable for the Alberta government to approve two new high-voltage power lines between Edmonton and Calgary that will cost approximately $3 billion to construct. AltaLink has been selected to build the western line and ATCO Group has been selected to construct the eastern line. The panel also recommended that the Electric Statutes Amendment Act, 2009 be amended to make certain future decisions regarding transmission expansion be sent to the Alberta Utilities Commission for approval, as was the practice until 2009.

Critics of this project argue that this much new infrastructure is not needed at the moment and critics are also concerned about the economic impact this will have on industry and residential customers. Proponents of the project argue that the two lines are needed for reliability and in the case of an emergency. The risk of having the lines completed too late is far greater than having them constructed before they are required. The Alberta Electric System Operator believes the project makes the power grid more efficient and it accommodates long-term growth.

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Drummond on energy

Patrick Duffy and Daniel Suss -

The much hyped Don Drummond Report released Wednesday is an appeal for a more sustainable and rational approach to fiscal policy in Ontario.

Energy features prominently in Drummond’s report. Beyond a general emphasis on maximizing efficiencies across the board, there are specific recommendations regarding the FIT review, energy procurement, and the future of Ontario Power Generation (OPG), Hydro One, and local distribution companies (LDCs). The focus is on sending more efficient price signals to the marketplace to encourage more optimal levels of investment in electricity infrastructure and capitalize on export opportunities for domestic goods and services.
 

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3rd Annual Canadian Power Finance conference: outlook for 2012 and beyond

The 3rd Annual Canadian Power Finance Conference held in Toronto last week brought together a number of executives from some of the leading developers, investors and lenders in the Canadian energy market. Most of the sessions focussed on renewable energy, particularly wind, solar and hydro.

The tone was relatively optimistic for growth for a number of reasons including attractive medium-term renewables targets in provinces like Nova Scotia and Ontario and the need for large amounts of new energy infrastructure across Canada. Members of the developer panel were confident Canadian power purchase agreements will be attractive to lenders and other financing parties in late 2012 and beyond as procurement programs elsewhere in the world slow down. Most panelists anticipate significant consolidation and a lot of M&A activity this year. Still, there were concerns raised about the lower demand for energy and increasing government scrutiny over ratepayers’ costs.

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Positive outlook for Canadian power M&A

The outlook for M&A activity in the Canadian power sector is positive, according to participants in a panel discussion at the Canadian Power Finance Conference on January 25th. Factors cited by the panel, which was moderated by Lewis Smith of Stikeman Elliott's Toronto office, included:

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Ontario amends property tax treatment of renewable energy installation

James Klein and Annie Pyke -

On January 4, 2012, Ontario amended O. Reg. 282/98 under the Assessment Act to provide new rules with respect to the assessment of property taxes on renewable energy installations. These amendments apply to facilities that generate electricity using solar energy, wind energy or anaerobic digestion of organic matter. The amendments differentiate between rooftop and ground solar installations, as well as between entities whose primary business is the generation, transmission or distribution of electricity (corporate power producers) and persons who are not ordinarily in the business of electricity generation (ancillary producers).

For rooftop solar installations the amendments provide that the assessment and tax classification of property will not change due to the addition of a renewable energy installation on the rooftop of a building. For ground-mounted installations, the property tax treatment will depend upon the size and location of the facility as well as who is conducting the generation.  Corporate power producers will be taxed at the industrial rate, regardless of the size of the facility. With respect to ancillary producers, no changes were made with respect to ancillary producers up to 10 kW. Ancillary producers of greater than 10 kW of solar or wind energy will be taxed at the surrounding land use rate for up to 500 kW and then at the industrial rate for the proportion over 500 kW. On-farm anaerobic digesters over 10 kW, which are operated by farmers, will be taxed at the surrounding land use rate regardless of size. These amendments took effect as of January 1, 2011.

Constitutionality of assessments for energy conservation and renewable energy programs upheld

Patrick Duffy and Christopher Yung -

On December 8, 2011 the Ontario Energy Board dismissed a motion by the Consumers Council of Canada (CCC) challenging the constitutionality of the Board’s assessments to recover costs in respect of energy conservation or renewable energy programs.

The assessment is made under the Ontario Energy Board Act, 1998, to recover costs associated with the Home Energy Savings Program and the Ontario Solar Thermal heating Initiative.  It is imposed on licensed electricity distributors and the Independent Electricity System Operator (IESO). In turn, distributors and the IESO pass the assessment onto their customers. 

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Transmission line for renewable energy park approved

Patrick Duffy and Daniel Suss -

Grand Renewable Wind LP (GRW) has received approval from the Ontario Energy Board to construct a new transmission line and associated facilities for the Grand Renewable Energy Park (GREP) located in Haldimand County.  The Board’s approval is subject to GRW obtaining all other necessary approvals, including its Renewable Energy Approval for the GREP, and complying with certain mitigation measures.

GRW’s application was one of first leave to construct applications since the enactment of the Green Energy and Green Economy Act, 2009 and it raised novel issues that the Board has not considered before. Of particular interest in this case was a request from Haldimand County Hydro Incorporated (HCHI) for access to GRW’s transmission facilities so that HCHI could connect a new transformer station for its distribution system. GRW denied that it had an obligation to provide HCHI with access to its transmission facility.

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Ontario Private Member's Bill seeks to amend Green Energy Act

Annie Pyke -

A bill introduced by Todd Smith, MPP for Prince Edward – Hastings, proposes amendments to the Green Energy Act, 2009 (the Act) to allow municipalities to regulate green energy projects through by-laws. The bill, which has been titled the Local Municipality Democracy Act, 2011, would amend the sections of the Act which make by-laws inoperative with respect to designated green energy activities and would provide that by-laws respecting “…health, safety and well-being of persons or respecting public assets of the municipality…” would continue to apply to designated green energy activities. Currently, municipalities participate in the planning process for green energy activities through the Renewable Energy Approval process, which requires municipal and local authority consultation. The bill received its first reading on November 28, 2011 and is expected to receive its second reading on December 1st, 2011. While private members' bills rarely become law in a majority government, the fact that Ontario currently has a minority government may increase the chances of success for private members' bills. 

Ontario Energy Board amends licence for new transmitter

Patrick Duffy -

The Ontario Energy Board has ordered that the transmitter licence for TransCanada Transmission (TCT) be amended to change the effective date to the earlier of: (i) the date on which TCT is designated as a developer of transmission assets in Ontario pursuant to a Board designation process: or (ii) the date on which TCT applies for approval to own and/or operate specific transmission facilities in Ontario.

The order is effectively a reversal of the Board’s earlier decision denying TCT an exemption to certain obligations under the Board’s Affiliate Relationships Code for Electricity Distributors and Transmitters (ARC). TCT was particularly concerned with a requirement in the ARC that prohibited it from sharing employees that have access to confidential customer information with other TransCanada affiliates. TCT argued that this requirement drove-up costs and was unnecessary as newly licenced transmitters do not yet have any customers in Ontario. 

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UK proposes lowering FIT rates

Matthew Cameron -

Announced the same day as the Ontario Power Authority’s review of the Ontario Feed-in Tariff program, the UK Department of Energy and Climate Change (DECC) announced the start of its review of its Feed-in Tariffs scheme (FITs) on October 31, 2011 by releasing a comprehensive review document and requesting responses in respect of its solar PV program.  The review is open for responses until December 23, 2011.

The review document proposes to reduce the prices offered to solar PV generating projects under 250kW commissioned after December 12, 2011 (projects between 250kW and 5MW will continue to be offered 8.5p/kWh, subject to adjustment per the Retail Price Index). Solar PV has led the FITs in terms of volume deployed and has had a substantial increase in the pipeline of potential FITs projects. That, coupled with the dropping cost of solar PV components and the rising cost of energy, has led to returns beyond the 5% originally envisaged which, in the DECC’s view, is not sustainable and thus requires a revised price.

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Ontario Government Announces FIT Review

On October 31, 2011, the Ontario Government announced its first review of the FIT program. The review, which will be led by Deputy Minister Fareed Amin, aims to tackle issues including price reduction, long-term sustainability, job creation, new technologies and local consultation.

Ontarians are invited to participate in the review during the consultation period from October 31, 2011 to December 14, 2011. The OPA will also be holding a webinar tomorrow, November 2, 2011 at 10 a.m. in order to provide additional information.

Any FIT contracts awarded subsequent to today’s announcement will be subject to the new rules and pricing schedule that result from the review. Existing contracts will not be affected. The OPA is offering to refund application fees for those who wish to withdraw their application as a result of today’s announcement.

Shell purchases marine terminal near Kitimat

Royal Dutch Shell PLC (“Shell”) has made a move to enter the competition of exporting Canadian natural gas to Asia by purchasing a marine terminal near Kitimat, British Columbia. Shell currently has partners in South Korea and Japan that are the world’s top liquefied natural gas buyers. This move is part of Shell’s “early stage” work to determine whether to construct a LNG export facility to export Canadian resources to Asia. Shell’s newly purchased site is near land where Apache Corp. and partners are poised to construct a $5 billion-plus export terminal, a project that received a regulatory license last week.

Canadian natural gas companies are suffering from low prices as a result of strong supply from all the recent shale gas discoveries in the United States. Canada’s only export customer for natural gas is the U.S. and these shipments to the U.S. have been halved in recent years. However, prices in Asia are far higher than they are in North America.

Shale gas discoveries in British Columbia’s northeast are massive and the industry is of the view that these discoveries would easily supply exports and domestic consumption. Companies such as Shell believe that this shale gas might be left in the ground if exports to Asia are not opened.

Chris Bentley named Ontario's new Minister of Energy

Daniel Suss -

On October 20, 2011, Dalton McGuinty revealed his new, and slimmed down, cabinet. Chris Bentley, former Attorney General of Ontario, was named Minister of Energy, while Brad Duguid, former Minister of Energy, became Minister of Economic Development and Innovation. The energy portfolio came under much scrutiny during the provincial election and Bentley will now be responsible for running Ontario’s FIT program, as well as the negotiations regarding the natural gas plants originally planned for Mississauga and Oakville. In addition, Bentley will oversee the phase-out of coal power generation in the province, expected by 2014, and will be a key decision-maker with respect to the future of nuclear energy in the province.

Ontario Court ruling an important precedent for wind farm developers

Patrick Duffy -
 
Wind farm developers in Ontario are being threatened with litigation from neighbouring residents who claim property values are suffering because of the perceived health concerns associated with wind turbines.  These claims were recently the subject of an investigation undertaken by the CBC that reported homes near wind farms were selling for less and taking longer to sell than other homes.  The issue has also been raised before the province's Assessment Review Board by property owners seeking to lower their property tax assessments.
 
A recent ruling from the Ontario Court of Appeal in Ellen Smith v. Inco Limited will provide the province's wind developers with  stronger hand in fighting back against such claims.  The claimants in the Inco case alleged that their property values were reduced by nickel contamination that originated from Inco’s refinery in Port Colborne.  They succeeded at trial and Inco was held liable for the tort of nuisance and under strict liability imposed by the rule in Rylands v. Fletcher.   The ruling was notable as the refinery had adhered to the applicable environmental regulations during its operation and the level of nickel contamination did not present a threat to human health or otherwise impact the complainants' ability to use and enjoy their property.  Nonetheless, the trial judge held Inco liable for the loss of property value because the contamination led to a negative public perception about the contaminated land.

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Ministry of Finance proposes property tax amendments for renewables

The Ministry of Finance is proposing amendments to Ontario Regulation 282/98 that will alter the property tax treatment of certain renewable energy installations for the 2011 tax year. A summary of the proposed changes can be found in the table below.

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OPA waives pre-NTP termination rights for FIT contracts

On August 2, 2011, the Ministry of Energy directed the OPA to allow Suppliers under Ontario’s Feed-In Tariff (FIT) program to obtain a waiver of the OPA’s termination rights contemplated in section 2.4(a) of the FIT Contract.

Obtaining a waiver of this termination right is meant to expedite issuance of a Notice to Proceed (NTP) by reducing contractual termination risk and allowing Suppliers to procure financing for equipment orders. 

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IESO approves new data obligations for renewable facilities

Andrew Sullivan -

Beginning November 1, 2011, many wind and solar PV generators will be required to submit real-time meteorological and output data to the IESO.

The market rule amendment is part of IESO plans for renewable integration. As part of this integration, the IESO is seeking to implement centralized forecasting. Instead of providing energy forecasts, renewable facilities will be required to submit real-time, site specific data (“dynamic data”) to the IESO that will be used to produce variable generation forecasts provided by a third-party.

The requirements will apply to all wind and solar facilities connected to the IESO-controlled grid in addition to embedded non-market participants with an installed capacity over 5MW.

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Bruce to Milton Line FIT contracts announced

Yesterday the Ontario Power Authority offered Feed-in Tariff contracts to 19 large scale on-shore wind projects and 6 ground-mount solar projects, totalling nearly 1,046 MW of new renewable energy projects. 750 MW of wind-based contracts were offered in the Bruce Area and the remaining 296 MW were offered in the West of London Area, 27.5 MW for ground-mount solar and 268.4 MW for on-shore wind.

The biggest winner of the contract offers is Boulevard Associates Canada, Inc., with 335 MW offered in the Bruce Area. International Power Canada, Inc. received offers for 198 MW in the West of London Area.

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BNamericas 5th Annual Andean Energy Summit

Calgary partner Stuart Olley will be speaking at the Andean Energy Summit  in Bogota on July 13 and 14. In its 5th year, the Andean Energy Summit will address the financial, regulatory, technological and operational challenges facing oil & gas, electric power and renewable energy operators in the Andes and Central America. For access to a 25% discount (tickets only) on attending the summit, please send an email to sstone@stikeman.com.

Anti-wind turbine crusader's case comes to an end

Patrick Duffy

Ian Hanna, an Ontario anti-wind crusader, has been denied permission to appeal an earlier court decision that dismissed his judicial review application. 

Hanna’s application challenged Ontario Regulation 359/09 that governs renewable energy approvals in Ontario. The Regulation requires a 550 meter distance between wind turbines and noise receptors such as residences.

Hanna argued that there was no scientific basis for the 550 setback. He challenged the regulation on the basis that the Minister of Energy had not followed the necessary process required by Environmental Bill of Rights (EBR). Section 11 of the EBR requires the Minister to consider the Statement of Environmental Values (SEV) when making decisions that might significantly effect the environment. In turn, the SEV requires the Ministry to “use a precautionary, science-based approach in its decision-making”. Hanna argued the Ministry had failed to meet that requirement when it determined the setback distance.

Hanna’s application went before the Ontario Divisional Court and was dismissed in March 2011. The court was satisfied that the Minister complied with the process required by the EBR and SEV. In support of this, the court cited public consultation and a science-based ministerial review using World Health Organization reports and acoustic engineering experts. 

Hanna vowed to fight on and sought leave to appeal the decision to the Ontario Court of Appeal, but on June 20 the court denied his application.

InterSolar Europe in Munich abuzz with German government announcing nuclear exit by 2022

Eric Bremermann -

The international renewable energy and general electricity generation community that gathered at Intersolar Europe from June 8 to 10 was abuzz digesting the news of the German parliament releasing its plan to have the country’s electricity generation fully withdraw from nuclear energy by 2022. I attended the Intersolar Europe and observed optimism among solar industry participants that Germany’s nuclear exit will bring new opportunities in the German solar market. That country’s solar market had begun to lag in recent times due to solar feed-in-tariffs being curtailed. However, as Germany today only relies on roughly twenty percent nuclear power, the German government’s announcement was primarily seen as producing significant new opportunities for development of substitute base load capacity, which is thought will have to come from utility scale offshore wind parks, as well as natural gas fired plants

AESO cuts $1 billion from transmission budget forecast

Alberta Electric Systems Operator (AESO) forecasts the province will spend $13.5 billion in the next decade to keep pace with growth in electricity demand. Within 20 years, Alberta will require 13,000 megawatts of new generation capacity, with much of the growth fuelled by oilsands developments.

However, AESO reduced the province's planned expenditures by $1 billion compared to its 2009 draft budget by eliminating or reducing the scale of certain projects. In the latest forecast, $8.3 billion will be committed towards 50 regional projects serving 200 customer connections. The remaining $5.2 will be directed towards four transmission infrastructure projects outlined in The Electric Statutes Amendment Act, 2009.

As well, earlier plans for two North-to-South high voltage direct current lines between Edmonton and southern Alberta will be scaled down, leaving the option to build up as demand requires. 

Germany's Nuclear Plan: A "bump in the road" or "end of the road"?

Andrew Sullivan -

Angela Merkel’s collation government has pledged to decommission all of Germany’s seventeen nuclear reactors by 2022. This historic announcement comes in the wake of a global reaction to the events in Fukushima, Japan. The crippled reactors have caused many governments to rethink their nuclear strategy.

Before the Fukushima disaster, resurgence in the popularity of nuclear energy had been characterized as “the nuclear renaissance”. The industry had finally recovered from the Chernobyl disaster, over quarter-century before. Around the world, nuclear energy appeared to be a viable solution in the effort to reduce greenhouse gas (GHG) emissions. Globally, 2010 saw fourteen new reactors under construction, compared with three in 2005. That number will assuredly fall this year as governments rein-in their enthusiasm for nuclear energy.

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OPA to offer an additional FIT contracts for Bruce or West of London transmission areas

A new directive by the Ministry of Energy to the Ontario Power Authority will give hope to FIT program applicants in the Bruce and West of London areas. The OPA was instructed on June 3, 2011 to issue contracts for large projects within the Bruce to Milton Transmission project as part of the province’s FIT program. As a result of this directive, over 1,000 MW of renewable energy contacts are to be offered - up to 750 MW in the Bruce transmission area and up to 300 MW in the West of London area.

These new FIT contracts are available to projects already on the FIT Priority Ranking list for the Bruce or West of London transmission areas. The OPA has granted a five business day window for proponents to change connection points (though the project location cannot change). The change of connection window begins on June 6 and closes June 10, 2011 at 5:00 pm.

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Energy Board clarifies Transmitter Designation Process

Patrick Duffy -

In issuing an electricity transmitter licence to Chatham-Kent Transmission Inc. (CKT), the Ontario Energy Board made some important comments that will be of interest to any transmitters seeking to participate in the Board's upcoming transmitter designation process for the East-West Tie.

While the primary purpose of CKT's application was to own and operate a transmission line that will connect a wind generation facility within the Municipality of Chatham-Kent to the grid, CKT also indicated its longer term intention to participate in the Board's transmitter designation process.  A number of intervenors questioned whether CKT had the financial and technical capability to qualify for a full transmitter licence and requested that the licence be limited to the specific facility proposed by CKT.

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Energy Board denies First Nations Intervenor Status

Patrick Duffy -

In case with strong echoes of Rio Tinto Alcan Inc. v. Carrier Sekani Tribal Council, the Ontario Energy Board has recently denied a request from a group of twelve First Nations for intervenor status in a licensing application.

The application seeks licence amendments related to eight hydroelectric generating stations owned by AbitibiBowater. The amendments will facilitate the sale of the generating stations to Bluearth Renewables, which intends to take advantage of incentives for upgrades and expansions offered by the Ontario Power Authority's Hydroelectric Contract Initiative (HCI). The First Nations group requested intervenor status with the intention of exploring the adequacy of the Crown’s consultation efforts with respect to potential infringements of their Aboriginal rights. The group argued that the sale of these facilities to Bluearth would result in increased or expanded hydroelectric generation under the HCI, which would change water levels and flows and impact their ability to harvest wild rice.

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OPA offers 40 new FIT contracts

This morning, the Ontario Power Authority announced contract offers for 40 large scale renewable energy projects under the Feed-In Tariff Program, representing over 872 megawatts of renewable power.

Although only four of the contracts offered are for on-shore wind projects, on-shore wind is the energy source for over 70% of the capacity offered.  Thirty-five solar projects (33 groundmount and two 500kW rooftop) represent over 29% of the capacity. A single water-power project of 500 kW makes up the balance. By region, 49% of the capacity is in the central region, 22% in the east and 28% in Niagara.

The announcement reflects the long anticipated results of the OPA’s transmission and distribution availability tests (so called TAT and DAT). Contract offers for smaller capacity allocation exempt(or CAE) projects are expected to follow over the coming weeks.

The list of contracts offered is available from the OPA FIT website.

Ontario amends Renewable Energy Approvals regulation

The Ontario government has published amendments to the Renewable Energy Approvals Regulation (O. Reg. 359/09) that will take effect on January 1, 2011.  We reported on an earlier version of the proposed amendment in an October blog posting.

The most significant changes in the amended regulation concern noise receptors and setback requirements for wind faculties. As a result of the amendments, the term “overnight accommodation” in the definition of noise receptors will be replaced with a definition of “dwelling” based on the definition in the Building Code. The definition of “dwelling” was also modified by replacing the words “intended to be used” with “capable of being used”.These changes appear to set a higher threshold for what structures qualify as a dwelling.

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Ontario's long term energy supply plan

Lanette Wilkinson

In 2006, the Minister of Energy directed the Ontario Power Authority (the OPA) to develop an Integrated Power System Plan (the IPSP) that focused on creating a sustainable energy supply in the Province over the next twenty years. In 2007, an IPSP was introduced to the Ontario Energy Board (the OEB), but the hearings were subsequently suspended. On November 23, 2010, the Province released a long-term energy supply plan (the Plan) that is intended to address developments in technology, the uptake of renewable energy arising out of the Province’s feed-in tariff program (the FIT Program), and shifts in demographics and the economy since the release of the IPSP in 2007. A proposed supply mix directive based on the Plan has been posted on the Environmental Registry for a forty-five day comment period ending January 7, 2011, after which time the directive will be finalized and issued to the OPA. The OPA is to develop an IPSP to be submitted to the OEB for review. Once finalized, the IPSP will constitute the new system plan for the next 20 years and will be updated every three years as required by regulation. The Plan contemplates the following:

Eliminating Coal by 2014

The Province remains committed to eliminating coal generation by shutting down two units in Nanticoke in 2011 and converting Thunder Bay Generating Station and Atikokan Generating Station to respectively use natural gas and biomass by 2013. The Province is also considering accelerating the closure of the remaining six units of coal-fired generation (at Nantioke and Lambton) and converting these units to natural gas.

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Canadian tax considerations for windpower and solar power projects

John Lorito

The following is a brief summary of the main Canadian federal income tax considerations applicable to windpower and solar power projects in Canada and, in particular, the accelerated capital cost allowance rates for qualifying depreciable property and the Canadian renewable conservation expense regime. 

Accelerated Capital Cost Allowance Rate

“Capital cost allowance” (CCA) is essentially depreciation for Canadian federal income tax purposes. CCA deductions are discretionary and are taken on a declining balance, class-by-class basis. For example, if the capital cost of depreciable property of a particular class is $100 and the CCA rate for the class is 30%, CCA to a maximum of $30 may be claimed in respect of the property in the first year (subject to the half-year rule discussed below). If $20 of CCA is claimed, this amount is deducted from the capital cost to arrive at the “undepreciated capital cost” (UCC) and the 30% rate is applied to this amount to determine the maximum deduction in the following year (in this example, $24). The cost of newly acquired property of the same class is added to the UCC and proceeds from the sale of property in the class (up to the original cost of the property) is deducted from the UCC. If the UCC is negative at the end of a year, the negative amount (known as recapture) is included in computing income in that year.

CCA classes 43.1 and 43.2 of the regulations (the Regulations) under the Income Tax Act (the Act) provide enhanced CCA rates for various renewable asset properties. Certain assets of a qualifying wind energy conversion system or photovoltaic system that are included in class 43.1 will be entitled to an accelerated CCA rate of 30% per year. Such assets that are acquired after February 22, 2005 and before 2020 and that would otherwise be included in Class 43.1 are included in class 43.2, which has a CCA rate of 50%. 

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Ontario release long term energy plan

The Ontario Ministry of Energy has released a Long-Term Energy Plan (LTEP), which is a 20-year plan to guide the province's electricity system. The LTEP forecasts demand growth of 15 percent between 2010 and 2030. Key features of the LTEP include a recommitment to eliminate coal-fired generation by 2014, refurbishment and expansion of nuclear capacity, continuation of FIT and microFIT programs, and the development of a Combined Heat and Power standard offer program for projects under 20 MW. The government will also be proceeding with five priority transmission projects immediately.

As part of the LTEP, the government will be posting a proposed supply mix directive on the Environmental Registry for a 45 day public comment period. Once this process is complete, the directive will be finalized and sent to the OPA and will form the basis for the OPA's new Integrated Power System Plan (IPSP).

Ontario releases new regulations to protect energy consumers

The Ontario Government recently released O. Reg. 389/10, made under the Energy Consumer Protection Act, 2010 (the Act). This regulation will govern the conduct of energy retailers and gas marketers and provides for increased consumer protection. The regulation also contains rules regarding the implementation and use of smart meters by individual units in multi-residential buildings. Both the Act and the regulation come into force on January 1, 2011.  For more information on the Act and regulations please see our post of June 17, 2010.

On a related note, the Ontario Energy Board issued a Revised Notice of Proposal (the Proposal) on October 15, 2010 to revoke and re-issue the Electricity Retailer Code of Conduct and the Code of Conduct for Gas Marketers, and to amend the Gas Distribution Access Rule. The Proposal will implement the consumer protection provisions of the Energy Consumer Protection Act, 2010. Comments on the Proposal are due on October 29, 2010.

Oakville generating station not moving forward

Ontario's Minister of Energy Brad Duguid announced today that the Ontario government has directed the Ontario Power Authority not to proceed with plans to build a highly controversial gas-fired power plant in Oakville.  The government has decided that changes in demand and supply in ontario electricity sector mean the plant is no longer needed and that the needs of the Southwest Greater Toronto Area can be served by investing in a new transmission. 
 
The proponent of the facility, TransCanada, has issued a statement that it will begin discussions with the OPA "where both sides mutually agree to terminate the contract and discuss reasonable payments TransCanada is entitled to."

Ontario Ministry of Environment posts draft amendments to the Renewable Energy Approvals Regulation

The Ontario Ministry of the Environment has posted a draft amend to the Renewable Energy Approvals Regulation (O. Reg. 359/09) to provide clarity with respect to the regulatory requirements that proposed renewable energy projects must satisfy.  The proposal notice and a draft of the regulation can viewed on the Environmental Registry.
 
Perhaps the most notable amendments include changes to the definition of noise receptors and clarification of the noise receptor setback prohibitions for wind facilities. Uncertainty over the proper interpretation of the current requirements has been a concern of the developers of these facilities.   Other changes of note include stronger requirements for mandatory consultations with the public, Aboriginal communities, municipalities and the Niagara Escarpment Commission, and changes to the assessment of protected properties, protected properties, archaeological and heritage resources, and natural heritage assessment and water assessment.

Instructions on FIT NTP

On September 15th, 2010, the Ontario Power Authority released instructions on applying for Notice to Proceed ("NTP") under the Feed-In Tariff Program (the "FIT Program"). The NTP is used to provide confirmation to begin building a project under the FIT Program. The OPA  will issue an NTP when it is reasonably confident that a Project has (i) secured proper financing; (ii) completed all necessary Impact Assessments; (iii) received any applicable environmental and site plan approvals; and (iv) there is sufficient evidence that the Project will be capable of meeting any Domestic Content Level requirements.

Ontario to update LTEP

On September 20th, 2010, the Ontario government began the process of updating the Long-Term Energy Plan (the “LTEP”). The LTEP was first introduced in 2006 and directs the development of new generation and transmission capacity in the Province. The 2006 plan led to the development of approximately 8,000 megawatts of new generation in Ontario. The new LTEP will incorporate the Province’s commitment to shutdown all coal-powered generating stations by 2014. The general public is invited to comment by answering a series of questions regarding demand, price, generation, transmission and conservation,  on the Ministry of Energy website. The government will also conduct more formal consultations with key stakeholders such as utilities, environmental organizations, businesses, First Nations and Métis organizations, and consumer groups.

The end result of this consultation will be the issuance of a new Supply Mix Directive, which will be posted for comment on the Environmental Registry. Once the Minister of Energy finalizes and issues the Supply Mix Directive it will be used by the Ontario Power Authority to inform the development of the Long-Term Energy Plan which will be submitted to the Minister for approval and then submitted to the Ontario Energy Board for review. The Minister anticipates the LTEP will be finally approved in 2011.
 

B.C. seeking input on feed-in tariff

Under B.C.’s Clean Energy Act, the feed-in tariff (“FIT”) program will involve BC Hydro and Power Authority (“BC Hydro”) entering into supply contracts with small-scale electricity providers producing power from clean sources such as biomass, biogas, geothermal heat, hydro, solar, ocean, wind and other prescribed resources.

The B.C. government will seek to pass FIT program regulations by early 2011, and is currently accepting comments regarding its Feed-In Tariff Regulation Consultation Paper released last month.

According to the Consultation Paper, FIT programs are intended to support investment in emerging clean technologies in the earlier stages of commercial deployment, as well as to spur growth in areas of the province that would benefit from greater grid integration and job creation. 

FIT programs will not finance clean power projects, but rather create a marketplace for clean power by offering rates of return of about five to ten per cent. Rates paid to FIT operators are expected to vary depending on the project's size, resource type, location and other factors.

The Consultation Paper states that the B.C. Ministry of Energy, Mines and Petroleum Resources has made the following proposals regarding FIT projects:

  1. To cap the size of FIT projects at five megawatts, meaning that FIT projects will not function as general power procurement tools for BC Hydro;
     
  2. To limit annual spending on all power acquired under FIT projects to $25 million above the cost of acquiring the same volume of electricity through BC Hydro’s Standing Offer Program, a similar BC Hydro initiative to support clean energy but with fixed rates paid to program participants; and
  3. To limit the term of most FIT projects to five years, with the option of securing an Electricity Purchase Agreement with the project at the end of term at the rates under the Standing Offer Program.

The comment period for the Consultation Paper will close September 30, 2010. 

Nova Scotia is presently developing its own FIT program, and Ontario's FIT program (see here, here and here) is entering its second year.

Ontario Power Authority directed to enter into biomass arrangement at Atikokan

The Ontario Power Authority has been directed to enter an agreement to purchase biomass power that will be produced at the Ontario Power Generation’s Atikokan station starting in 2012.

This development is part of the OPA’s 20-year plan that began in 2007, and proposed that the province phase-out coal-based electricity by 2014 and invest approximately $14.6 billion in renewable energy sources. Pursuant to Ontario Environmental Protection Act regulations made under the OPA plan, the Atikokan station is one of several coal facilities that will cease coal-fired steam electricity generation. 

However, unlike the Lambton and Nanticoke stations that will be permanently decommissioned, OPG will convert the Atikokan station to use wood pellets as a biomass fuel source.

Frank Chiarotto, OPG’s Senior Vice-President (Thermal), acknowledged the benefit to the community by converting the Atikokan station, as opposed to shutting its doors.

Atikokan can provide Ontario with a new source of renewable energy and Northwestern Ontario with economic benefits for years to come ... This is good news for OPG, Northwestern Ontario and the province.

OPA posts finalized pricing for ground-mounted solar PV microFIT projects and updates to the FIT Program

Over the last week, the OPA has posted the following amendments and updates to the FIT Program to its website:

  • Price category for ground-mounted solar PV microFIT projects finalized

On August 13, 2010, the OPA announced that it finalized the 64.2 cents per kWh price category for ground-mounted solar PV microFIT projects.  The revised price applies to all microFIT ground-mounted solar applications submitted after 12 p.m. on July 2, 2010.  In addition to changes to the contract price, the OPA has announced that:

(1) commercial aggregators that lease land or rooftops from individuals for multiple renewable energy projects will no longer be able to participate in the microFIT program;

(2) the OPA will be setting up a microFIT advisory panel to provide advice on the evolution of the microFIT program; and

(3) the advisory panel will be charged with making recommendations regarding the appropriate contract provisions that should apply to aggregators (outside the microFIT program).

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OEB denies stay of Green Energy Act assessments

On July 26 the OEB denied a request to stay the Green Energy Act assessments issued under Regulation 66/10.  The request for a stay was made as part of a proceeding before the OEB to determine if the assessments are an unconstitutional indirect tax.  The assessments were the subject of considerable publicity last spring when the C.D. Howe Institute issued a study concluding that the assessments were unconstitutional.  The OEB stated that written reasons for the denial will follow.  A date has not yet been set for a hearing on the merits of the constitutional challenge.

Ontario MNR approves revised onshore windpower policy and procedure

On July 5, 2010 the Ontario Ministry of Natural Resources has approved revisions to its Onshore Windpower Development on Crown Land policy and procedure.

The revisions apply to all onshore Crown land windpower applicants and are part of the MNR’s broader review of Ontario’s Crown land release process applicable to renewable energy projects begun in September 2009.

The aim of the new revisions for onshore wind projects is to eliminate duplication with renewable energy approval processes, provide procedural clarity to applicants currently within the site release process and to align with Ontario’s Green Energy initiative. Revised policy and procedure for offshore windpower projects will follow the government’s broader decision on draft rules regulating off-shore wind turbines proposed by the Ministry of the Environment. The window for new renewable energy applications for Crown land will remain closed until the completion of the phased review.

OPA posts updated FIT contract and rules

The Ontario Power Authority posted Version 1.3.1 of the FIT Contract, FIT Rules, and Standard Definitions on July 2, 2010. A summary of changes of the changes to the FIT Contract, FIT Rules, and Standard Definitions can be found on the OPA's website.  The Ontario Power Authority has also posted a revised Price Schedule to reflect the proposed new pricing for ground-mounted solar PV projects and an updated Program Overview.

FERC wants feedback on electricity storage

The Federal Energy Regulatory Commission (“FERC”) is seeking feedback regarding recent developments in the field of electricity storage.

Electricity storage technologies like rare earth metal batteries, pumped hydro and pre-compressed gas turbines can increase the value of renewable assets, such as solar and wind, by making supply coincide with periods of peak consumer demand. For grid management purposes, electricity storage can also provide “ride-through” during outages, reduce harmonic distortions, and eliminate voltage sags and surges.

FERC is seeking stakeholder input regarding how FERC’s accounting and reporting requirements should account for the capital and operating costs associated with new electricity storage facilities.  FERC is also seeking guidance on the rate-setting treatment for facilities that serve multiple purposes, some in and some outside of FERC’s jurisdiction, as well as the regulatory implications of open-access electricity storage services.

Comments are due July 26, 2010.

Ontario passes new Energy Consumer Protection Act

Patrick Duffy

On April 22, 2010, the Ontario legislature passed Bill 235, which when it comes into force will create a new Energy Consumer Protection Act and amend the Electricity Act, 1998. The principal aim of the legislation is to enhance consumer protection and energy conservation through new rules for gas marketers, electricity retailers, landlords, and condominium developers.

The new legislation sets the framework for increasing the use of smart meters by individual units in multi-residential buildings (referred to as "suite metering"). According to the Minister of Energy and Infrastructure, empirical data indicates that energy consumption drops between 12%-22% when unit owners are responsible for personal power bills. The legislation will enable the government to provide guidance on suite metering, and also addresses concerns related to suite meter companies and tenant rights.

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Prudency review required before deferred revenue can be recovered

Glenn Zacher

In a decision released on June 3, 2010, the Ontario Court of Appeal upheld orders of the Ontario Energy Board and the Divisional Court that deny Great Lakes Power (GLP) recovery of approximately $15 million from its customers because the underlying costs had not been subject to a prudency review.

The appeal related to a portion of GLP's revenue requirement that had been voluntarily deferred between 2002 and 2007 to avoid rate shock to its customers.  The underlying costs did not undergo a full prudency review by the Board because of the "rate freeze" implemented by Bill 210 in 2002.  GLP refused to submit to a prudency review when it sought recovery of these amounts in its 2007 rate application.  GLP argued that the Board had approved the costs in a 2002 interim order and was foreclosed from revisiting those costs by Bill 210.  The Board disagreed with GLP's interpretation of the 2002 interim order and denied recovery in the absence of a prudency review.  The Board's decision was affirmed by the Divisional Court in July 2009. A full description of the case appeared in the August 2009 edition of our Energy Update. 

In affirming the decisions of the Board and Divisional Court, the Court of Appeal ruled that the Board is entitled to deference when interpreting its own orders as that task calls upon the Board's expertise and policy considerations.  Further, the Court agreed that the costs at issue were not approved by the 2002 interim order and could not be recovered in the absence of a prudency review by the Board.  In dismissing GLP's pleas that the result was unfair, the Court noted that GLP was ignoring those parts of Bill 210 that allowed for a prudency review of the deferred amounts and had "made a conscious decision to forego a prudency review" in its 2007 application.

Glenn Zacher and Patrick Duffy represented the Ontario Energy Board before the Divisional Court and the Court of Appeal.

Metering discrepancy first major snag in the roll-out of FIT and microFIT projects

Alison Forbes

As of the end of May, project developers who had previously installed and connected in-series renewable generation projects under the FIT and microFIT programs still do not know the future of their projects.  While the current official position of the Ontario Power Authority (OPA) is that it will continue to work with the necessary regulatory bodies, including the Ontario Energy Board (OEB) and Measurement Canada, and local distribution companies (LDCs) to address systems already connected, the OEB has now directed all LDCs to stop connecting facilities using in-series meters and the OPA FIT and microFIT rules have been amended to prohibit behind-the-meter, in-series facilities.

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Ontario Energy Board clarifies smart sub-metering rights for multi-unit buildings

Glenn Zacher and Patrick G. Duffy

In the past year, the Ontario Energy Board (OEB) has issued two important decisions that provide clarity to condominium developers and landlords in Ontario on their rights to sub-meter individual units in their buildings using smart meters. As discussed below, there is also new legislation concerning smart sub-metering on the horizon that will be of interest to developers and landlords in Ontario.

At the core of this issue are the smart-metering provisions of the Electricity Act, 1998 and the related regulations, in particular Ontario Regulation 442/07. Regulation 442/07 required all new condominium buildings constructed in Ontario after August 1, 2007 to include a smart meter for each unit. Under the regulation, a condominium developer has the choice whether to have individual units metered directly by the local distributor, or to have the distributor provide a bulk interval meter for the building while having individual units sub-metered by an alternate provider. The smart sub-metering provider must be licenced by the OEB and comply with the requirements of the OEB's Smart Sub-Metering Code. Existing condominium buildings are not required to install smart meters for each unit, but can do so at the option of the condominium corporation and also enjoy the right to use the services of a licenced smart sub-metering provider.

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Ontario Court denies distributor recovery of $15 million in deferred costs in absence of a prudency review

Glenn Zacher and Patrick Duffy

The Ontario Divisional Court recently dismissed an appeal by Great Lakes Power Limited (GLP) of a decision of the Ontario Energy Board, in which the Board refused to allow GLP to collect nearly $15 million that GLP voluntarily deferred between 2002 and 2007, but that had never been subject to a prudency review by the Board.

The roots of the appeal stretch back to GLP's 2002 distribution rate application. That application was premised on a forecast revenue requirement of $12.7 million, but to avoid "rate shock," GLP sought to recover only $9.8 million and defer the rest of its revenue requirement for recovery beginning in 2005.   The Board granted an interim order approving GLP's requested rates, but due to the passage of Bill 210 in late 2002, a full hearing was never conducted. Bill 210 deemed interim orders to be final and imposed a rate freeze on distributors.

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Alberta regulator approves formula-based ratemaking

David Wood and Katie Slipp

On March 25, 2009, the Alberta Utilities Commission (AUC) approved an application by ENMAX Power Corporation (EPC) for formula-based ratemaking (FBR) to be applied to EPC's regulated electric distribution and transmission businesses. This is the first time that an FBR plan has been approved for an electric utility in Alberta. Unlike traditional cost-of-service ratemaking, the FBR plan approved by the AUC establishes a formula that provides incentives to EPC to increase its productivity and become more efficient. The formula includes factors for inflation and productivity. The starting point for the FBR plan is EPC's 2006 approved distribution and transmission rates, subject to some adjustments, which were established through the traditional cost-of-service ratemaking process.

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Major utility shareholders must seek approval

Patrick Duffy

Due to a recent Ontario Energy Board ruling, any shareholder holding more than 20% of the shares of an electricity distributor in Ontario must now seek leave from the Board before it can increase its shareholdings in the distributor.

The ruling arose from an application by the Town of Essex (Essex) to acquire all of the outstanding shares of E.L.K. Energy Inc. (ELK). Essex already held 38% of the shares of ELK, which it had acquired as part of a previous amalgamation that was not subject to Board scrutiny. Prior to a hearing on the merits of the application, Essex requested the Board rule that the transaction did not require leave from the Board under subsection 86(2) of the Ontario Energy Board Act, 1998

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Utilities must disclose contemplated corporate reorganizations

Patrick G. Duffy

In a recent decision concerning Union Gas Limited (Union), the Ontario Energy Board (OEB) ruled that a utility has a duty to disclose, as part of its  rate application, any contemplated corporate reorganizations that have a "real prospect" of proceeding, even if the utility's board has not yet granted final approval.

The issue arose in an application to the OEB for approval to transfer a controlling interest in Union to a limited partnership.  The purpose of the transaction was to generate $50 million in tax savings for Union's parent, which in turn would reduce Union's annual revenue requirement by approximately $1.3 million.  As part of the application, Union requested the cost reduction not be factored in to its rates until after the expiry of its Incentive Rate Mechanism Plan (IRM Plan) in 2012.  Under the IRM Plan, which was approved by the OEB in January 2008, Union's rates are set by a formula that is tied to the cost of inflation and a productivity-improvement factor.

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Overview of Electricity Regulation in Canada

Reprinted with permission from the 2007/2008 Lexpert®/CCCA Corporate Counsel Directory and Yearbook, 6th Edition. © Thomson Carswell.

Lou Cusano, David Wood & Glenn Zacher

Electricity restructuring in Canada remains limited to only a few provincial jurisdictions. In those jurisdictions that have introduced private sector reforms, the results have been mixed and the process has been slow.

Alberta's electricity market is the most evolved, and it has stimulated the most private sector investment. No significant regulatory changes have interrupted the evolution of Alberta's market over the past year.

Ontario sought to introduce both wholesale and retail competition in 2002. High prices and other circumstances, however, conspired to bring a quick end to the market. Ontario has since adopted a "hybrid market." The most significant recent regulatory development in Ontario has been the Ontario Power Authority's ("OPA") release of its Supply Mix Advice Report and the provincial government's ensuing Supply Mix Directive. This was the first major step toward the OPA's development of a 20-year Integrated Power System Plan which the OPA aims to file in to file with the Ontario Energy Board ("OEB") in mid to late 2007 and have approved by the OEB the following year.

Some limited progress toward restructuring was made in British Columbia with the creation of the British Columbia Transmission Corp. ("BCTC"), whose mandate is to manage and provide non-discriminatory access to BC Hydro's transmission system. As well, in March 2007, the British Columbia Utilities Commission approved BC Hydro's Integrated Electricity Plan and Long-Term Acquisition Plan.

At the federal level, the last year has seen further progress toward the adoption of North American mandatory reliability standards. There have also been developments concerning the construction of international transmission projects.

 PDF of entire article

Transfer Tax Exemption

The Ontario government has revived the transfer tax exemption for transfers of electricity assets within the public sector. The move is designed to encourage consolidations among municipal electrical utilities. To qualify, the transfer must be made to a municipal corporation, a municipal electricity utility, Hydro One Inc. or Ontario Power Generation Inc. or a subsidiary of either of them, that is exempt from federal income tax under subsection 149 (1) of the Income Tax Act (Canada).

The exemption applies to transfers made after October 16, 2006 where an application for approval is made to the Ontario Energy Board before October 17, 2008 and a written agreement to make the transfer is complete before October 17, 2008 and is not materially changed after that date.

New regulations concerning smart meters

Patrick Duffy

As part of its conservation strategy, the Ontario provincial government has established targets for the installation of 800,000 smart meters by December 31, 2007 and installation of smart meters for all Ontario customers by December 31, 2010. Smart meters record hourly data for every customer and transfer that data to the distributor and a centralized database that will be made available to customers and other interested parties. The aim of the initiative is to provide customers with the incentive and the ability to control their energy costs by moving usage to off-peak periods and reducing energy use during peak periods.

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Clarification of Local Market Power Rules

(MR-295)

The IESO Board approved amendments to clarify the local market power rules. The purpose of the amendments is to clarify that the local market power rules are not a "fault-based" or "punitive" regime whereby participants are penalized for intentionally abusing local market power. Rather, the amendments confirm that the purpose of the rules is to remedy the impacts of local market power by clawing-back congestion management settlement credit (CMSC) payments in cases where local market power exists and has been exercised (albeit unintentionally). To date, IESO staff has made CMSC adjustments (without a financial penalty) where local market power screens have indicated that participants' offer/bid prices were not consistent with their costs, including opportunity costs. The IESO has only considered imposing a financial penalty where there was evidence that a participant had intentionally sought to exercise local market power (although to date no such financial penalties have been imposed). Under the amendments, all references to the term "abuse" in the local market power rules will be removed. As well, the IESO's authority to impose a financial penalty for the intentional exercise of local market power will be removed (it being acknowledged that the investigation of abuse of market power is the responsibility of the Market Surveillance Panel, not the IESO). As such, under the amendment the IESO's authority will be limited to solely making CMSC payment adjustment where local market power has been exercised. In addition to clarifying the intent of the local market power rules, the amendments will also more explicitly identify the conditions and criteria necessary for determining whether local market power exists and whether a CMSC adjustment is warranted.

Links: 

IESO Board Decision
Technical Panel Recommendation on Amendment Proposal
Amendment Proposal R00 Request for Stakeholder Review and Comment
Amendment Submission

OEB Releases Discussion Paper on Transmission Facilities Filing Guidelines

Earlier this year, when the Ontario Energy Board (the OEB) considered Hydro One Networks' application for approval of transmission facility upgrades in the Niagara Peninsula, a debate emerged about the basis upon which the Board should evaluate the costs and benefits of transmission infrastructure investments. Subsequently, the OEB commenced a process to develop filing requirements for transmission infrastructure investments, and on October 14, 2005 Board staff issued a discussion paper presenting a potential test for evaluating transmission investments.

Cost/Benefit Analysis

In its discussion paper, Board staff puts forward a cost/benefit analysis framework that would be used to evaluate and rank transmission investment proposals compared to alternatives, in order to ensure that applicants offer "the most efficient transmission upgrade." Such a framework would include the principle of maximizing prospective total benefits over total costs.

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