Lawyers in Canada: Davis LLP - Legal Advisors Since 1892

BC Hydro Releases Q&A on First Nations Consulation with Respect to Power Calls

On November 18, 2009 BC Hydro released Questions and Answers (Q&A) on its website regarding BC Hydro's role with respect to First Nations consultation. The Q&A stems from uncertainty in the nature and scope of consultation required as a result of BC Court of Appeal decisions in Carrier Sekani Tribal Council v. British Columbia Utilities Commission, (2009 BCCA 67) and Kwikwetlem First Nation v. British Columbia Utilities Commission (2009 BCCA 68).

The Q&A is directed to Independent Power Producers (IPPs) to "help in understanding BC Hydro's role regarding First Nations consultation for current and future power acquisition activities."

In the Q&A, BC Hydro describes a shift in assessing IPPs consultations with First Nations, from a risk assessment standpoint in evaluating IPPs proposals (ie. will consultations affect securing of land tenure), to adequacy of consultations prior to submissions of Electricity Purchase Agreements (EPA) to the BCUC under section 71 of the Utilities Commission Act.

One question begging to be answered from this is: how will this affect IPPs in the Clean Power Call, the Bioenergy Call, or future power calls? For the current Clean Power Call, BC Hydro's response is that "further information or action may be required from or by those proponents to enable BC Hydro to complete that assessment."

For the Bioenergy Call Phase II, since the call is in its early stages, BC Hydro intends to incorporate new requirements with respect to First Nations consultation into call documents and timelines, and will update the website accordingly.

For the Standing Offer Program (ongoing acquisition process for projects up to 10 megawatts), this program requires proponents to apply with permits already in place, but BC Hydro notes that it will still assess the adequacy of consultation before offering an EPA to an applicant.

For future power calls, it appears as though BC Hydro will build in this new assessment approach into each call. When assessing the adequacy of consultation, BC Hydro will "seek to identify what, if any, other agencies have already assessed the adequacy of consultation", and this evidence may satisfy their requirements, or they may require "additional evidence to support an IPP proposal".

The factors BC Hydro will consider when assessing First Nations consultation may include:

• Information on how the IPP determined which First Nations to consult.
• Information on the potential degree of impact from a project on aboriginal rights and title, and information on how this assessment was reached.
• Information on the level of consultation and potential avoidance, mitigation or accommodation required for each impact and how this was, or will, be undertaken by the IPP as evidenced by consultation reports, logs, impact benefit agreements, letters of support, correspondence and any other material submitted demonstrating consultation.

What is clear from this Q&A is that the BC Hydro has recognized that the ground rules with respect to First Nations consultation have changed as a result of the Carrier Sekani and Kwikwetlem cases and they are attempting to respond to this in a way that addresses this issue with respect to current power calls and future power calls, to provide some level of clarity for IPP proponents, First Nations and other interested stakeholders.

BC's Northwest Transmission Line Project to receive up to $130 million under the Green Infrastructure Fund

Almost one year ago, British Columbia Premier Gordon Campbell announced that the Province would start the environmental assessment process and First Nations consultation on the Northwest Transmission Line, which consists of a 287 kV line which would extend 335 kilometres into the Northwest portion of the province from Terrace to Meziadin Junction and north to Bob Quinn Lake.

The estimated $404 million project which is expected to be ready for construction in early 2010 has been given a serious boost as a result of yesterday's announcement by the federal government that it has been selected as a priority for funding of up to $130 million under the Green Infrastructure Fund, conditional upon the signing of a contribution agreement with the British Columbia government under the fund.

The Northwest Transmission Line will provide multiple benefits:

As the area surrounding the project has a significant potential to generate green power, local communities will be able to access clean electricity in the future, reducing their reliance on diesel generation and resulting greenhouse gas emissions. There is currently an estimated 2,000 MW of renewable energy in the area from small hydro, geothermal, wind and biomass sources and the project could immediately serve a number of potential generation projects representing approximately 500 MW being considered under British Columbia's current Clean Power Call.

The project also provides access to the electricity grid for potential customers, which in turn will support and promote economic diversification in the area. According to the Mining Association of BC, the project has the potential to attract $15 billion in new capital investments and create almost 11,000 jobs.

Lastly, construction of the transmission line will be a key step in a potential interconnection between southeast Alaska and the North American transmission grid via British Columbia.

Davis Helps Bring Bioenergy to BC's Power Grid

Davis client, Canfor Pulp Limited Partnership, was one of four biomass projects chosen by BC Hydro to add electricity to BC's power grid. The four projects will burn wood waste to generate year-round electricity, providing carbon neutral fuel for 52, 000 homes. Canfor is expected to begin contributing power to the province soon. Davis lawyers Brian Hiebert and Will Todd acted for Canfor.

To read the Vancouver Sun article on this subject, please click here.

BC Hydro "clarifies" the Clean Power Call target

Clean Power Call bidders and clean power supporters in BC will be relieved to learn that BC Hydro appears to have softened its position with respect to the lower acquisition target of 3,000 GWh per year it announced at the end of last year. In a letter to the BC Utilities Commission dated January 12, 2009, BC Hydro suggested that it may be willing to award EPAs "up to or greater than the original target of 5,000 GWh per year if the EPAs are cost-effective."

Recall that in late December, BC Hydro asked the BCUC for permission to claw back its Clean Power Call target from 5,000 GWh to 3,000 GWh (see this related posting). No doubt this request was received poorly by the independent power producers who had submitted bids based on the original target.

BC Hydro offered the following explanation for its latest change of position:

""The Evidentiary Update includes a load forecast which projects future electricity needs in British Columbia within a large range of outcomes. Even this large range may not necessarily capture all of the uncertainties inherent in possible future demand for electricity. These uncertainties include those associated with the recovery of the economy which is related to world economic events, as well as opportunities created by British Columbia initiatives. Further uncertainties and opportunities result from the potential future demand created by the transformation to a low carbon economy, a British Columbia initiative as well as a world-wide trend. These further uncertainties and opportunities include the switching from other fuels to electricity for personal transportation, mass transit, heating and other applications. As a result of all of these uncertainties and opportunities, and the 2007 Energy Plan's goal to achieve electricity self-sufficiency by 2016, BC Hydro does not want to limit its opportunities to acquire cost-effective renewable power through competitive processes with independent power producers.""

OPA changes the procurement landscape for renewable developers in Ontario

Ontario's Renewable Energy Standard Offer Program (RESOP) may be a victim of its own success. Under the RESOP, the Ontario Power Authority (OPA) expected to contract for 1,000 MW of renewable power over 10 years. After just over 1 year, it has contracted for 1,300 MW. OPA has decided it would be "prudent to review the program to ensure continued success moving forward." As part of its review, OPA announced changes to the RESOP on May 13 that will make it much harder for larger developers to participate in the program. Larger developers can take some comfort in the OPA's concurrent announcement of a new call for 600 MW of renewable power. However a shortage of transmission capacity will continue to be a challenge for both RESOP and RFP participants.

OPA announced 3 major changes to the RESOP:

• Each project proponent will be limited to no more than 10 MW of projects per Transformer Station;


• Each project proponent will be limited to no more than 50 MW of projects in development (i.e., pre-commercial operation) per resource type at any one time; and


• Projects will now be required to meet specific pre-commercial operation milestones to remain eligible for the RESOP

The changes will be most significant for project proponents who are attempting to develop more than 10 MW of generating capacity under the RESOP. For example, by virtue of the first change, a project proponent would no longer be able to build a wind farm with a nameplate capacity of 20 MW by obtaining two 10 MW RESOP contracts. Similarly, by virtue of the second change, a project proponent with six 10 MW project under development would not be able to obtain a RESOP contract for the sixth project until the first reached commercial operation. The effect of the changes will therefore be to push larger developers out of the RESOP, leaving the program available for small and community-based developers.

However, larger developers will still be able to participate in OPA's non-RESOP calls for power, including Renewable Energy Supply III (RES III) , a new 600 MW call for renewable power. OPA is also "moving forward" on several other renewable and clean energy supply procurements, including:

• Combined Heat and Power II (CHP II)


• Renewable Combined Heat and Power (CHP III)


• Northern Hydro Initiative (NHI)


• Clean Energy Standard Offer Program (CESOP)

All RESOP applications received after May 12 will be processed under the new rules. However, exactly how the changes described above will be implemented remains to be seen. For example, can a parent company circumvent the 50 MW limit by incorporating a number of companies to develop projects at the same time? What level of ownership of a project company is required to be considered a "project proponent"? Can a lender that takes a security interest in multiple projects be caught if it ultimately needs to exercise its security rights against several projects? The OPA has responded to many questions such as these by saying that the details of the changes will be addressed in stakeholder consultation and technical sessions.

These stakeholder consultations and technical sessions are already in progress. The OPA will hold three technical meetings in before the end of June. Draft revised rules and a draft update of the RESOP contract are scheduled to be released on the week of July 14. After some additional online questions and answers, OPA hopes to release the finalized rules and contract in the week of August 4.

The changes to the rules do not tell the full story. Part of the impetus for the change is the quickly diminishing supply of available transmission capacity in the province. When announcing the changes to the RESOP, OPA included a map illustrating bulk transmission capability for 2008 procurements (see page 24 of the Renewable and Clean Energy Supply Procurement Update). There is limited or no capacity in all of Northern Ontario, most of Southwestern Ontario (all the way up to the Bruce Peninsula), and in the part of Eastern Ontario closest to the Quebec border. Planned transmission upgrades will improve the situation in Southwestern Ontario, but not in the other two regions. It is unlikely that OPA will issue additional RESOP contracts in any of these regions until new transmission infrastructure is built. Transmission capacity will also be an issue for developers choosing to respond to the RES III RFP, which expressly addresses transmission constraints (see appendices P and Q of the draft RES III RFP released June 5).

BC launches Standard Offer Program for clean power projects between 0.05 and 10MW

Posted by Andrew Lord

BC continues to deliver on the BC Energy Plan: A Vision for Clean Energy Leadership. On April 11, BC Hydro launched a Standard Offer Program (the "BC SOP"). The BC SOP is intended to complement BC's traditional power tender process by giving smaller developers a streamlined way to sell power to BC Hydro.

The BC SOP sets out several eligibility requirements, including but not limited to the following:

• The project must be located in BC;
• It must have a nameplate capacity between 0.05 and 10 MW;
• The energy generated by the project must be clean, renewable or high efficiency co-generation;
• Only proven generation technologies are eligible (but nuclear is excluded). Proven generation technologies must meet specific criteria in the SOP Rules, particularly that the technology has been used in at least three plants, each for at least three years, to a standard of reliability generally required by Good Utility Practice (as defined in the Standard Form Electricity Purchase Agreement);
• All prescribed permits must be obtained before an application is submitted;
• The developer must have rights to use the proposed project site and that site must be appropriately zoned; and
• The project must also be able to interconnect to the grid. However, a formal interconnection study is not required until the project has been pre-screened by BC Hydro.

For developers, a key feature of the BC SOP is that BC Hydro will enter into a long term power purchase agreement. The proposed Standard Form Electricity Purchase Agreement gives developers the option of selecting a term of anywhere from 20 to 40 years (in whole years).

The pricing mechanism in the BC SOP is significantly different from that in Ontario's Standard Offer Program. In Ontario, the price per kilowatt hour depends on the type of generation technology used. For example, wind power fetches $0.11/kWh whereas photovoltaic power commands $0.42/kWh. Under BC's program, the price will not vary by generating technology. Instead, the price will be based on the following:

1. A base price that will depend on where in the province the power will be delivered to BC Hydro. The base prices listed in the SOP Rules currently range from $0.06994/kWh in Peace Region to $0.08423/kWh on Vancouver Island;


2. A CPI escalation of the base price up to the year when the Electricity Purchase Agreement is signed;


3. A time of day and month price adjustment. The adjustments currently range from a factor of 126% for Heavy Load Hours in February to 72% for Light Load Hours in July; and


4. The price of Environmental Attributes (if applicable). Currently, that price is set at $0.0310/kWh (to be CPI-adjusted) for any project that receives an Environmental Certification and delivers power to BC Hydro. The adjustment in point (3) will not be applied to the price of Environmental Attributes.

The price paid for Environmental Attributes reflects the fact that the Standard Form Electricity Purchase Agreement provides that the developer must assign all rights to Environmental Attributes to BC Hydro. This provision means that developers cannot sell the Environmental Attributes to other market players as part of voluntary carbon offsets, BC Emissions Reductions Units (under BC's proposed cap-and-trade law), renewable energy certificates (RECs), or other instruments that are based on Environmental Attributes. The provision may therefore limit a developer's flexibility in obtaining carbon financing for their project. However, the approval process under the BC Standard Offer Program provides developers with an opportunity to request changes to the Standard Form Electricity Purchase Agreement. Some developers may attempt to negotiate out of the Environmental Attributes assignment clause.

The SOP also provides for some cost-sharing. The developer is responsible for certain interconnection costs while BC Hydro will bear the costs of certain network upgrades.

For more information about the BC SOP, refer to the Standing Offer Program Rules and the Standard Form Electricity Purchase Agreement.

BC Hydro Announces 2007 Bioenergy RFEOI

In the first step towards a Bioenergy Call for Power, BC Hydro announced today that it is conducting a request for expressions of interest ("RFEOI") with regards to the use of wood fibre as a fuel source for power production in BC.  Although not a requirement for submitting an eventual bid, the RFEOI process does feed into the formation and drafting of the eventual call for power.  Now is the time to highlight concerns and interests.  

Interested parties can submit a RFEOI form which outlines a very high level business plan for producing Bioenergy.  This form asks interested parties to describe the company that would bid into the process, its major investors and to list some potential fuel sources.  These three issues alone of course raise a number legal issues regarding the appropriate corporate structure to use, efficient tax planning, contracting with fuel suppliers, whether or not an enviornmental assessment is required, what other permits are required, whether to look for private equity funding or to seek debt financing and whether to build a new plant or expand an existing one - which of course leads to more legal issues and so forth.  Although BC Hydro and the Minister of Forests have compiled information on Pine Beetle wood fuel supplies , they are not offering any advice on the above issues. 

The deadline for submission of RFEOI's is the 17th of April, and there will be an information session in Prince George, BC on the April 3rd.  In the meantime, there are a lot of issues to start considering.