Ontario Minister of Energy Brad Duguid issued a directive today requiring the Ontario
Power Authority ("OPA") to offer FIT contract holders the
option of getting a waiver of the OPA's pre-Notice to Proceed
("NTP") termination rights. The directive has the
potential to remove a very significant obstacle to the development
of many projects under the FIT program. It may also help the
Liberal government make good on its green collar job creation
promises in advance of this fall's election.
Under the FIT contract, the OPA is permitted to terminate the
contract unilaterally at any time before the supplier has received
its Notice to Proceed from the OPA. A supplier cannot request a NTP
until it has completed all of the following:
obtained a Renewable Energy Approval;
completed impact assessments with the applicable distributor or
submitted a Domestic Content Plan; and
obtained financing commitments for at least 50% of project
If the OPA exercises its right to terminate pre-NTP, it may
still have to pay damages in respect of certain pre-construction
development costs. However, such damages are expressly capped at a
modest (some would say almost trivial) amount (which varies
depending on project size and renewable fuel).
For many in the industry, particularly those being asked to
finance projects, the OPA's pre-NTP termination rights meant
that a FIT contract was worth only slightly more than the paper its
was written on until a NTP was issued. Because of project
development delays, particularly with respect to the Renewable
Energy Approval process with the MOE and MNR and the impact
assessment process with the utilities, very few project are in a
position to request NTP. Many developers found themselves caught in
a chicken-and-egg scenario where a NTP was required to finance a
project but financing was required to move the project forward
before getting a NTP.
Today's directive will require the OPA to waive its pre-NTP
termination rights, provided that suppliers agree to certain
conditions. Non-Capacity Allocation Exempt
projects will have to submit the waiver, a Domestic
Content Plan and evidence of agreement(s) for the purchase of
Generating Equipment as follows:
the Waiver by October 14, 2011;
a Domestic Content Plan, in the Prescribed Form titled FIT
Contract Form of Domestic Content Plan (Waiver), by October 14,
2011 (wind and solar projects only); and
evidence of agreement(s) for the purchase of Generating
Equipment, in the form of a Statutory Declaration, by November 30,
2011 (wind and solar projects only).
Capacity Allocation Exempt projects must submit
the waiver and a Domestic Content Plan by 5 p.m. December 30, 2011.
Details are available on the FIT website. The OPA will post the necessary
By waiving the pre-NTP termination rights, the OPA will
potentially make it easier for developers to finance projects. Once
projects are financed, developers will be able to place binding
It is likely that the government issued the directive to help
unleash demand for equipment. Recall that the FIT program requires
that solar and wind projects incorporate a substantial percentage
of domestic (i.e., Ontario) content. As a result, many
manufacturers have committed to establishing operations in Ontario.
These manufacturers will create many of the green collar jobs that
the Liberal government promised under the FIT program. In the lead
up to the provincial election, the government has been emphasizing
these new jobs as evidence of the success of the FIT program.
Opposition parties have responded that the job creation numbers are
artificially high, because the represent potential future job, not
actual current jobs. By having the OPA waive its pre-NTP rights,
the government no doubt hopes that local manufacturers start
filling the jobs they have promised to create.
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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