Canada: Domestic Content Requirement Audits By The Ontario Power Authority

Last Updated: September 13 2012
Article by Sven Walker

Under the Ontario Power Authority's (OPA) FIT Program, once a solar photovoltaic (PV) power generating facility has reached commercial operation, the Supplier to the OPA will receive payments for its electricity production in accordance with the metering and settlement requirements contained in the FIT Contract. The Supplier may still, however, undergo a random audit by the OPA for the purpose of reviewing whether the solar power generation facility was developed in compliance with the domestic content requirements. The purpose of this article is to provide a high level overview of the OPA's audit process and requirements for solar power generation projects with an installed nameplate capacity in excess of 10 kW that use crystalline silicon PV technology.

Domestic Content Requirements

The domestic content requirements were designed to stimulate job creation in Ontario's renewable energy sector. Suppliers to the OPA are therefore required to ensure that a minimum of 60% of the goods used and services performed in respect of each solar PV project originate from Ontario. The percentage of qualifying domestic content is calculated based on a prescribed list of designated activities set out in Exhibit D of the FIT Contract.

Audit for FIT Contract Compliance with Domestic Content Requirements

According to an annual audit schedule developed for OPA Contract Management, the OPA conducts audits of FIT Contracts for compliance with the minimum required domestic content level (MRDCL) for the solar power generation facility. For the purpose of this audit the Finance Audit Service Team (FAST) of the Ministry of Finance acts as the OPA's representative in reviewing the required documents.

The scope of the audit may involve any aspect and/or requirement defined in the FIT contract and is conducted according to the FIT Contract Section 14.2 and 2.11 (d). Section 2.11 (d) states:

Notwithstanding, Section 2.11 (c), the OPA may, in accordance with Section 14.2 request any additional information or documentation relating to any Designated Activity as having been performed. Where the Supplier fails to provide such information or documentation to the satisfaction of the OPA, acting reasonably, the Domestic Content Level shall be recalculated excluding the applicable Designated Activity.

After receiving an audit notification the Supplier is required to submit to the OPA, usually within 30 business days, all documentation required to demonstrate compliance with the MRDCL. Failing to do so may result in the recalculation of the applicable domestic content level to exclude the applicable designated activity and may put the Supplier at risk for a Supplier Event of Default under the FIT Contract.

Documentation required to demonstrate compliance with your MRDCL

All relevant documentation should be submitted to demonstrate domestic content compliance. The list of documents below represents the kinds of material to be submitted:

Requested Documents (As per Audit Notification)

Domestic Content Report-Solar (PV) Power Projects Greater than 10 kW

Utilizing Crystalline Silicon PV Technology Designated Activity (DA)

Designated Activities (DA)

Requested Documents

Designated Activity 1

  • List of Module model, make, serial numbers (if not already provided) and manufacturing capacity rating(s).
  • Purchase Orders, invoices, and/or delivery/shipment orders between all companies listed in the supply chain of the solar photovoltaic modules used for the Contract Facility.
  • Production orders with ID/batch number and traceability documentation for each step in the manufacturing/supply chain that should include the date/time the product was manufactured
  • Supporting documents not only from the silicon manufacturing facility itself, but also for each step of the supply chain, that outlines how 100 % Ontario refined silicon was maintained throughout the process. Examples of these documentation includes:
    • Service Provider (OEM) reference package documents refer to as "DC Traveler" documents (these travel with purchased modules)
  • Domestic Content Certificates for each company involved in this Supply chain as supplemental supporting documentation (if not already provided).

Designated Activity 2 & 3

  • List of Module model, make, serial numbers (if not already provided) and manufacturing capacity rating(s).
  • Purchase Orders/invoices with serial numbers, OEM spec sheets
  • Shipping records and traceability documents for every step in the supply chain of the solar photovoltaic modules used for the Contract Facility.

Designated Activity 4

  • List of Module model, make, serial numbers (if not already provided) and manufacturing capacity rating(s).
  • Purchase Orders/invoices with serial/material ID numbers, OEM spec sheets
  • Documents that confirm that electrical connections between solar cells and encapsulation of the solar photovoltaic module were performed in Ontario. Examples of other documentation that may be made available include:
  1. Production orders with material ID/batch numbers
  2. Machine reports from the manufacturer that include the date/time the product was manufactured
  3. Invoices, delivery and shipping order records
  4. Technical drawings indicating the details of the making of the connections between solar cells and the encapsulation of the panels in Ontario.

Designated Activity 5

  • Inverter-Purchase Orders/invoices with serial numbers, OEM spec sheets
  • Model, Make, Manufacturer's Capacity rating and serial numbers of all the inverter(s) used in the Contract Facility.
  • Documents ensuring that inverter has been assembled, finally wired and tested in Ontario.
  • Documentation ensuring that the mounting system has been manufactured in compliance with the October 04, 2011 mounting system interpretations posted on the FIT website. Examples of other documentation that may be made available include:
  1. Production orders with material ID/batch numbers
  2. Reports from the manufacturer that include the date/time the inverter was manufactured
  3. Purchase orders, ideally with inverter serial numbers recorded thereon
  4. Delivery and shipping order records
  5. A list or documentation of the materials that are imported versus those made in Ontario, cross-referenced to the relevant interpretation. For example, what products are imported, what products are pre-assembled outside of Ontario, what assembly takes place in Ontario, etc.
  6. UL (i.e., UL 1741) or CSA certificates that outline inverter testing compliance in Ontario.

Designated Activity 6

  • Invoices for all components (Make/Model, as applicable) of the mounting system
  • Documents ensuring that the mounting system has been entirely machined or formed or cast in Ontario. If standard bolts, clamps and screws were used (e.g., ISO, ASME), they may be listed generically.
  • Documentation that evidences applicable bolts, screws, nuts, washers or clamps are standard components
  • Documentation ensuring that the mounting system has been manufactured in compliance with the April 26, 2011 mounting system interpretations posted on the FIT website. Examples of other documentation that should made available include:
  1. Production orders with material serial numbers, as applicable
  2. Machine reports from the manufacturer that include the date/time the product was manufactured
  3. Purchase orders with reference material ID numbers
  4. Invoices, delivery and shipping order records
  5. Technical drawings describing the mounting system manufacturing and assembly in Ontario.

Designated Activity 7

  • Invoices/purchase orders, delivery/shipping records for all wiring and electrical hardware with the name and registered address of the Ontario Supplier clearly indicated
    • Certificate of Articles of Incorporation listing the registered office and/or head office in Ontario
    • If the Ontario Supplier is an individual, the Supplier may include a photocopy of the utility bills sent to the Ontario Supplier's home address or a photocopy of the individual's driver license, as proof of Ontario residency.
    • If the Ontario Supplier is a partnership with at least one partner who is an Ontario Supplier, the Supplier must include proof that a partner is an Ontario Supplier as per the above.
    • Corporate Profile Reports.
  • Wiring and electrical hardware items include but are not limited to:
    • Array DC disconnects
    • AC breaker panel
    • Combiner/switcher boxes
    • Transformers, as applicable
    • Wiring (e.g. PV connection cables)
    • Various electronic fittings
    • Etc.

Designated Activity 8

  • Labour records, on-site construction time sheets, officer's certificates
  • Documents demonstrating the job categories that were included in the hour count. (e.g. this can be as broad as "craft construction labour" or as specific as a individual job responsibility such as lead construction engineer, electrical/mechanical installation, etc). Examples of other documentation that should made available include:
  1. Service purchase orders & on-site labour invoices clearly stating job category and applicable construction hours
  2. Purchase agreements stating onsite labour hours, as applicable.
  • Survey results of the Construction Company where each employee must indicate whether they are Ontario Residents
  • Photocopies of the utility bills sent to an individual's home address or a photocopy of the individual driver's license, as proof of Ontario Residency

Designated Activity 9

  • Consulting hour records, time sheets, officer's certificates
  • Documents that outline all the companies involved in consulting (from start of FIT Application) and that demonstrates the job categories that were included in the hour count. (e.g., environmental studies, design, etc). Examples of other documentation that should made available include:
  1. Service purchase orders, consulting hour invoices clearly stating job category and applicable construction hours
  2. Purchase agreements stating consulting hours, as applicable
  • Survey results of the Consulting Company where each employee must indicate whether they are Ontario Residents
  • Photocopies of the utility bills sent to an individual's home address or a photocopy of the individual driver's license, as proof of Ontario Residency

Further Instructions

The supporting documents, including attachments, should be organized by the designated activities performed in order to separate each designated activity from the rest. The OPA has reserved the right to request further documents not included in this list.

Conclusion

As noted above, the OPA has the right to terminate the FIT Contract if the MRDCL is not met. Although not all Suppliers will be subjected to the OPA's random domestic content compliance audits, prudent Suppliers to the OPA are strongly advised to ensure that the above requirements will be met before commencing the actual development of the solar PV power generating facility. Any agreements with suppliers and other partners should be carefully drafted with a view to ensuring that equipment suppliers and other partners will also comply with the above requirements. Doing so will afford the Supplier with appropriate legal recourse and remedies in the event of a breach.

There has been considerable foreign investment and job creation in Ontario as a result of the introduction of the domestic content requirements. Nevertheless, the question remains how long these protectionist measures will survive to maintain these jobs and investments. The domestic content requirements are currently being challenged at the World Trade Organization ("WTO") by the US, Japan and the European Union on the basis that they are contrary to Canada's free trade obligations under the General Agreement on Tariffs and Trade, 1994. The WTO is expected to rule on this matter in November of 2012 and it is possible that the OPA will be forced to eliminate the domestic content requirements from the FIT Contract in the future. In addition, Mesa Power Group LLC ("Mesa"), a Texas-based wind energy company owned by famous American financier T. Boone Pickens, commenced a similar challenge under the North American Free Trade Agreement ("NAFTA") in July of 2011. Mesa is currently pursing four wind projects in Ontario with the total potential installed capacity of 465 megawatts. Mesa claims that Ontario's FIT Program violates Canada's NAFTA obligations under Article 1106 by giving preferential treatment to certain businesses and requiring Suppliers to buy materials locally.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Sven Walker
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions