Canada: Ontario Energy Board Seeks Comments On Proposed Transmission System Code Amendments To Address "Enabler Facilities"

Introduction:

In an October 29, 2008 Notice of Proposal to amend the Transmission System Code (the "TSC"), the Ontario Energy Board (the "OEB") has circulated a series of proposed amendments to the TSC that would provide for the establishment and funding of "enabler" lines or facilities – described in the Ontario Power Authority's Integrated Power System Plan (the "IPSP") as dedicated radial transmission lines designed to connect clusters of renewable generation facilities. The IPSP is currently before the OEB, although the IPSP proceeding has been adjourned pending revisions arising out of a September, 2008 directive from the Minister of Energy and Infrastructure. The OEB notes that ten renewable resource clusters are identified in the IPSP, and that for three of these, the IPSP also describes the associated enabler lines.

As discussed below, the OEB is proposing a "Hybrid option", under which enabler facilities would be developed, built, operated and owned by a licensed transmitter. The costs associated with the enabler facilities would be pooled temporarily, and each generator would make a pro-rata capital contribution towards the cost of an enabler facility as and when it became ready to connect. Outstanding costs for any "unsubscribed" portions of an enabler facility would be included in the transmitter's rate base and be recovered from transmission ratepayers.

The OEB's consideration of enabler lines arose as part of the OEB's Transmission Connection Cost Responsibility Review. That process will address both load- and generation-related issues, but OEB staff, in a July 8, 2008 discussion paper, suggested that it would be appropriate to focus attention on enabler facilities. OEB staff suggested that re-examination and modification of the Board's connection cost responsibility policies appears to be warranted only in relation to the connection of clusters of renewable resources that are (a) identified in an approved IPSP and (b) expected to be exploited by multiple proponents.

The connection provisions of the TSC are based in part on the principle that generators should be responsible for the costs of their connections to the transmission system. The issue being addressed by the OEB is one of co-ordination. In its Notice, the OEB discusses the staff findings that:

"...coordination among proponents within a renewable resource cluster will be difficult to achieve if left to the proponents themselves. To paraphrase and extend the Discussion Paper analysis: coordinated action would be required in advance of having secured the necessary agreements with the OPA for supply of the commodity if the transmission facilities are to be developed and built on a timely basis. This is because the lead times for transmission design, development, and construction are considerably longer than they are for generation investments. Multiple proponents who are otherwise unrelated would have to jointly carry out these activities as well as pursue all of the required regulatory approvals well in advance of having secured OPA supply contracts. This would present significant commercial uncertainties for the proponents as any of them that failed to gain an OPA supply contract would find their past investments in transmission development stranded.

On the other hand, if proponents obtained supply contracts before commencing transmission development, they would face significant transmission cost risk as their output price would be determined long before their transmission costs are known. While this risk might be mitigated by means of the OPA building greater flexibility into its supply contracts (for example by having a variable transmission cost component), the Board does not believe that this solution would be optimal as it would result in the transfer (and perhaps magnification) of the risk to the electricity customer."

Put simply, without some means of co-ordination among the proponents in a cluster, transmission connections may not be built in a timely manner because the commercial risk of constructing transmission infrastructure without contracts for the purchase of the generators' output would be too high; if the infrastructure were built in advance but a proponent failed to receive a contract, its investment would be lost; or if the proponents waited until contracts were in place, those contracts may not adequately account for the cost of building the infrastructure.

The Options before the OEB:

The OEB considered four options presented by staff for dealing with the co-ordination issues:

  • The "status quo" option: Generators would remain responsible for the construction and cost of their own connections to the transmission system, including enabler facilities. The OEB noted that while this approach would involve the fewest regulatory steps, there were risks involved including the potential for a consolidated proponent to exercise market power by undersizing the enabler facility.
  • The "pooling" option: Enabler facilities would be developed, built, operated and owned by a licensed transmitter, and all costs associated with the enabler facilities would be included in the transmitter's rate base and be recovered from transmission ratepayers. Generators would pay for their individual connections to an enabler facility. The OEB noted that having the transmitter construct the facilities would address the coordination problem, and allowing the facilities to be placed into the transmitter's rate base would create strong incentives for the transmitter to proceed with the development of enabler facilities. However, the OEB observed that there was a risk of creating an uneven playing field between single generation proponents (who would still be responsible for 100% of their connection costs and would build those into procurement bids to the OPA) and clusters of proponents, who would not be responsible for those costs, and who could price their bids accordingly. The OEB also anticipated additional regulatory proceedings including leave to construct applications and rate applications that would have to take the enabler facilities into account when determining the transmitter's rate base.
  • The "hybrid" option: "Under this option, enabler facilities would be developed, built, operated and owned by a licensed transmitter. The costs associated with the enabler facilities would be pooled temporarily. Each generator would make a pro-rata capital contribution towards the cost of an enabler facility as and when it became ready to connect, calculated as a share of the cost of the enabler facility equal to a generator's capacity (defined as the generator's nameplate capacity) as a share of the capacity of the enabler facility. Outstanding costs for any "unsubscribed" portions of an enabler facility would be included in the transmitter's rate base and be recovered from transmission ratepayers." The OEB observed that this option would allow for a level playing field between single and multiple developers, as each would pay only its share of the connection costs. The OEB contemplated more regulatory steps than under the pooling option, as each developer would be subject to calculations of its proportionate share of the connection costs.
  • The "shared" option: "Under this option, enabler facilities would be developed, built, operated and owned by a licensed transmitter. However, unlike the "hybrid" option, generators that initially connect to the enabler facility would pay capital contributions representing the full cost of the enabler facility. Additional generators that subsequently connect to the enabler facility would also make a capital contribution, which would then be paid as a refund to the generators that connected earlier." The OEB observed that this option would not create the same rate base incentive for transmitters to build the enabler facilities (presumably because the full cost of the facilities would be paid back to the transmitter sooner). The OEB also contemplated additional complexities due to potential windfalls to the generators receiving refunds, where those generators incorporated the full connection costs into their contracts with the OPA. Recovering the windfall could require the renegotiation of OPA contracts.

The OEB recommends the Hybrid Option:

After reviewing the four options, the OEB confirmed its selection of the Hybrid option as the basis for its proposed amendments to the TSC. While transmitters will have the initial responsibility for constructing the enabler facilities, transmission customers will not ultimately bear their costs. When a generator connects its project to the enabler facilities, it will assume its share of the costs of those facilities and they will be taken out of the transmitter's rate base. The OEB "believes that the hybrid option holds the greatest promise in terms of economic efficiency, regulatory predictability and administrative efficiency, and is accordingly the preferred approach." The OEB also reiterated its belief that "maintaining generator cost responsibility is appropriate for all generation connections, including enabler facilities associated with renewable resource clusters."

The proposed amendments to the TSC define enabler facilities and renewable resource clusters, and establish the requirements related to cost recovery by transmitters with respect to the construction of the enabler facilities, including the timing of contributions by generators whose projects form part of renewable resource clusters and the posting of security deposits by those generators.

Opportunity to comment on proposed amendments:

The OEB's Notice is available on the OEB's web site, at:

http://www.oeb.gov.on.ca/OEB/_Documents/EB-2008-0003/Notice_of_Proposed_Amendments_APPX_20081029.pdf

The Notice invites interested parties to comment on the proposed amendments to the TSC by December 1, 2008. We would be pleased to discuss these proposed amendments with you.

About BLG

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
 
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