Canada: Developments Regarding Calls For Tenders In Quebec In Wind Energy And Biomass Cogenerated Energy Industries

Copyright 2009, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Energy–Electricity, February 2009

On November 12, 2008, two decrees were published in the Gazette Officielle du Québec enacting two regulations on two separate 250 MW blocks of wind energy, one earmarked for aboriginal projects and the other earmarked for community projects. Two additional decrees relating to the economic, social and environmental concerns communicated to the Régie de l'énergie concerning these two calls for tenders were published on the same date.

On January 14, 2009, a decree was published in the Gazette Officielle du Québec enacting a regulation amending the Regulation respecting energy produced by biomass cogeneration.

REGULATIONS RESPECTING TWO SEPARATE 250 MW BLOCKS OF WIND ENERGY

Hydro-Quebec Distribution is expected to launch the call for tenders no later than February 25, 2009. The wind farms will have to be operational by the following dates: i) 50 MW, no later than December 1, 2012; ii) 100 MW, no later than December 1, 2013; and iii) 100 MW, no later than December 1, 2014. In addition, Hydro-Quebec Distribution has already announced certain wind measurement requirements for the bidders.

On February 9, 2009, Hydro-Quebec Distribution submitted the grid with respect to the weighting of the non-monetary criteria which would apply to both community projects and aboriginal projects for approval to the Régie de l'énergie. It proposes to allot 30 points to the cost of electricity and 70 points for the non-monetary criteria, including: the feasibility of the project, the experience of the bidders, the financial capacity of the bidders, the regional and Quebec additional content, and sustainable development.

To ensure optimal development of the aboriginal and community projects, the regulations provide – in particular, for each of these calls for tenders – a maximum price of 9.5¢/kWh in 2008 dollars indexed to the Consumer Price Index, excluding the costs of transmission and balancing services and supplementary capacity.

Moreover, it is planned that various communities representing a minimum of 30% of the ownership interest in the relevant project will participate. Aboriginal nations – a minimum of 50% of control by the communities or their institutions for the duration of the project is required. Each aboriginal project is limited to a maximum of 25 MW. In addition, each aboriginal nation is limited to an aggregate of 50 MW. Beyond 50 MW, an aboriginal nation could accommodate one or more additional projects, subject to the involvement of at least one other aboriginal nation. Community projects – a minimum of 30% of the control of the project is required. It is not specified, as for aboriginal projects, that this minimum control is required for the duration of the project. Each community project is limited to a maximum of 25 MW and no more than 25 MW may be granted on the territory of a same regional county municipality (RCM).

The definition of "community wind project" remains as set out in the draft Regulation published on May 14, 2008. It should be noted, however, that it is specified that a co-operative – a component included in a local community – must have a majority of its members domiciled in the administrative region where the community project is located. Furthermore, a legally constituted group of individuals – also a component included in a local community – must be held and controlled by members or shareholders, the majority of whom are domiciled in the administrative region where the community project is located.

The requirement that no less than 60% of the total cost of each wind farm, including installation of the wind turbines, be realized in Quebec is maintained. Moreover, at least 30% of the total cost of a wind energy produc-tion equal to 250 MW, excluding installation of the wind turbines, must include manufacturing expenditures or investments incurred in the Matane RCM and in the administrative region of Gaspésie-Îles-de-la-Madeleine. It is specified that preferential treatment will be granted to projects for expenses incurred in the Matane RCM and the administrative region of Gaspésie-Îles-de-la-Madeleine which exceed the above-mentioned thresholds.

The assessment of economic impacts associated with aboriginal projects, shall take into account all stages of a project realization, i.e., the pre-feasability, the feasibility, the call for tender process, permitting and the construction until commissioning of the wind park. It should be noted that the operation, maintenance, dismantling and re-equipment of the wind farm, if necessary, are no longer mentioned for such assessment.

REGULATION AMENDING REGULATION RESPECTING ENERGY PRODUCED BYBIOMASS CO GENERATION

The Regulation respecting energy produced by biomass cogeneration enacted by decree no. 916-2008 dated September 24, 2008 was amended by decree no. 9-2009 dated January 7, 2009 in order to extend the time period granted to the electric power distributor to proceed with a call for tenders.

The Regulation respecting energy produced by biomass cogeneration provides for an energy block produced in Quebec by new biomass cogeneration facilities equal to a total of 125 MW. Aminimum of 75% of biomass is required to be used as fuel by the new facilities for the production of electricity. Article 3 of such Regulation provided that the launching of the call for tenders was to take place no later than January 6, 2009 and the projects resulting from this call for tenders were to be carried out so that deliveries would begin no later than December 1, 2012. The amending Regulation extends the launching date for the call for tenders to before April 15, 2009. The postponement will allow the electric power distributor to, among other things, adequately prepare the tender documentation and maximize the quality of the bids received in connection with such call for tenders.

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.

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