Municipalities And The Green Energy Act: Benefits, Burdens And The Loss Of Power

Article by Paul Manning¹ and Joanna Vince²

TABLE OF CONTENTS

1 INTRODUCTION

2 PLANNING POWERS.

3. GENERATION

4 LOCAL DISTRIBUTION COMPANIES

5 CONSERVATION AND DEMAND MANAGEMENT PLANS

6 CONCLUSION

MUNICIPALITIES AND THE GREEN ENERGY ACT: BENEFITS, BURDENS, AND THE LOSS OF POWER

1 INTRODUCTION

On May 14, 2009, the Government of Ontario passed the Green Energy and Green Economy Act (GEGEA).³ The GEGEA enacts the Green Energy Act and amends over 16 other Acts. At the time of writing,⁴ none of the amendments discussed in this paper have been proclaimed in force. The stated purpose of the GEGEA is to "green" Ontario's energy sector through increased energy conservation and renewable energy generation.

The GEGEA will have important implications for municipalities across the province, as governing bodies, electricity generators and electricity consumers. The GEGEA removes municipal planning powers over the development of renewable energy generation facilities, requires municipalities to prepare and implement conservation and demand management (CDM) plans and permits municipalities to generate up to 10MW of renewable electricity.

This paper will consider each of these changes and the implications of the GEGEA for local distribution companies (LDCs), largely owned by municipalities.

2 PLANNING POWERS

The GEGEA introduces significant changes to municipal planning powers.

2.1 MUNICIPAL PLANNING POWERS TO DATE

Renewable energy generators consider a municipality to be "the key review and approval body for the construction"⁵ of a renewable energy generation project because of the powers granted to municipalities under the Planning Act. Through the Planning Act, municipalities have the power to enact Official Plans and zoning by-laws to determine local planning policy and to restrict the use of land respectively.⁶

Renewable energy generation projects frequently require an application to the municipality to amend either or both the Official Plan and zoning by-laws.⁷ If a municipality decides the installation of a renewable energy generation project would not be consistent with good planning, it can refuse the application or impose conditions upon an approval. A refusal or the imposition of onerous conditions confronts a proponent with a potentially lengthy and costly appeal to the Ontario Municipal Board (OMB). Even an approval may result in a third party appeal against that approval to the OMB. In each case cost and delay will be a powerful deterrent to the project.

Because of the vulnerability of local politicians to local public opinion, detractors view municipal planning powers among the main weapons in the arsenal of NIMBY opponents to renewable energy projects in their neighbourhood.

2.2 CHANGES UNDER THE GEGEA

The GEGEA endeavours to streamline the approvals process for renewable energy projects by

• exempting them from environmental assessment requirements under the Environmental Assessment Act
• consolidating approvals under the Environmental Protection Act into a single "Renewable Energy Approval"
• curtailing municipal powers under the Planning Act.

The GEGEA amends the Planning Act to create a number of exemptions for renewable energy generation facilities. These exemptions include altering subsections 50(3) and 50(5) to ensure subdivision and part lot control restrictions do not apply to renewable energy project leases between 21 and 50 years. Most significantly, the GEGEA creates a new section in the Planning Act, section 62.0.2, which exempts renewable energy generation projects from numerous sections of the Planning Act, including those dealing with official plans,⁸ zoning by-laws,⁹ demolition control areas,¹⁰ and development permit systems.¹¹

The exemption of renewable energy generation projects from these sections means that municipalities have lost all of their powers to block, alter or control renewable energy generation projects. The public has not only lost a powerful forum in which to express concern and to influence development, it has also lost its third party right of appeal against a planning approval for a renewable energy project to the OMB under s. 34(19).

The GEGEA replaces the third party right of appeal to the OMB with a limited right of appeal to the Environmental Review Tribunal (ERT) against the grant of a Renewable Energy Approval.

A municipality or other appellant will have 15 days from the date of the decision to file an appeal. A hearing can only be requested on the grounds that the renewable energy project will cause "serious harm to human health or serious and irreversible harm to plant life, animal life or the natural environment."¹² The ERT will only be able to review the Renewable Energy Approval on these grounds. The burden is on the person requesting the hearing to prove the harm alleged.¹³ This is an onerous burden that may be difficult for an appellant to meet.

While the GEGEA removes the powers of a municipality at the planning stage, there is still an opportunity, although a diminished one, for municipal participation in the approvals process of renewable energy generation projects. Consultation between the project proponent and the municipality will be one of the requirements for a Renewable Energy Approval. ¹⁴

During this consultation, the proponent must obtain from the municipality information required by the Ministry of the Environment (MOE), such as location of water works, sanitary sewers and gas/hydro. It is unclear at the time of writing if the municipality will be legally obliged to provide this information to the proponent. If the municipality raises any concerns with the proponent about the project, the proponent must explain to the MOE how it has addressed or will address the municipality's concerns. It is proposed that some facilities will be exempt from municipal consultation. These facilities include wind power greater than 3 kW with a sound power rating less than 102 dBA, solar greater than 10 kW and farm-based biogas and biomass combustion.¹⁵

The combination of these proposed changes will, in essence, upload the planning responsibilities and processes for renewable energy projects from the municipality to the province. The result will be a loss of power for municipalities, who will lose the ability to control energy generation projects within their borders. Municipalities are left with a single consultation and a narrow right of appeal to the ERT.

3 GENERATION

The GEGEA amends the Electricity Act to allow a municipality to generate up to 10 MW using a renewable energy generation facility. Previously, municipalities could only generate electricity using an independent corporation.¹⁶ The overhead cost of doing this restricted energy generation to Ontario's largest municipalities.

The ability to generate electricity from renewable sources without the creation of an independent corporation will allow municipalities to increase their revenue through participation in the Ontario Power Authority's (OPA) Feed-in Tariff (FIT) program and selling electricity onto the grid. Alternatively, municipalities may decide to use the electricity generated to power their own facilities (particularly when considering the 10 MW limit). This will allow municipalities to "green" their operations,¹⁷ decrease energy expenditures, and shield themselves from increasing and unpredictable fuel prices.¹⁸

The ability to self-generate is particularly important when considering that municipalities are the second largest electricity consuming sector in Ontario, second only to the pulp and paper sector. In total, municipalities consume 6.6 billion kWh of electricity per year. This results in a large monetary expenditure on electricity each year of over $680 million. ¹⁹ Self-generating electricity can reduce this monetary expenditure and free up much needed funds for use elsewhere in the municipality's budget.

3.1 WHAT IS A RENEWABLE ENERGY GENERATION PROJECT?

As a generator, the municipality will be looking to take advantage of the streamlined approvals regime introduced by the GEGEA for renewable energy projects. The definition of "renewable energy generation facility", at the time of writing, remains to be fleshed out by regulation. As potential generators, municipalities will be particularly interested in the application of this definition to landfill gas and energy from waste (EFW) energy generation projects.

At the time of writing, the proposed content for Renewable Energy Approvals includes landfill gas capture as a renewable energy technology. The OPA's draft FIT program includes a special rate for landfill gas capture.

EFW is not treated as a renewable energy technology in the proposed Renewable Energy Approval Regulation and is not included in the draft FIT program. EFW consequently will not have the benefit of the streamlined approval process and must comply with the existing approvals and assessment regime. It remains to be seen whether EFW will be accommodated in future iterations of regulations under the GEGEA and the FIT.

3.2 OTHER INCENTIVES FOR MUNICIPAL PARTICIPATION IN ENERGY GENERATION

The GEGEA amends the Electricity Act to allow the Minister of Energy and Infrastructure to direct the OPA to provide programs or funding for the participation of municipalities in the development of renewable energy generation projects.²⁰ To date the Minister has not directed the OPA to provide programs under this provision.

The OPA's FIT Program provides an increased FIT rate for projects with community participation. The term "community group" was initially defined to include municipalities. Community participation in a renewable energy generation project required the community group to be equity owners in the project. This would have allowed municipalities to partner with established renewable energy generation companies to produce renewable energy and receive a higher FIT rate. In the latest draft of the FIT Program, released July 10, 2009, the definition for community group has been removed and at the time of writing is "under development". It is unclear if the term community group will continue to be defined to include municipalities.

4 LOCAL DISTRIBUTION COMPANIES The vast majority of LDCs are owned by municipalities. LDCs will gain similar benefits and burdens under the GEGEA as their municipal owners. The GEGEA allows LDCs to generate electricity from renewable energy sources up to 10 MW. While this only enables LDCs to generate renewable electricity on a small scale, it allows LDCs to provide a "green" product to their consumers.

The GEGEA gives the government the power to make regulations governing the implementation of Ontario's "smart grid". Smart grids allow for electrons and information to flow in two directions, in theory allowing for greater control over and efficiency in electricity supply and demand. The actual responsibilities for each party in the implementation of a smart grid have, at the time of writing, yet to be determined. It is suggested that LDCs will have a significant responsibility in the implementation of a smart grid in Ontario. These responsibilities will be clarified by a Directive from the province to the Ontario Energy Board.²¹

LDCs will also be subject to the potential burden of developing a conservation and demand management (CDM) plan, discussed in the following section.

5 CONSERVATION AND DEMAND MANAGEMENT PLANS

As part of an initiative to conserve energy, the Green Energy Act, enacted under the GEGEA, gives the province the power to create regulations requiring public agencies, including municipalities, to develop a CDM plan.²² At the time of writing, no regulations mandating the development of CDM plans have been released.

The regulations can specify the time period to be covered by the plan. The regulations can also require that the plan is filed with the Ministry of Energy and Infrastructure.²³ If CDM plans are required, they will have to include:

Additional requirements may be prescribed by regulation.

Perhaps of greater concern are two other provisions of the Green Energy Act: the requirement to implement the CDM plan and the ability of the province to require municipalities to meet prescribed conservation and demand management targets and standards.²⁵

Though no regulations prescribing targets have been released at the time of writing, such requirements will create a heavy burden on municipalities. Many municipalities will not have the financial resources to implement conservation or other measures to meet set targets. Additionally, the legal obligation to reduce emissions removes municipalities' right to claim emissions credits under most emissions trading systems and so eliminates a potentially valuable additional source of funding. ²⁶

6 CONCLUSION

Through the GEGEA, the province abrogates to itself municipal powers in relation to renewable energy projects. Protagonists will applaud the facilitation of green energy. Opponents will criticize the loss of an adequate forum for the public voice. It remains to be seen whether legal innovation will find alternative forums for that voice to be heard.

The conservation requirements under the GEGEA will be burdensome to municipalities and LDCs. However, if the province can be persuaded to provide or facilitate "pump priming" finance, the savings to municipalities and LDCs may, in due course, result in both environmental and economic benefits, especially where a municipality or LDC is also able to take advantage of their new generation powers under the GEGEA.

© 2009.

Footnotes

^{1 Paul Manning is a Partner at Willms & Shier Environmental Lawyers LLP.}

^{2 Joanna Vince is a J.D. student at the University of Toronto Faculty of Law and an articling student designate at Willms & Shier Environmental Lawyers LLP.}

^{3 S.O. 2009 c. 12.}

^{4 August 7, 2009.}

^{5 Canadian Wind Energy Association, "Overview for Municipalities of the Review and Approvals Required for Wind Farms in Ontario" online: CANWEA http://www.canwea.ca/images/uploads/File/Wind_Energy_Policy/Municipal_Policy/Rural_Municipalities_Re view_and_Approval_Processes_-_Final.pdf.}

^{6 Planning Act, R.S.O. 1990, c. P.13, sections 17 and 34.}

^{7 Canadian Wind Energy Association, supra note 5.}

^{8 Planning Act, supra note 6 at section 24.}

^{9 Ibid., Part V, City of Toronto Act, s. 113.}

^{10 Ibid., section 33.}

^{11 Ibid., section 70.2, City of Toronto Act, s. 114.}

^{12 GEGEA, Schedule G, Environmental Protection Act, section 142.1.}

^{13 Ibid., section 145.2.1.}

^{14 MOE, "Proposed Content for the Renewable Energy Approval Regulation under the Environmental Protection Act" (June 9, 2009), page 6 online: EBR Registry, http://www.ene.gov.on.ca/envision/env_reg/er/documents/2009/010-6516.pdf.}

^{15 Ibid.}

^{16 GEGEA, Schedule B, Electricity Act, s. 144.}

^{17 See comments of George Smitherman, Hansard, 2009/05/11, Session 39:1.}

^{18 Association of Municipalities of Ontario, "AMO Written Submission to the Standing Committee on General Government" (16 April 2009) at page 3}

^{19 Power Application Group Inc for the Independent Electricity System Operator, "Ontario Municipalities: An Electricity Profile" (January 25, 2008), page 2.}

^{20 GEGEA, Schedule B, Electricity Act, s. 25.32 (4.6).}

^{21 Charlie Macaluso, "Ontario's New Green Energy Legislation Enables Clean, Renewable Energy, Conservation, and Development of a Smart Grid" page 2, online: Electricity Distributors Association https://www.edaon. ca/eda/edaweb.nsf/0/99E36F690B895FE3852575D6006548EB/$FILE/Metering_Intl_June09_EDA_Final.pdf.}

^{22 GEGEA, Schedule A, Green Energy Act, s. 6(1).}

^{23 Ibid, s. 6(3).}

^{24 Ibid. s. 6(5).}

^{25 GEGEA, Schedule A, Green Energy Act, s. 6(4).}

^{26 See AMO supra, note 18 at page 11.}

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