Minister of Energy issues directive to Ontario Power to continue FIT Program

July 12, 2012

On July 11, 2012, the Minister of Energy issued a directive to the Ontario Power Authority (OPA) providing further direction regarding the FIT 2.0 Rules and Contract. Among other items, this directive provides further details on the prioritization and ranking of applications, land use restrictions and project location, directs the OPA to design a new pilot stream for microFIT applicants with unconstructed buildings and also extends the voluntary withdrawal period for existing FIT Contract holders to September 30, 2012.

A brief summary of the main points of the directive follows.

Priority Points and Ranking

The directive provides that all projects that applied prior to July 4, 2011 automatically receive one priority point and those projects that applied on or after July 5, 2011 will receive half of a priority point. A FIT contract will only be awarded where the project has achieved at least one priority point.

Community and Aboriginal participation projects will continue to be prioritized. All applications with greater than 15% community or Aboriginal equity interest will still receive 3 priority points and those applications with greater than 50% community or Aboriginal equity interest will be offered contracts in advance of all other applications within the same application window.

The directive indicates that the FIT contract will be revised such that, where a project has received priority on the basis of a 50% or greater community or Aboriginal equity interest, any change in the ownership that would result in such ownership falling below the 50% threshold is prohibited and will constitute an event of default leading to a termination right on the part of the OPA. The OPA termination right will arise following a six-month cure period during which time the supplier can remedy the default. There will also be a six-month cure period in the instance of the community or Aboriginal equity interest falling below the 15% threshold required in order to be awarded prioritization points. With respect to community equity interest projects, in order to have the benefit of the cure period, a supplier must report the change in the membership of the co-operative within 12 months of any change that leads the supplier to fall below the 50% or 15% equity interest threshold.

Project Siting

With respect to project siting, as described in our April 9, 2012 post, the draft FIT 2.0 Rules prohibited ground-mount solar projects from being located on a site comprised (in whole or in part) of CLI Class 1, 2 or 3 Lands, Specialty Crop Areas or CLI Organic Lands. The directive provides that while a ground-mount solar facility cannot be located on any of these lands,  the site can contain a mix CLI Class 1, 2 or 3 Lands, provided that the ground-mount solar facility will not actually be located on the CLI Class 1, 2 or 3 Lands, as evidenced by a peer reviewed soil study. In addition, non-hydroelectric projects will not be permitted to be located 50 km or more from their proposed connection point to the existing transmission or distribution grid. This distance will be measured based on the distance to the connection point from land which the supplier has access rights over at the time of application.

FIT Contract Changes

As discussed in our earlier post, the draft FIT 2.0 Contract contained a new right for the OPA to terminate the contract for convenience at any time following Notice to Proceed. The directive appears to remove this provision and states that only those rights of termination in favour of the OPA which existed in prior versions of the FIT Contract shall be contained in the final FIT 2.0 Contract. It is not clear whether this also applies to the right of the OPA to give a “Stop Work Direction” under the draft FIT 2.0 Contract.

The directive also provides that, with respect to rooftop solar facilities, the Milestone Date for Commercial Operation will continue to be 18 months following the Contract Date, except in the case of a “portfolio of rooftop solar facilities greater than 15 MW”, for which the Milestone Date for Commercial Operation will be 36 months following the Contract Date.

The OPA is expected to release revised drafts of the FIT and microFIT Rules and Contract to reflect this directive and also to open an application window for microFIT and Small FIT Contracts.

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