Ontario Energy Board grants Distribution System Code exemption for waterpower projects

May 6, 2011

In an oral decision made on May 5, 2011 the Ontario Energy Board granted an application by Ontario Waterpower Association (OWA) for an exemption from sections 6.2.4.1(e) and 6.2.18 of the Distribution System Code (DSC) for hydroelectric projects with a nameplate capacity of between 1 and 10 MW that are located on provincial Crown or federally-regulated lands.

Section 6.2.4.1(e) of the DSC requires a distributor (in this case Hydro One) to remove an applicant's connection capacity allocation if the applicant has not signed a connection cost agreement (CCA) within 6 months of receiving the allocation.  The provision was introduced in the fall of 2009 to ensure that connection capacity was not tied up by projects that were not being pursued diligently. The Board found there was no evidence that the 28 hydroelectric projects at issue in the application were "laggards" and noted that such projects face unique challenges because of their site-specific nature and the extensive approval processes involved. Accordingly, the Board granted these waterpower projects an indefinite exemption to this requirement. 

Section 6.2.18 of the DSC requires an applicant to pay a connection cost deposit equal to 100% of the total estimated allocated cost of connection when the CCA is signed.  Again the purpose of the provision is to ensure that connection capacity is not tied up by projects that are not being pursued diligently.  The evidence before the Board established that it was difficult for waterpower proponents to obtain sufficient financing to meet this requirement at the CCA stage given the extensive regulatory processes that still need to be completed.  In place of section 6.2.18, the Board accepted a schedule under which an applicant will pay an initial deposit of $20,000 per MW of nameplate capacity with increased amounts due as various steps in the development process are achieved.

In making the decision, the Board emphasized that exemption was "strictly limited" and does not extend to the proponents of other renewable energy projects.  In that regard, the decision is a notable contrast to the Board's December 2010 decision  in which 12 power projects were granted a much more limited exemption to section 6.2.4.1(e) and a request for an exemption from section 6.2.18 was refused.

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