Ontario Independent Electricity System Operator Approves Market Rule Amendments for Wind and Solar Generators

The Ontario Independent Electricity System Operator (IESO) began a stakeholder initiative in November 2009 to establish guidelines to integrate renewable generators into the IESO dispatch regime. As we reported last year, the IESO issued its final renewable energy integration "Design Principles" in March 9, 2011 and followed this with proposed amendments to the IESO market rules, designated under MR-00381 (Market Rule Amendments). The proposals were designed to, among other things, impose reporting and monitoring requirements on variable generators (i.e., wind and solar generators that have an installed capacity or five megawatts or greater or that are directly connected to the IESO-controlled grid) and make variable generators that are market participants become dispatchable on an economic basis by the IESO. As expected, these Market Rule Amendments were approved by the IESO’s board of directors on November 29, 2012 and were published January 3, 2013, thus causing them to come into effect on January 3, 2013.

One consequence of the publication of these amendments is that certain holders of feed-in tariff contracts (FIT Contracts) or renewable energy supply contracts with the Ontario Power Authority (OPA) are at risk of economic curtailment and, therefore, an adverse effect on their respective economics under these contracts. There may be other adverse effects caused by these amendments relating to reporting and monitoring requirements.

The holders of FIT Contracts and renewable energy supply III contracts (RES III Contracts) are entitled to provide notice to the OPA under section 1.7 of the FIT Contract or section 1.6 of the RES III Contract and to seek compensatory changes to such contracts. FIT Contract holders have 15 days to provide such notice (January 18, 2013) while RES III Contract holders must give such notice "promptly."

The second consequence of the publication of these amendments is that the timeline for a potential appeal to the Ontario Energy Board (OEB) starts to run. Specifically, the OEB may overturn the market rule if it determines that the rule unjustly discriminates in favour or against a market participant or is otherwise inconsistent with the purposes of the Electricity Act, 1998. The deadline for filing an appeal to the OEB is January 24, 2013.

Should you have any questions about the Market Rule Amendments, the provisions of the FIT Contract or any renewable energy supply contract, or an OEB appeal, do not hesitate to contact a member of our Power Group.