Historic Procurement Opportunities
For the first time Canadian “Public Utility Companies” will have their procurement processes, evaluation methodologies and contract awards subject to international disciplines under the Comprehensive Economic Trade Agreement (“CETA”) between Canada and the European Union. This is a historic change because public utilities, such as Hydro Québec, BC Hydro, the Ontario Power Authority, Toronto Hydro, have previously been exempt from international standards and disciplines. The North American Free Trade Agreement, World Trade Organization Agreement on Government Procurement and in some cases even the Agreement on Internal Trade exempt utilities from their procurement disciplines.
What this means for the utilities in Canada is that they must become much more cognizant of their procurement obligations and bid dispute mechanisms under the CETA. A disappointed European potential supplier will have a better opportunity to challenge a utility contract award under the CETA. For Canadian companies supplying those utilities, CETA will force them to face more competition from EU suppliers who will now have better access to the same contracts. At the same time, CETA should afford Canadian companies better access to European utility procurements. The scope of this opportunity for Canadian companies looking abroad is not to be underestimated: the EU spends more than $2.7 trillion on procurement annually.
“Public Utility Companies” is defined to include any public entity that is responsible for the provision or operation of fixed networks intended to provide a service to the public in connection with the production, transportation or distribution of electricity or the supply of electricity to such networks. This broad definition is likely to capture both provincial power utilities (such as Hydro- Québec) as well as municipally owned entities (such as Hydro Ottawa). Any doubt as to the application of CETA to municipally owned utilities can be easily dispelled as procurements by municipalities are specifically governed by the procurement chapter of CETA.
It appears that CETA will not apply to utilities owned by a private entity. Presumably public energy utilities that have been privatized should not be subject to the CETA procurement rules. Similarly, public-private partnerships are reported to be exempt as well. However, the devil is in the detail, and confirmation of coverage can only be had after the release of the negotiated text of the Agreement.
So why would a potential Canadian supplier care that Canada’s public utilities now must commit to open procurement processes? The answer is that when a procuring entity is bound by a trade agreement, the scope of those commitments also apply to Canadian suppliers. As such, if BC Hydro violates a commitment in CETA as it applies to a supplier in Vancouver, that supplier would be able to bring a complaint using the process agreed upon in CETA against the procuring entity. So while CETA provides for more competition with European suppliers, it also provides for additional opportunities and fairness for Canadian suppliers.
Watch this space over the coming weeks for further information about precisely what CETA means to both suppliers and procuring entities. Key topics that will be addressed include:
- Scope - What Procurements Are Covered?
- Obligations – What Must Utilities Do to Comply?
- Violations & Remedies – When, Where, and How to Complain?
- Opportunities for Canadian Suppliers in the EU
- Going Beyond Power – Application of CETA to Other Utilities
Finally, we leave you with a small sampling of the utilities in Canada that will likely be subject to these new rules:
- British Columbia
○ BC Hydro
- New Brunswick
○ NB Power
- Newfoundland and Labrador
○ Churchill Falls (Labrador) Corporation Limited
- Northwest Territories
CETA Comprehensive Economic Trade Agreement Energy Procurement procurement processes