Targeted Amendments to the Leave to Construct Framework for Electricity Transmission Projects

Context

Proponents seeking to construct, expand or reinforce electricity transmission lines greater than 2 km in length are required to obtain Leave to Construct (LTC) approval from the Ontario Energy Board (OEB). This requirement is set out in section 92 of the Ontario Energy Board Act, 1998 (OEBA), and existing applicable exemptions are set out in section 6.2 of Ontario Regulation (O. Reg.) 161/99 (Definitions and Exemptions), made under the OEBA.

In evaluating transmission project proposals under section 92, the OEB considers whether the project is in the public interest. When determining whether an application is in the public interest, the OEB's review is restricted to a consideration of the interests of electricity consumers with respect to price, reliability, quality of electricity service and whether the project supports economic growth in a manner consistent with the policies of the Government of Ontario. The OEB also approves the form of agreement that the applicant offers to any landowners affected by the route or location of the project.

We are now proposing four targeted changes that would modernize the OEB’s LTC process.

1. Exempt projects that are procured by the IESO from needing to obtain LTC

Amend the exemptions listed in section 6.2 of O. Reg. 161/99 (Definitions and Exemptions) made under the OEBA to add a further exemption which would exempt projects procured by the IESO pursuant to clause 25.32 (2)(d) and (5) of the Electricity Act, 1998 – Government’s authority to direct IESO on transmission system procurements -- from the requirement to obtain LTC from the OEB. We are also proposing to repeal subsection 97.2 (2) of the OEBA. That provision currently provides that “If the applicant in an application under section 92 is a person with whom the IESO has entered into a procurement contract respecting the development, construction, expansion, reinforcement of the line or the making of the interconnection, the Board may make an order under section 96 without holding a hearing”.  Removing this provision would better align with the proposed regulatory amendment by removing reference to the OEB authority to hold a hearing in this context.

Proposal Rationale

Under section 25.32(2)(d) and (5) of the Electricity Act, 1998, the IESO is required to launch procurements for the development of electricity transmission systems if required to do so through a directive or direction from government. Ontario anticipates the volume of transmission projects procured this way will increase as the IESO continues its work on bulk system planning, and as the procurement system for transmission projects improves. Projects of this type would be subject to a contract between the successful transmitter and the IESO which would contain provisions including those related to project cost and design criteria. An IESO-led competitive procurement is being utilized for the Toronto Third Line project.  

Through the above-noted proposed regulatory amendments to s. 6.2 of O. Reg. 161/99, Ontario is proposing to exempt electricity transmission projects procured by the IESO from being required to obtain LTC from the OEB, because the objectives and functions of LTC review would be adequately addressed through existing mechanisms, the IESO procurement process and resulting contracts.

• Project Need: Transmission projects being procured by the IESO will have been determined to be needed through the IESO’s planning initiatives prior to the start of the procurement process. Project scope and size will have been established by government under Section 25.32 of the Electricity Act, 1998 and/or the procurement contract. Furthermore, confirmation of project need throughout the development of the project would be overseen and managed through the IESO's contract. As such, an OEB review on the basis of need is not required and would be duplicative.
• Price: The IESO designs its competitive procurement processes (such as the one used for the Toronto Third Line) to provide cost-control mechanisms through competitive tension among proponents, bid evaluation criteria, and subsequent contractual terms. Depending on the contractual structure, the OEB would continue to exercise prudency review over costs that fall outside the scope of the contract through the transmitter's rate applications that occur through the OEB’s Uniform Transmission Rate (UTR)-setting process.
• Reliability and Quality of Electricity Service: Considerations related to reliability and quality of service will continue to be assessed through the IESO’s Connection Assessment and Approval Process which is a function of the IESO Market Rules, and which includes a System Impact Assessment (SIA) and Customer Impact Assessment (CIA). This assessment is required through the IESO’s Market Rules regardless of whether a project requires LTC approval under section 92 of the OEBA.
• Supporting Economic Growth: IESO considers economic development when establishing the load forecast that determines the project is needed. Furthermore, IESO's competitive procurement will facilitate timely and cost-effective project development and therefore support the government's mandate for economic growth. As such no further review from OEB is required. 
• Landowner agreements: With respect to the form of landowner agreement, review of hearings to date indicate that transmitters currently adopt best practices with regard to landowner agreements. The IESO also has the ability to prescribe the form of landowner agreement in its contract with transmitters, to ensure consistency with the form and features typically approved by the OEB. In the event the transmitter and landowners do not reach voluntary agreements that address access to or control over land, the OEB would continue to maintain its authority to grant or refuse to grant leave to expropriate an interest in land pursuant to section 99 of the OEBA.

Eliminating the LTC requirement for projects that are procured by the IESO would remove redundant processes, and is anticipated to reduce project costs, improve regulatory certainty and potentially advance the in-service date of projects, allowing new customers to connect earlier.

Environmental impacts of electricity transmission projects are out of scope for LTC hearings. Transmission proponents will continue to be required to obtain all necessary permits, authorizations and approvals and to adhere to all applicable requirements of the Environmental Assessment Act and associated regulations, including those related to Indigenous consultation. 

To support feedback on this proposal, we are proposing amendments related to:

• Section 6.2 of Ontario Regulation 161/99 which would (if approved) add an exemption for electricity transmission projects that are the subject of a procurement undertaken by the Independent Electricity System Operator (IESO) pursuant to clause 25.32 (2)(d) and (5) of the Electricity Act, 1998 from the requirements of having to obtain LTC from the OEB pursuant to section 92 of the OEBA.
• Subsection 97.2 (2) of the OEBA, which allows the OEB to make an order granting LTC without holding a hearing when the applicant has entered into a procurement contract with the IESO. To streamline and clarify the position of entities who would benefit from the proposed exemption, Ontario is proposing to also repeal subsection 97.2(2) including the language reference to the OEB granting LTC as well as the reference to the OEB holding a hearing and to instead rely on the proposed amendments to Ontario Regulation 161/99.

2. Providing Legacy Transmission Projects the Ability to Apply for Expropriation

Amend section 99 of the OEBA to allow owners or operators of transmission and distribution facilities built prior to the enactment of the 1998 electricity transmission and distribution LTC framework (i.e., “legacy projects”) the ability to apply to the OEB for authority to expropriate land. The proposed changes are meant to address an outstanding policy gap and would create a more consistent and transparent framework for all transmission proponents. They align with established practices for current projects and would not alter existing landowner protections.

Proposal Rationale:

Section 99(1) of the OEBA provides jurisdiction to the OEB to grant, to an applicant-transmitter, authority to expropriate land for electricity infrastructure. To apply for this authority an applicant must meet one of the following conditions:

1. The applicant previously received LTC approval under the current or previous parts of the Ontario Energy Board Act, 1998. 
2. The applicant is exempt from requiring LTC and is constructing, expanding or reinforcing a facility.

Some legacy projects which were built prior to the introduction of the electricity transmission and distribution LTC framework in 1998 (through the Energy Competition Act, 1998) are not able to meet the above noted requirements since they were not in place prior to 1998.  However, without OEB LTC approval or exemption, owners or operators of legacy projects remain ineligible to request authority from the OEB to expropriate land for the continued upkeep of these facilities.

To address and clarify the OEB’s legislative jurisdiction under section 99, we are proposing legislative amendments that provide owners or operators of legacy projects the ability to apply to the OEB for the right to expropriate. This change would only provide the owner or operator responsible for the transmission or distribution facility the right to apply to the OEB for the authority to expropriate. The OEB would still be required to evaluate the application and determine whether expropriation is in the public interest. In doing so, it is expected that the OEB would continue to assess whether the applicant has made best efforts to negotiate appropriate agreements with landowners and whether the applicant is requesting the minimum amount of land needed for the project.

We are also proposing an amendment to expand the rationale for expropriation to include purposes related to the operation and maintenance of electricity transmission, distribution, or interconnection facilities. This is meant to ensure owners or operators have access to the land these facilities are located on for the lifetime of the assets, which can generally operate for 40 years or more, with certain components having a useful life extending up to 90 years. Land agreements may not be designed to remain in force for such long tenures. These amendments are meant to guarantee access by owners and operators of those facilities by providing the ability to apply for expropriation during the lifetime of those assets in order to better ensure their continued operation and maintenance.

To support feedback on this proposal, we are proposing amendments related to:

• Section 99 of the OEBA to provide the OEB the authority that would clarify / expand the OEB’s jurisdiction over expropriation matters related to legacy projects that were being constructed or were completed before the LTC framework came into force. This section would also be amended to expand the available rationale a person or entity may use to apply to the OEB for expropriation to include purposes related to the operation and maintenance of electricity transmission, distribution or interconnection facilities.

This proposal is not expected to have environmental impacts as projects in scope for these amendments are already constructed / completed. Obtaining the ability to request expropriation from the OEB is mainly to address issues related to ensuring owners and operators of transmission and distribution infrastructure have access to land for purposes related to the operation and maintenance of the facilities.

3. Providing LTC-Exempt Projects the Right to Enter Land

Amend section 98 of the OEBA to allow proponents of transmission projects exempt from LTC through regulation the right to enter land to conduct specific activities or in specific circumstances to support project development. The proposed changes are meant to address an outstanding policy gap and would create a more consistent and transparent framework for all transmission proponents. They align with established practices for current projects and would not alter existing landowner protections.

Proposal Rationale

Section 98 (1) of the OEBA authorizes proponents of transmission works to enter lands and carry out necessary surveys and examinations at the intended location of proposed works.

This authority is given to proponents of projects which have obtained LTC approval or are exempted from LTC where the OEB makes an order exempting LTC under the Board’s exemption authority provided for under section 95 of the OEBA.

Ontario is proposing to expand this authority to proponents of projects exempt from LTC through regulation. In doing so, all projects exempt from LTC would be treated in a consistent manner under the amended provision, if the amendments are approved. 

To support this proposal, we are proposing amendments related to:

• Subsection 98(1) currently permits proponents wishing to fix the site of an intended work (e.g. transmission infrastructure) to have early access to land in order to conduct preliminary work to fix the site of the work. Examples of such work include the surveying of land, collection of soil samples and conducting engineering studies. 
• Persons currently permitted this early access to land include: 
  1) Any person who has LTC under Part VI of the OEBA or a predecessor of this Part. 
  2) Any person who is exempted under section 95 from the requirement to obtain LTC.
  3) In the transmission and distribution context, any person who is required by the OEB by a condition of the person’s licence,     to expand or reinforce the transmission or distribution system.
  4) The officers, employees and agents of a person described in paragraphs 1,2, or 3.
• The amendments being proposed to subsection 98 (1) of the OEBA, that would, if approved by the Legislature, extend the above-noted right to enter land early on in the LTC process to proponents which are exempt not just pursuant to an OEB order made under section 95 but which are exempt under the OEBA (which would extend this right of early access to entities who are exempt by Regulation, e.g. O. Reg. 161/99) from having to receive LTC.  

Environmental impacts of electricity transmission projects are addressed by MECP’s Environmental Assessment process, where applicable, and are not considered through the OEB’s LTC process. This proposal does not seek to change the manner in which the Environmental Assessment Act deals with projects and is not expected to have environmental impacts as projects in scope continue to be subject to applicable Environmental Assessment requirements.

4. Providing Owners and Operators of existing LTC-Exempt projects the Ability to Enter Upon Land

Amend section 103 of the OEBA to allow owners and operators of projects exempt from having to apply for or receive LTC from the OEB the ability to enter upon lands under that section. Unlike the previous proposal, which addresses development work, this proposal addresses work for existing transmission assets. The proposed changes are meant to address an outstanding policy gap and would create a more consistent and transparent framework for all transmission proponents. They align with established practices and would not alter existing landowner rights or protections.

Proposal Rationale:

Section 103 (1) of the Ontario Energy Board Act, 1998 establishes the authority for a person to enter upon land, without the consent of the owner of the land, for purposes related to the operation and maintenance of an electricity transmission facility. This authority is granted on the condition that the transmission facility received LTC approval for its construction, expansion or reinforcement.

The Ministry is currently proposing to expand subsection 103(1) of the OEBA in the manner described above. This would permit owners and/or operators of transmission or distribution infrastructure projects who are exempt from the OEB’s LTC process to have access to land to repair and maintain their transmission or distribution infrastructure. 

To support this proposal, we are proposing amendments related to:

• Section 103 of the Ontario Energy Board Act, 1998 to expand the authority to enter upon land to include persons responsible for projects exempt from LTC.

Environmental impacts of electricity transmission projects are addressed by MECP’s Environmental Assessment process, where applicable, and are not considered through LTC. This proposal is not expected to have environmental impacts as projects in scope for these amendments are already constructed. Extending authority to enter upon land is to ensure access for the responsible operation and maintenance of transmission facilities.