Proposal to amend Ontario Regulation 161/99 (Definitions and Exemptions) under the Ontario Energy Board Act, 1998 to exempt certain electricity transmission projects from Section 92 (Leave to Construct) approval.

Currently, proponents seeking to construct, expand or reinforce electricity transmission lines greater than 2 km in length are required to obtain Leave to Construct approval from the OEB. This requirement is set out in section 92 of the Ontario Energy Board Act, 1998, and existing exemptions are set out in Section 6.2 of O. Reg. 161/99.

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 typically limited to consideration of the interests of electricity consumers with respect to prices and the reliability and quality of electricity service.  The OEB also considers the form of agreement used by the applicant in engaging with landowners affected by the project.

We are proposing to amend the exemptions listed in Section 6.2 of O. Reg. 161/99 to exempt projects that are wholly funded by commercial & industrial load and generator customers and that are not expected to have a significant impact on other electricity ratepayers.

This exemption, as proposed, is expected to apply to projects funded by:

• Transmission-connected commercial & industrial load customers such as mines, auto manufacturers and data centers,
• Transmission-connected generator customers,
• Transmission-connected load or generator customers that are operating as storage facilities, and
• Distribution-connected commercial & industrial load customers and generators, including storage facilities. 

For clarity, the exemption from Leave to Construct approval is not proposed to apply to:

• Transmission connection projects that would trigger a material upgrade in the broader network system, as the costs associated with network facility investments are typically recovered from all electricity ratepayers in Ontario.
• Transmission connection projects where the transmission customer is a Local Distribution Company (LDC) and the project cost (including any capital contribution) is being funded by the LDC through its rate base.
• Transmission connection projects that are funded jointly by both commercial & industrial load or generator customers and transmitters or LDCs. These applications would not be exempt as they may involve complex issues of cost responsibility and may result in a cost impact to ratepayers.

Proposal Rationale:

The projects proposed to be exempt from the requirement to obtain Leave to Construct do not have a significant ratepayer impact. Under the OEB’s Transmission System Code (TSC), load and generator customers are required to fund transmission infrastructure needed for their own use. This transmission infrastructure is called a connection facility in the TSC, as it connects the customer to the broader transmission network system which serves all electricity ratepayers. Generator customers provide all of the funding for connection through an upfront capital contribution, while load customers provide a capital contribution to the extent there is a shortfall between the project costs and the amount that will be paid by the customer in the form of rates over time. The methodology and assumptions used to determine the capital contribution is set out in Appendix 5 of the TSC. While such projects do not typically have an impact on other electricity ratepayers, in the event the transmission infrastructure is built but the customer goes out of business, future rate revenues would not be collected, and any remaining portion of the project costs would be recovered through electricity rates paid by all ratepayers in Ontario. The OEB’s methodology mitigates this risk by providing different time frames for full recovery of costs depending on a customer’s risk profile. For this reason, the projects proposed to be in scope for exemption are described as not being expected to have a significant impact on electricity rates.

This proposal intends to maintain the OEB’s core function as an economic regulator, consistent with the conclusions of the OEB Modernization Review Panel, while at the same time eliminating a regulatory hurdle for certain project proponents. The Section 92 hearing process can typically take several months to complete. These exemptions would significantly reduce burden and costs to business.

Under this proposal, key project impacts would still be evaluated through other processes and approvals. Considerations related to reliability and quality of service will continue to be assessed through the IESO’s Connection Assessment and Approval Process, 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 Leave to Construct approval under Section 92.

Environmental impacts of electricity transmission projects will continue to be assessed by the Ministry of Environment, Conservation and Parks’ (MECP’s) through the processes set out in the Environmental Assessment Act and associated regulations.

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. In the event the transmitter and landowners do not reach agreement related to land, the OEB will continue to administer the expropriation of land, the OEB will continue to administer the expropriation of land under Section 99 of the Ontario Energy Board Act, 1998. under Section 99 of the Ontario Energy Board Act, 1998.