Following the enactment on November 6, 2013, of the Order-in-Council 1149-2013 respecting Regulation on a block of 450 megawatt of wind power (the “Regulation”) and of the Order in council 1150-2013 respecting economic, social and environmental concerns indicated to the Régie de l’énergie in respect of a block of 450 megawatt of wind power (the “Order-in-Council”), Hydro-Québec Distribution (“HQD”) filed on November 14, 2013, in the file of the Régie de l'énergie (the “Régie”) R-3866-2013, an application for approval of the weighting table of the evaluation criteria for the call for tenders of 450 MW of wind power (A/O 2013-01).

Highlights:

Although HQD privileges a weighting table similar to that used in the context of the previous call for tenders for the block of 250 megawatt from community projects (“A/O 2009-02”), this weighting table contains certain differences from those used in the context of A/O 2009-02, the most significant of which are: 

  • Weighting of the non-price criteria: HQD reduces the allocation of points for the non-price criteria thereby attaching greater importance to the cost of energy in the analysis of tenders. Indeed, while the weighting table used in the context of A/O 2009-02 allocated 30 points to the cost of energy and 70 points to the non-price criteria, the weighting table for the next call for tenders provides an allocation of 40 points for the cost of energy and 60 points for the non-price criteria. 
  • Sustainable Development: Under the terms of A/O 2009-02 up to 25 points could be awarded by HQD for the criteria related to sustainable development (additional participation of the local community, payments to the local community, payments to private owners, application of the terms of reference). According to the weighting table for the next call for tenders, no points will be allocated for the sustainable development criteria, including any allocation of points for an additional participation of the local community to the wind project. It is logical to assume that this is due to the fact that the participation to the call for tenders requires, as a minimal condition, a participation from the local community of 50% and the payment of contributions in the order of $5,000 per megawatt installed to the local community.
  • Manufacturing of strategic components: In accordance with the requirements of the Order-in-Council, greater importance is attached to the purchase in Quebec of strategic components (power electronic converters, generators, control systems, breaking systems and speed multipliers). Up to 20 points may be allocated by HQD for this criterion. With the exception of the points awarded for the additional regional content and the additional Québec content, no points were specifically allocated for Quebec strategic components under the terms of the call for tender A/O 2009-02. 
  • Additional Québec content: As for the weighting table for A/O 2009-02, HQD grants certain points in the tenders which provide a Québec content in addition to the minimum threshold set under the call for tenders. While the weighting table for the call for tenders A/O 2009-02 allocated up to 10 points, the allocation of points for this criterion may not exceed 5 points. This decrease appears logical considering the addition of 20 points for the purchase in Québec of strategic components as mentioned above. 

Table 1 below represents a comparative chart of the points allocation in the weighting table for the A/O 2009-02 and one of the next call for tenders

Table 1. Comparative chart of the weighting table. 

Click here to view table.

Please note that under the public notice issued by the Régie, any interested person may submit comments on the weighting table to the Régie and to HQD, until November 28, 2013 at 12:00.

Regulation:

In addition, this application for approval of the weighting table comes in the wake of the enactment of the Regulation and of the Order-in-Council, both published in the Gazette officielle du Québec on November 6, 2013, and following the Draft Regulation on a block of 450 MW of wind power published in the Gazette officielle du Québec on August 28, 2013 (the “Draft Regulation”). An overview of the highlights of the Draft Regulation and of certain of its issues prepared on September 18, 2013 by Dentons Canada is available here.

Note the following points of interest of the Regulation in its final version:  

  • Maximum Price

The Règlement states that the price for the supply of electricity cannot exceed 9.0¢/kWh in 2014 dollars and indexed at the consumer price index (the “Maximum Price”). Although the Maximum Price now excludes the transmission costs, as well as the costs for the balancing service and supplementary capacity (which was included in the Maximum Price provided in the Draft regulation, but involved an element of uncertainty for the supplier), the said price reflects an important reduction in comparison with the terms of the previous call for tender A/O 2009-02, which provided a maximum price of 12.5¢/kWh. Clearly, the reduction of the Maximum Price aims to respond to certain critics regarding the cost associated with wind power.

  • Control by the local community

The participation in the call for tenders is limited to all electricity suppliers demonstrating that the local community holds a participation of 50 percent or more of the control of project. In our publication of September 18, 2013, we identified certain potential consequences of the requirement of control of the projects by the local community (click here).

Please note that the final version of the Regulation includes to the definition of “local community” (in addition to the regional county municipalities) local municipalities, aboriginal communities and intermunicipal management boards, the cooperatives of which the majority of members have their domicile in the administrative region where the project is situated.

  • Delivery delays

Hydro-Québec responds to various criticisms of the industry following the publication of the Draft Regulation regarding maintaining the supply chain of the projects. The Regulation provides that, out of the 450 MW referred to under the terms of the upcoming call for tenders, 100 MW shall be connected to Hydro-Québec’s main network on December 1, 2016, at the latest, and that the second block of 350 MW shall be connected at the latest on December 1, 2017.

  • Minimal regional content

Under the terms of the Order-in-Council, it is required that expenses or investments equivalent to a minimum of 35% of the cost of the wind turbines (excluding the installation of the wind turbines) be performed within the MRC de la Matanie or in the administrative region of Gaspésie-Îles-de-la-Madeleine. This is an increase since A/O 2009-02, which provided for a minimum threshold of 30%.

  • Financial contributions

It is a requirement that all selected promoters of projects pay to the municipality, to the regional county municipality or to the aboriginal community, an annual sum of $5,000 by megawatt installed in the territory of the municipality, the regional county municipality or the aboriginal community.

At first glance this requirement appears to reveal problems of application in the case where the wind turbines of a project are located both in the territory of a municipality and in the territory of a regional county municipality and/or in the territory claimed by an aboriginal community. In this eventuality, will the supplier be required to double the payment of financial contributions, or should such payment rather be shared between the entities forming the local community and in which case, how shall it be shared? It would be in the best interest of HQD to clearly define, inter alia under the terms of the documents of the upcoming call for tenders, this requirement as well as determining what constitutes the “territory of the aboriginal community”.

  • Hydro-Québec’s call for tenders

Under the terms of the Regulation, HQD shall proceed to a call for tenders for the block of 450 MW at the latest on December 31, 2013