Scope of the Comprehensive Economic Trade Agreement with Europe Regarding Public Utility Procurement

Our prior instalment considered the changes that the Comprehensive Economic Trade Agreement (“CETA”) will have on procurement by public utilities. We will now look at the extent to which the obligations imposed by CETA on procurements by public utilities will be limited by minimum monetary thresholds and certain special exceptions.

Under all procurement treaties including CETA, only procurements which exceed a certain monetary value are subject to the treaty’s obligations. Under CETA, only those procurements by  a covered public utility that exceed $630,000 will be subject to its requirements.[1] Procurements by utilities below that threshold will not be subject to CETA. Splitting procurements into smaller bundles is prohibited under CETA (as is the case under all procurement treaties). This means that a covered utility could not beak a procurement with an overall value of $1 million into two procurement of $600,000 and $400,000 in order to circumvent the provisions of CETA.t

Procurements by utilities will also be subject to special exceptions set out in the text of the treaty itself. For example, one major special exception for all procurement is the so-called “National Security Exemption” that is present in other agreements, such as NAFTA. In addition, public private partnerships for the utilities sector will be exempt from CETA requirements.  There will also be additional carve-outs for certain procurements conducted by power generators and hydro companies.

The government has been incredibly tight-lipped as to what these exceptions will be; only stating that 20-30% of all subject procurements by a covered public utility are likely to be subject to these special exceptions.

And that has, largely, been the story of CETA and the procurement provisions in particular. The Canadian government has been reluctant to provide any material information that can be used by industry to begin planning out how they will implement CETA once it is officially enforced. As such, the treaty remains a ‘work in progress’. However, we will continue to bring you information as it becomes available, continuing our series with the next installment – Obligations: What Must the Utilities Do to Comply?

[1] Some sharp observers may wonder why an international treaty states thresholds in Canadian dollars. Those who are even more astute may wonder if this number will account for inflation or exchange rates. In reality, this number is an approximation. Like most international treaties involving amounts of currency, the threshold is given in “Special Drawing Rights” or SDRs.

These SDRs are a product of the International Monetary Fund – which uses a basket of various worldwide currencies to determine the “value” of an SDR. This helps keep the threshold value constant in real terms despite currency fluctuations in nominal value. You can find more on SDRs here.