On June 15, 2023, the Government of British Columbia announced that BC Hydro would be moving forward with a call for new sources (the Call to Power) of 100 percent clean, renewable emission-free electricity from large-scale projects, notably including wind and solar. As part of phase two of BC Hydro's engagement process, on January 8, 2024, BC Hydro issued a draft Request for Proposals (RFP) and draft specimen Electricity Purchase Agreement (EPA). Organizations were invited to review the draft RFP and EPA and provide feedback on the proposed drafts. The opportunity to provide feedback during this engagement process closed on January 22, 2024.
The documents released and processes completed to date can be accessed here.
The Call to Power is part of BC Hydro's response to the province's growing electricity demand. The British Columbia government expects the demand for electricity to increase by 15 percent by 2030. This accelerating growth has been intensified by recent drought conditions. As a result of such conditions, BC Hydro needed to import approximately 10,000 GWh of electricity into the province, at a cost of about $450 million.1
Under the Call to Power, BC Hydro seeks to acquire approximately 700 GWh of new clean, renewable energy from greenfield facilities prior to fiscal 2029 and 3,000 GWh per year thereafter. The Call to Power is in line with the growing trend of procurement opportunities for renewable energy that we are seeing across Canada.
The RFP is anticipated to be formally issued at the beginning of April 2024.
The purpose of the RFP is to solicit responses from potential energy suppliers from sustainable sources.
The draft RFP is set up as a competition, with significant rules and requirements for proposals, the proposal evaluation process, and a Fairness Monitor.2 This does not appear to be a fully open-ended RFP where BC Hydro is seeking any type of solution, but is an RFP in which the specific types of solutions, and the process for winning the EPA, are set out. The RFP indicates that BC Hydro anticipates entering an EPA substantially in the form provided with the RFP, and in fact the proposed commercial proposal form is more stringent and requires a proponent to confirm its offer is in strict compliance with the EPA.
As the proponents work through the process to develop proposals, they should be cognizant of the strictness of the RFP to ensure they provide a proposal that sufficiently complies with BC Hydro’s requirements.
As part of developing the proposals, it would be expected that the proponents will be pulling together a number of different subcontractors and suppliers. BC Hydro indicates that a proponent's team will include any person that will provide a material part of the EPA services.
The identification of subcontractors and suppliers is potentially a material bidding point because there may be overlapping subcontractors and suppliers providing equipment or services that are on multiple teams on a non-exclusive basis.
Section 13.2 of the RFP states that if a proponent intends to include on that proponent's team a supplier, subcontractor or subconsultant that is or is anticipated to be a member of another proponent's team, "BC Hydro may in its discretion, in the interests of a fair and transparent process, disclose to any or all Proponents such details of the teaming arrangement, and any measures implemented by the Proponent to address potential conflicts of interest or unfair process.” The reference to "teaming arrangement" is not defined, and it is unclear how suppliers, subcontractors and subconsultants will react to this requirement and how early they will commit to be on a proponent's team.
The draft RFP sets out BC Hydro's "rules" for awarding EPAs to eligible projects. Under the current draft RFP, proponents must meet three key dates to ensure a proponent's participation in the RFP:
The interconnection process for all projects will follow CEAP. Only valid CEAP interconnection requests for network resources interconnection service (CEAP IR) received by BC Hydro, together with executed Interconnection Feasibility Study Agreements and the requisite deposits, will be accepted. Projects that do not have an accepted CEAP IR will be ineligible to participate in the Call for Power. Early submission of a CEAP IR is advisable given there may be multiple rounds of revisions.
Proponents with projects either in the FortisBC service area or intending to interconnect to the BC Hydro System3 through a Third Party System4 will have to arrange for delivery of energy from their project to the point of interconnection between such Third Party System and the BC Hydro System. As part of its CEAP IR, proponents will need to provide evidence to BC Hydro that the interconnection through the Third Party System to the BC Hydro System is feasible.
The draft RFP currently sets out the minimum eligibility requirements that all projects must meet. For a project to be eligible under the RFP, it must:
Failure to meet any of the minimum eligibility requirements will result in a project being disqualified. A proposal fee of $13,000 is due to BC Hydro for each proposal submitted by a proponent.
On top of the proposal fee, proponents must provide bid security in the amount of $25,000 per MW of the proposed project's capacity, in the form of a letter of credit. If a project is not awarded an EPA, the bid security will be returned to the proponent provided that neither the proponent nor the project was disqualified.
As the current version of the RFP is in draft, we expect that BC Hydro will make some changes based on feedback received during this phase of engagement.
The evaluation criteria are set out in Section 11 of the RFP.
BC Hydro states that it developed the RFP in collaboration with First Nations and in alignment with its United Nations Declaration on the Rights of Indigenous Peoples Implementation Plan. The RFP follows a First Nation economic participation model, consisting of: (1) a minimum First Nation Equity Ownership requirement, and (2) additional evaluation credits granted to proponents for proposals that contain further economic benefits for First Nations.
1. Minimum First Nations Equity Ownership
a. Each proposal must include at least one BC First Nation whose asserted traditional territory includes the location of the proposed project, and holds a minimum 25 percent First Nations Equity Ownership in the proponent;
2. Additional Credits for First Nation benefits
a. Additional credits will be granted to proponents whose proposals include the following:
i. First Nations Equity Ownership in excess of the required 25 percent; and
ii. One or more letter(s) of support from First Nations whose asserted traditional territory includes the location of the proposed project, but who will not receive First Nation Equity Ownership. Additional credits will be granted if the letter confirms that non-equity economic benefits will be given to such First Nations by the proponent on a successful RFP bid.
First Nations Equity Ownership must be held by the applicable First Nation(s) for a minimum of three years following the date that commercial operations commence. If the First Nation Equity Ownership decreases, the proponent may be subject to either termination in accordance with the provisions of the EPA, or liquidated damages, the exact calculation method is not yet determined, but is expected to reflect the value given to the First Nations Equity Ownership in the proposal.
The minimum First Nations Equity Ownership requirement will be judged on a pass-fail basis. Proposals that do not demonstrate this requirement will be disqualified from the RFP. The other two evaluation credits will have adjustments applied to determine an Evaluation Price7 for the purpose of evaluating proposals. This process will reduce the Bid Price8 for a proposal to make it more cost effective in the evaluation process. Note that there are a series of adjustments to a proponent’s Bid Price to calculate an Evaluation Price for each project. The Evaluation Price is solely for evaluation purposes and is unrelated to the amount paid for energy under the EPA.
Equity ownership means that the First Nation has a right to receive or the opportunity to participate in any payment arising out of or return from, and an exposure to a loss or a risk of loss by, the business activities in relation to a proposal submitted in response to this RFP.
BC Hydro is also in the process of developing possible financing available for the project and First Nations Equity Ownership for successful proponents. Details of such funding, likely to take place through the Canada Infrastructure Bank under its Indigenous Equity Initiative, will be released shortly. In addition, in parallel with the Call to Power announcement in June 2023, the Province announced a contribution of $140 million to the New Relationship Trust to expand the B.C. Indigenous Clean Energy Initiative and in furtherance of supporting smaller-scale, Indigenous-led clean energy projects (some of which may not qualify under the Call to Power based on the minimum capacity requirements as noted above).9
The EPAs, once awarded, will be entered into by the selected energy supplier(s) (Seller) and BC Hydro. The EPA term is 30 years commencing on the commercial operation date.
The EPAs will need to be updated for details specific to each Seller, including to reflect the Seller’s corporate structure, whether the Seller’s plant has an indirect connection to the BC Hydro System, and the energy source for the Seller’s plant. The EPA will be substantially different if the Seller’s plant is an expansion of an existing plant that is subject to a separate EPA with BC Hydro (which will also require amendments to the existing EPA).
EPAs awarded under the RFP are "energy supply contracts" under the Utilities Commission Act, RSBC 1996, c 473 (UCA). Accordingly, unless an exemption applies, they must be filed with the British Columbia Utilities Commission (BCUC) under section 71 of the UCA. If BCUC acceptance has not been issued on or before the date that is 180 days after the EPA is signed, BC Hydro may terminate the EPA. BC Hydro anticipates a BCUC decision in relation to its Integrated Resource Plan, which may impact this requirement.
The draft RFP sets out a non-exhaustive list of required permits. There are many material potential federal and provincial permits, and it is clear that BC Hydro intends that the permits are the sole responsibility of the proponents. The assessment of the necessary permits and their requirements is expected to entail significant due diligence, both for initial (and subsequent) equity development investors, and for potential lenders. Similarly, while a proponent may meet the requirement for First Nations Equity Ownership, that does not necessarily mean that the proponent satisfies all interests of Indigenous peoples, including any consultation requirements or requirements as part of permitting.
There is significant schedule risk under the EPA. The Seller must ensure that the Seller's plant achieves Commercial Operation Date (COD) by the Guaranteed COD (to be set out in the proposal). COD may not occur earlier than 180 days before the Guaranteed COD.
If the Seller does not achieve COD by the Guaranteed COD, the Seller is liable for liquidated damages, calculated as follows:
($70/MW-day) x (Plant Capacity) x (number of days in the period between Guaranteed COD and the earlier of COD and the date on which BC Hydro’s right to terminate the EPA arises)
There are also incentives for the Seller to achieve COD between certain dates. For example, if at COD, the Guaranteed COD is between October 1, 2028, and September 30, 2029, and if Seller achieves COD before September 30, 2029, BC Hydro will pay $5/MWh multiplied by the amount of Delivered Energy10 between the later of October 1, 2029, and COD, and September 30, 2029. The payment amount becomes $2/MWh if, at COD, the Guaranteed COD is between October 1, 2028, and September 30, 2030.
The Seller must deliver performance security by way of a letter of credit in an amount equal to $60,000/MW multiplied by the Plant Capacity to BC Hydro. The performance security is to be maintained until 180 days after COD. BC Hydro may draw on the performance security if Seller fails to pay any required amounts to BC Hydro (such as liquidated damages and termination payments).
The EPA carries considerable risk. As such, the Sellers are likely to seek to drop down as much risk as possible to the members of their team. Given the uncertainties of the long development periods, and the experience in the last few years of risks that have materialized on contracts (particularly fixed price contracts) there may be considerable uncertainty and risks that Sellers will bear until project completion or until the risk profile, including schedule, for a project is sufficiently certain.
The parties agree to buy and sell all energy during an Energy Delivery Period,11 although the Seller’s obligations with respect to such energy are excused during events of force majeure, a BC Hydro constraint for reasons not attributable to Seller, disconnection of Seller’s plant for reasons not attributable to Seller, or during a planned outage. BC Hydro is not obligated to accept delivery of any excess energy.
All environmental attributes (such as emission offsets) are to be transferred to BC Hydro.
The EPA also sets out certain requirements for Deemed Energy, being the amount of Turn-Down Energy12 and the amount of Constraint Energy13 in any hour during an Energy Delivery Period. In addition, if the Seller is subject to a Capacity Commitment, meaning the Seller must provide a designated amount of energy to BC Hydro for a Capacity Commitment Period, and the Seller fails to provide the full amount of the Capacity Commitment, the Seller must pay liquidated damages for that delivery shortfall, calculated as follows:
(CPIJan 1,N/CPIJan1,2024) x (Designated Capacity Commitment - Deemed Delivered Capacity Commitment for the Capacity Commitment Period)
The price that BC Hydro will pay the Seller for Delivered Energy and associated environmental attributes is calculated as follows:
(Energy Price/hour) x (the amount of Delivered Energy/hour – Excess Energy/hour)
The Energy Price will be the bid price specified in each successful proponent's proposal, adjusted by CPI, and multiplied by the applicable percentage for on-peak hour or off-peak hour.
BC Hydro will satisfy its obligation to purchase Deemed Energy (for each hour during a Turn-Down Period) by paying an amount to Seller determined as follows:
(Energy Price) x (Turn-Down Energy in the hour) – (costs the Seller avoided or could have avoided in respect of that hour)
If there is a BC Hydro System Constraint, an amount calculated as follows, beginning in the 49th hour in the month in which a BC Hydro System Constraint is in effect and for each remaining hour during the month in which a BC Hydro System Constraint, will be payable by BC Hydro:
(Energy Price) x (Constraint Energy in the hour) – (costs the Seller avoided or could have avoided in respect of that hour)
The EPA may be terminated by the parties in certain circumstance, including in the event of Aboriginal Claims.14 The Seller may terminate the agreement if, after consultation with the applicable First Nation(s), it becomes clear that the Seller must resolve the claim or accommodate the potential impacts alleged in the claim and such actions would impose a commercially unreasonable cost on the Seller or require the consent of BC Hydro to amend the EPA and BC Hydro does not provide such consent within 60 days. BC Hydro may terminate the agreement if, at any time, they receive or obtain evidence or become aware of an Aboriginal Claim.
The EPA includes restrictions on assignment, including changes in control, without the consent of BC Hydro. The standard for consent is the sole discretion of BC Hydro prior to COD and a reasonableness standard after that date. This restriction may impact proponents' financing, as it is possible that the initial development equity investors will have no ability to sell before COD, and limited ability after that date.
There is some recognition in the EPA that the proponent may have a Facility Lender15 and that if the Facility Lender takes a security interest or similar interest, the Facility Lender will enter into BC Hydro’s form of lender consent agreement.
As part of the proposals, proponents should carefully review their financing plan to ensure that it falls within the scope and restrictions of the EPA.
BC Hydro has issued a consideration memo that summarizes their previous engagement, the feedback themes they received based on their original key terms and the modifications they have made to their original key terms considering such feedback. Examples of changes made by BC Hydro to date include: increasing the overall value of the credit provided for additional First Nations Equity Ownership and furthering the incentives for 50 percent and 51 percent First Nations Equity Ownership from what was originally proposed, reducing the required bid security from $40,000/MW to $25,000/MW and removing the requirement that proponents pay liquidated damages for failure to meet project milestones.
This document, while not determinative of what BC Hydro’s views will be on the feedback received in January 2024, provides some guidance to proponents as to what has already been considered and what proponents can expect in the final RFP.
The Energy and Energy Regulatory team at Bennett Jones are monitoring the developments of the call for power. We will provide further updates as changes to the RFP process and specimen EPA are issued by BC Hydro. Please contact the authors for further information.
2The individual appointed by BC Hydro to act as an independent observer of the administration of the RFP.
3 Defined as the generation, transmission, distribution, protection, control and communication facilities owned, controlled or operated by BC Hydro in British Columbia, and includes all additions and modifications thereto and repairs or replacements thereof.
4 Defined as the transmission infrastructure (including transmission, substation, protection, control and communication facilities, as applicable) that is directly connected to the BC Hydro System and that indirectly connects the Seller’s Plant to the POI.
5 Defined as biomass, biogas, geothermal heat, hydro, solar, ocean, wind or any other prescribed resource, as stated in the Clean Energy Act, [SBC 2010] Chapter 22.
6 Defined as any band, Aboriginal treaty nation, or other Aboriginal governing body that is established by Aboriginal people who, collectively and for their nation, possess the rights under Section 35, Constitution Act, 1982 in their asserted traditional territory.
7 Defined as the price that results after applying adjustments for evaluation purposes.
8 Defined as the proposed sale price of electricity indicated by the proponent in its commercial proposal.
10 Delivered Energy means, in an hour during the Energy Delivery Period, the amount of Turn-Down Energy in that hour for which BC Hydro is required to pay the Seller, and the amount of Constrained Energy in that hour for which the Buyer is required to pay the Seller.
11 Defined as the period of time from COD until the end of the Term.
12 Defined as the lesser of the amount of energy that could have been delivered but for the Seller’s compliance with a curtailment request less any amount of Delivered Energy and the hourly limit less the amount of Delivered Energy in an hour.
13 Defined as is the lesser of the amount of energy that could have been delivered but for the occurrence of a BC Hydro System Constraint, less any amount of Delivered Energy, and the hourly limit less any amount of Delivered Energy.
14 Defined as a legal claim or proceeding that alleges adverse impacts on the established or potential aboriginal rights due to the EPA, the Seller's plant, or the interconnection, that breach any First Nation’s rights under Section 35 of the Constitution Act, 1982.
15 Defined as any lender(s) providing any debt financing or debt hedging facilities for the design, engineering, construction and/or operation of the Seller’s Plant and any successors or assigns thereto, or any Person taking any mortgage, pledge, charge or grant of a security interest in all or any part of the Seller’s Plant or this EPA.