CanSIA SUB Interim Order 20110708

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    Suite 300079 Wellington St. W.Box 270, TD CentreToronto, OntarioM5K 1N2 CanadaTel 416.865.0040Fax 416.865.7380www.torys.com

    July 8, 2011RESS & CourierOntario Energy BoardP.O. Box 23192300 Yonge Street, 27th FloorToronto, ON M4P 1E4Attention:s. K. Walli, Board SecretaryDear Ms. Walli,Re: Submissions of CanSIA re Application by Hydro One Networks Inc. for 6-Month Exemption from Timelines to Connect Micro-Embedded Generators

    (EB-2o11-o118)We are counsel to the Canadian Solar Industries Association ("CanSIA") in respect of theapplication (the "Application")by Hydro One Networks Inc. (the "Applicant") for a 6-monthexemption from the timelines for connecting micro-embedded generators (EB-2o11-o118).CanSIA is a national trade association that represents approximately 700 solar energycompanies throughout Canada, the majority of which operate in Ontario. Since 1992, CanSIAhas worked to develop a strong, efficient, ethical and professional Canadian solar energyindustry with the capacity to provide innovative solar energy solutions and to play a major rolein the global transition to a sustainable, clean-energy future. Among CanSIA's members arecompanies that have established manufacturing and other facilities that serve the solar industryand the market for solar products and services in Ontario, including the needs of micro-embedded solar generators. Accordingly, the Application is of particular interest and concern toCanSIA and its members.The revised Notice of Application and Written Hearing issued by the Board on June 22, 2011provides an opportunity for parties to make submissions (a) if they object to the Board holding awritten hearing in this matter, and (b) with respect to the Applicant's request for an interimorder relieving the Applicant of its obligations under Sections 6.2.6 and 6.2.7 of the DistributionSystem Code (the "DSC") from the date of the Application until the date the Board renders afinal decision (the"Interim Order"). As set out in the detailed submissions that follow, whichare further to the intervenor request letter filed on CanSIA's behalf on June 24, 2011, it isCanSIA's view that (a) the matter should proceed by way of an oral hearing, and (2) that therequested Interim Order should be denied.

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    A. The Matter Should Proceed by Way of Oral HearingIn CanSIA's view, this matter should proceed by way of an oral hearing primarily because theApplication gives rise to complex and technical issues that could better and more efficiently beunderstood by the Board and by all parties through an oral hearing. With respect to thetechnical nature of the issues raised by the Application, it is CanSIA's expectation that thehearing will involve consideration of the Applicant's operating assumptions and screeningcriteria, as well as interconnection requirements, procedures and standards from the Applicantand in other jurisdictions. Through cross-examination, an oral hearing would provide a betteropportunity than would a written hearing for understanding and thoroughly testing theApplicant's evidence concerning its business and technical processes that are relevant to theconnection of micro-embedded renewable generation facilities, as well as the Applicant'sapproaches to planning and allocating resources for this purpose. An oral hearing would alsooffer a better opportunity for parties to consider various alternative means for addressing theunderlying challenge to the Applicant of dealing with the significant backlog of micro-embeddedgeneration connection applications.Furthermore, an oral hearing would enable CanSIA, and any other intervenors that may sochoose, to put forward their own evidence and/or to call expert witnesses to contradict theApplicant's evidence. The Application has the potential to significantly impact numerousstakeholders, including manufacturers of solar components, installers and service-providerswho service the needs of micro-embedded generator applicants, as well as generator applicantsthemselves. A written hearing, in CanSIA's view, would not provide the Board with sufficientopportunity to understand the wide-ranging impacts on these stakeholders of the Applicant'sdelays in processing connection applications, or the potential impacts on these stakeholders ifthe Application were to be granted.B. The Request for an Interim Order Should be DeniedThe Interim Order would relieve the Applicant of its obligations under Sections 6.2.6 and 6.2.7of the DSC from April 17, 2011, the date of the Application, until the date the Board renders afinal decision. In CanSIA's view, this request should be denied because: the granting of the Interim Order would give rise to significant adverse impacts,particularly on the solar industry in Ontario; the impacts of the Interim Order would be irreparable and could not be adjusted in theevent that the final decision either (a) denies the Applicant's request or (b) grants the

    request with conditions that cannot be applied retrospectively; the Applicant has not demonstrated that the Interim Order is needed to mitigate any

    effects that may be caused by the length of the proceeding; the Applicant has not established a prima facie need for the Interim Order; the Application, including the Interim Order request, was not filed until at least fivemonths after the Applicant first became non-compliant and the Interim Order wouldcause this already lengthy period of non-compliance to be even longer; the Interim Order would serve as a disincentive to the Applicant in clearing the backlogof connection applications; and

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    o issue the Interim Order would not be consistent with the Board's statutory objective ofpromoting the use and generation of electricity from renewable energy sources in amanner consistent with the policies of the Government of Ontario, including the timelyexpansion or reinforcement of distribution systems to accommodate the connection ofrenewable energy generation facilities.

    These considerations are discussed as follows.1.ignificant Impacts on Solar Industry in OntarioThe Interim Order, if granted, would have significant adverse impacts on the solar industry inOntario. The key stakeholders within the solar industry that would be affected are (a)manufacturers of solar components such as panels, inverters and racking, (b) installers, (c)distributors of solar components, and (d) project developers/generators. The majority of thesestakeholders that are active within the Ontario market are either start-ups that have emergedover the past few years in response to the Government of Ontario's green energy policies or areOntario-based affiliates of companies that are active in this sector internationally and who haveinvested significantly in Ontario in response to the Government's green energy policies.Generally, investment decisions by these stakeholders have been made with significantconsideration having been given to the regulatory regime existing in Ontario, including theregulatory requirements concerning timelines for obtaining connections of generation projectsto local distribution systems or transmission systems, as applicable. The requirements withrespect to the timing for connections is critical because it influences the entire supply chain.Due to the significant connection delays already experienced by would-be micro-embedded solargenerators, including by those seeking to connect to the Applicant's distribution system, thesolar industry in Ontario is facing very significant challenges. These challenges will be greatlyexacerbated by the heightened uncertainty that would result from the granting of the InterimOrder.To better understand the concerns of its members and the potential impacts of the Application,and the Interim Order request in particular, CanSIA circulated a short questionnaire to those ofits members that are in CanSIA's Ontario PV Caucus. The responses CanSIA received werecompiled into a table that is set out in the letter provided in Appendix 'A'. These responsesdemonstrate the very significant repercussions of the delays by Hydro One to date, as well as theexpected consequences of further delays in connecting microFlT projects. In particular, as theresponses indicate, the greater uncertainty and further delays that would be brought about bythe Interim Order would likely have a significant chilling effect on investment and employmentwithin the solar industry in Ontario. In particular, demand for solar components and relatedservices would be expected to drop due to uncertainty as to the timing for obtainingconnections. Investments in manufacturing facilities would correspondinglybe expected todrop due to anticipated lower demand for solar components. Manufacturers, installers anddistributors would continue to accrue significant unanticipated costs for the storage of materialsand components that have already been produced but that cannot yet be installed due toconnection delays on the part of the Applicant. Financing costs at all levels within the industrywould continue to accrue to manufacturers and developers but without any revenue coming into help cover such costs. While some businesses will be forced to shut down or further scaleback operations, the growing opportunity cost of continuing to operate in Ontario as comparedto elsewhere would be expected to result in a number of manufacturers, installers anddevelopers relocating to other jurisdictions. Moreover, staffing levels at companies in all areasof the sector would likely be impacted. It is important to also recognize that these effects wouldbe magnified by the fact that the period that would be covered by the Interim Order coincideswith the prime installation season for micro-embedded solar generation facilities.

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    The granting of the Interim Order would also be expected to give rise to a reasonable fear withinthe industry that the exemptions, if provided, are the beginning of a series of further setbacksthat would include even longer exemptions, other types of exemptions, as well as exemptionsfrom the timing requirements applicable to larger renewable generation projects.2.fects Cannot be Retrospectively AdjustedIt is not be appropriate for the Board to issue an interim order where the effects of an interimorder cannot be retrospectively adjusted by the Board. In EB-2007-o9o5, the Board considereda payment amounts application from Ontario Power Generation. As part of this proceeding,Ontario Power Generation filed a motion for an interim order to make its then current paymentamounts interim, pending the Board's final determination of the payment amounts application.In its oral decision on the motion, the Board describes the essential characteristics of an interimorder, as follows:

    First, an Interim Order does not require any decision on the merits of an issue.That will be settled in the final decision. The purpose of an Interim Order is toprovide relief for any deleterious effects caused by the length of the proceedings.Secondly. anInterim Order is temporary. It can be changed retrospectively oncethe final determination is made. Thirdly, an Interim Order assumes and requiresthat a final order will be made.' (emphasis added)

    In CanSIA's view, this should be a significant consideration for the Board in determining theApplicant's request for the Interim Order. By its very nature, an interim order is not based onthe merits of the underlying application or on the merits of an issue raised in the underlyingapplication. Rather, the applicant must establish a prima facie need for an interim order.Accordingly, when issuing an interim order, the Board must ensure that it preserves its ability toadjust or undo the implications of such interim order in the event that the final decision on themerits of the application so warrants. The need for such retrospective adjustment could arisewhere an application is ultimately not successful or where an application is successful but theBoard imposes conditions on the applicant and determines that such conditions should applyfrom the effective date of the interim order. Therefore, when considering the Applicant'srequest for the Interim Order, the Board will need to consider whether the effects of the InterimOrder are, in fact, reversible.In the rate-setting context, where the use of interim rate orders is not uncommon, the effects ofan interim order can be adjusted by deeming a rate or payment amount to have appliedretrospectively to the date of the interim order. Any over-recovery or under-recovery that mayhave resulted from such interim order can effectively be undone through adjustments to thefinal approved rates or payment amounts or such other means as the Board may determine.However, the Applicant's request for the Interim Order is an unusual request because the effectsof such order would not be reversible. The significant and wide ranging impacts of therequested Interim Order on the solar industry in Ontario, as described above and in Appendix`A', would not be effects that the Board would be capable of retrospectively adjusting uponissuing a final decision on the merits of the Application.

    Transcript, Motion for Interim Order, EB-2007-0905, February 7, 2008 at p. 112.

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    3. No Deleterious Effects on Applicant Due to Length of ProceedingAs cited above from the Board's decision on OPG's motion for an interim payment amountorder, in describing the essential characteristics of an interim order the Board stated that "thepurpose of an Interim Order is to provide relief for any deleterious effects caused by the lengthof the proceedings." The Applicant raises no specific concerns in the Application about anypotential deleterious effects that will be caused by or which may be caused by the length of theproceedings. Moreover, the Applicant does not raise any concerns in the Application about thetimelines for the proceeding or the need for the Application to be considered, from the outset,on an expedited basis. In CanSIA's view, this indicates that the Applicant is not at risk ofsuffering any deleterious effects due to the length of the proceeding. The Application was notbrought on an expeditious basis but, rather, was filed nearly five-months following the date thatthe Applicant first acknowledged its non-compliance to the Board. This raises serious questionsas to the urgency and need for the relief being sought by the Interim Order. The delay in filingthe Application, including in particular the Interim Order request, is especially troublingbecause of the importance for code commitments and service quality requirements to be takenseriously and addressed on a priority basis by regulated utilities.

    4. Unreasonably Long Period of Non-ComplianceIf the Interim Order were to be granted and the Application on its merits is ultimatelysuccessful, then the total period over which the Applicant will have been permitted by the Boardto remain out of compliance will be unreasonably long. Although it is not clear from theApplication as to when the Applicant actually became non-compliant, the Applicantacknowledges that it first notified the Board on November 25, 2010 that it was out of compliancewith Sections 6.2.6 and 6.2.7 of the DSC. The Applicant has since remained non-compliant butdid not file the Application until April 17, 2011,which was approximately five months after firstnotifying the Board. The Applicant should not be entitled to benefit from its own delay in filingthe Application.The Interim Order sought by the Applicant would exempt the Applicant from obligations underSections 6.2.6 and 6.2.7 of the DSC effective as of April 17, 2011and until such time as the Boardrenders a decision on the merits of the Application. Based on experience, it is our estimate thatsuch a decision would not be rendered until approximately September 2011. If successful, anexemption would then apply for six months, until approximately March 2012. In thesecircumstances, and assuming that the Applicant can achieve full compliance following the six-month exemption, the Applicant will have effectively been permitted by the Board to haveremained out of compliance for a period of at least 16 months without any regulatoryconsequences. In CanSIA's view, recognizing the significant and far-reaching impacts of theApplicant's non-compliance as described above, this would not be reasonable. Moreover,CanSIA is concerned about the signal that such a lengthy exemption would send, both to theApplicant with respect to any other compliance issues it may be facing or may face in the future,as well as to other licenced electricity market participants who encounter challenges in meetingregulatory requirements.5. Interim Order Would Serve No PurposeIt is not clear what the Applicant's purpose is in requesting the Interim Order. As noted, theApplicant has been out of compliance with Sections 6.2.6 and 6.2.7 of the DSC on a continuousbasis since at least late November 2010. The Applicant offers no reasons or explanation in theApplication as to why it believes that the Interim Order is needed or what purpose it would serveif granted.

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    In CanSIA's view, the only potential impact on the Applicant of receiving the Interim Orderappears to be that such order may forestall compliance or enforcement measures, such asadministrative penalties or charges, from being imposed on the Applicant by the Board.2However, the Applicant has not suggested in its Application that it is facing any imminent risk ofreceiving an administrative penalty or of being charged or of being subject to any othercompliance or enforcement measures by the Board. In any event, it is CanSIA's view that theInterim Order should not be a means to mitigate the risk to the Applicant of being subject tocompliance or enforcement measures in these circumstances, where the Applicant is already outof compliance and such non-compliance has already continued over an extended period.6.isincentive to Promptly Resolving BacklogThe Interim Order would provide a disincentive to the Applicant in addressing the underlyingproblem of there being a backlog of connection applications from micro-embedded generators.In CanSIA's view, one of the most important compliance tools available to the Board is its abilityto maintain a credible threat to regulated entities that such entities will be subjected tocompliance or enforcement measures in circumstances of non-compliance with regulatoryrequirements. The risk of receiving an administrative penalty or being charged provides astrong incentive to a regulated entity for maintaining compliance or for promptly achievingcompliance where circumstances have led it to fall out of compliance. By issuing the InterimOrder, the Board would effectively be relieving the Applicant of this risk for the period coveredby such Interim Order, thereby providing a disincentive to the Applicant with respect toaddressing the backlog. In CanSIA's view, the Interim Order is counter-productive to theobjective of eliminating the backlog of connection applications, particularly because therequested Interim Order would apply during the prime installation season for the majority ofmicro-embedded generation facilities.Related to the objective of eliminating the backlog, we note from the Application that theApplicant intends to continue to screen and assess applications using "reasonable commercialefforts" during the requested exemption period. We assume that, should the Board grant theInterim Order, the Applicant would be required to similarly continue to screen and assessapplications using reasonable commercial efforts during the period that would be covered bysuch Interim Order. We further assume that "reasonable commercial efforts" in this contextwould refer to the level of effort that a reasonable regulated utility of the size and sophisticationof the Applicant would be expected to make in circumstances where it is attempting to achievecompliance with regulatory requirements that it has been in breach of for a protracted periodand where the impacts of such non-compliance are significant and far-reaching. In CanSIA'sview, this calls for an extraordinary level of effort rather than a 'business as usual' level of efforton the part of the Applicant.

    2For example, under Section 112.5 of the Ontario Energy Board Act (the "Act"), if the Board is satisfiedthat a person has contravened an enforceable provision, which would include a licence condition thatrequires a licencee to comply with the DSC, then the Board may make an order requiring a person to payan administrative penalty of up to $20,000 per day for each day or part of a day on which thecontravention occurred or continues. The purpose of such an administrative penalty would be to promotecompliance with the requirements established by the Act and the regulations thereunder. Moreover,Section 126(1) of the Act makes it an offence where a person fails to comply with a condition of a licenceissued under the Act. A corporation convicted of such an offence could be liable to a fine of up to$250,000 for a first offence or up to $1,000,000 for a subsequent offence.

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    7. Not Consistent With Board MandateIn CanSIA's view, to issue the requested Interim Order would not be consistent with the Board'sstatutory objective, set out in Section 1(1)5 of the Ontario Energy Board Act, of promoting "theuse and generation of electricity from renewable energy sources in a manner consistent with thepolicies of the Government of Ontario, including the timely expansion or reinforcement ofdistribution systems to accommodate the connection of renewable energy generation facilities".As described, the granting of the Interim Order would have a significant chilling effect on thesolar industry in Ontario, which is already in a vulnerable position due primarily to connectiondelays experienced by solar generators to date. It is well known that it is a policy of theGovernment of Ontario to encourage electricity generation from renewable sources and that akey component of this effort is to encourage micro-embedded renewable generation through themicroFlT program of the Ontario Power Authority. It is also well known that a significantaspect of the Government of Ontario's energy policy is the objective of fostering thedevelopment of the renewable energy industry in Ontario by attracting manufacturers ofrenewable energy components and providers of related services. For example, the GreenEnergy and Green Economy Act provides for the application of domestic content requirementsunder the FIT and microFlT programs to attract investment in and support Ontario-basedrenewable energy component manufacturers and service-providers. The Interim Order wouldbring greater uncertainty and result in further financial hardship for many companies andindividuals that are active within this industry including, in particular, manufacturers of solarcomponents and related service-providers who are disproportionately affected by theApplicant's backlog of micro-embedded generator connection applications. An interimexemption from the obligations under Sections 6.2.6 and 6.2.7 of the DSC would not encourageprompt resolution of the backlog problem but, rather, would serve only to further delay theApplicant in achieving compliance with the critically important timelines required by theseprovisions. To encourage such further delays by issuing the Interim Order would, in CanSIA'sview, not be consistent with the Board's mandate.CanSIA appreciates the opportunity to make these submissions and, for the foregoing reasons,submits that the Application should proceed by way of oral hearing and that the Interim Orderrequest be denied.Y.. s uly,

    Jonathan MyersTel [email protected]

    cc :. Johnston, CanSIAP. Catalano, HONIC. Keizer, Torys LLP

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    APPENDIX 'A' - LETTER FROM CANSIA

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    Canadian Solar Industries AssociationL'Assaciation des Industries Solo res du Canada

    Isabolla St., SuitoOttawa., OntarioCANADA KIS 1V7

    T 1 (613) 736,90771 (866) 522..6742

    F I (613) 736 '6938F info,,acansia.ca

    www.cansia.ca

    July 7, 2011Ontario Energy BoardP.O. Box 231923 00 Yonge Street, 27th FloorToronto, ON M4P 1E4Attention:s. K. W alli, Board S ecretaryDear M s. Walli:Re: CanSIA Submission re Interim Order Request by Hydro One in EB-2o11-o118In connection with our submissions on the request for an interim order by Hydro O ne Netw orksInc. in EB-2 o11 -o118 , the Canadian Solar Industries Association ("CanS IA") issued a shortquestionnaire to its Ontario PV C aucus. The O ntario PV Caucu s is comprised of those mem bercomp anies that are most engaged in CanSIA 's working group activities in Ontario. The purposeof the questionnaire was to gain a better understanding of the specific concerns of our mem berswith respect to the potential imp acts of Hy dro On e's request for the interim order and for thesix-mo nth exem ption that it seeks by way of its application in EB-2 on-o11 8.The questions posed to our Ontario PV Caucu s mem bers are set out below. The responses wereceived are provided in a table in Schedule 'A' to this letter. In com piling the response s, theonly changes we have m ade to the responses received have been (1) for purposes of notdisclosing the identity of those companies that did not wish to be identified by nam e, (2)om itting the names and titles of the com pany representatives who prov ided the responses, and(3) m inor changes, such as to correct typographical errors. W e have not altered the substance ofany responses that were provided and w e have included all responses that were received withinthe timeframe w e specified in the questionnaire.QuestionnaireThe following are the exact questions posed and inform ation requested from o ur Ontario PVCaucus on July 6, 2011:

    1.Business Name:2. Business Lo cation:

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    3. Type of Business (i.e. solar panel manufacturer):4. Approximate Number of Employees:5. Name and Title of Individual:6. Has your business been impacted by delays on the part of Hydro One inconnecting microFlT generation projects? If so, please provide a shortdescription of those impacts and be as specific as possible.7. How will your business be impacted if such delays by Hydro One continue overthe next 3-4 months?8. How will your business be impacted if such delays by Hydro One continueover the next 5 months to 1 year?9. May our counsel use this information in submissions to the Ontario EnergyBoard with (a) specific reference to your company, or (b) only generically (i.e. "aToronto-based manufacturer of solar panels")?

    Yours truly,

    i0

    Elizabeth A. McDonaldPresidentTel 613-736-9077 ext. [email protected]

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