Introduction
BC Hydro recently concluded another round of public engagements regarding its recent call for clean and renewable energy resources ("Call for Power"). BC Hydro held sessions on November 28 – 30th with First Nations, independent power producers ("IPPs") and other stakeholders.
In the materials released for the November engagement sessions, BC Hydro provided an Energy Purchase Agreement ("EPA") term sheet, draft Request for Proposal ("RFP") terms, and an overview of its proposed "Fist Nations Economic Participation Model" that will include both a minimum equity participation of 25% and additional evaluation criteria for additional equity interest up to 51% and other economic benefits provided to First Nations.
In this article, we focus on BC Hydro's proposed First Nations Economic Participation Model and summarize some of the key terms of the EPA and RFP specific to First Nation participation. We also compare BC Hydro's proposed First Nations Economic Participation Model to SaskPower's Indigenous requirements in its recent request for solar and wind power in South Central Saskatchewan.
Overall, BC Hydro is demonstrating a commitment to economic reconciliation as a key component of its Call for Power and has proposed a useful framework for First Nations participation that allows flexibility and transparent evaluation criteria. However, there are clear shortcomings in BC Hydro's initial draft including a lack of guidance around community benefits like minimum Indigenous employment and training requirements, community capacity-building investment, or compensation for traditional land uses that we hope are addressed before an official RFP is issued in 2024.
Background on the Call for Power
On June 15, 2023, BC Hydro released the Call for Power to address significant resource shortfalls identified in its updated 2021 Integrated Resource Plan ("IRP") which was filed with the British Columbia Utilities Commission ("BCUC") on the same date as the Call for Power.1
BC Hydro filed its 2021 IRP for review by the BCUC in December 2021. In June 2023, BC Hydro filed a "Signpost Update", amending and updating the 2021 IRP. Among other things, the Signpost Update included changes to BC Hydro's resource outlook due to increased electrification and decreased supply. As a near-term action, BC Hydro is looking to procure approximately 700 GWh of new "clean or renewable energy"2 from existing facilities, and approximately 3,000 GWh of new clean or renewable energy from greenfield IPP facilities as early as 2029.3
In its updated 2021 IRP, BC Hydro specifically committed to engaging First Nations and stakeholders on the design of a competitive energy acquisition process with a particular focus on how to include a role for First Nations ownership in all projects.4
The updated 2021 IRP remains subject to BCUC approval with final written arguments being submitted over the next two months. Meanwhile, BC Hydro anticipates concluding public engagements on the Call for Power early next year and issuing an RFP in April 2024. The draft EPA term sheet, RFP terms and First Nations Economic Participation Model are published for public comment and are subject to change before the final terms are settled.
Engagement Process
Since the announcing the Call for Power in June, BC Hydro has conducted several public engagement sessions. Phase 1 of the engagement took place between July and August 2023 and a summary report was released on September 13, 2023. Phase two of the engagement included a month of First Nation-specific workshops to discuss possible First Nation participation models. Phase two continued with broader sessions with IPPs, First Nations and other stakeholders to discuss First Nations participation models and other terms of the Call for Power including eligibility requirements, EPA terms, RFP terms and interconnection issues.5
In Phase 2 of its engagement BC Hydro proposed three illustrative models for First Nations participation:6
- First Nations designated proposal. To participate in the call, a proposal must have some level of endorsement from First Nations impacted by the proposed project. This allows the developer and First Nations to develop their own participation agreement. Therefore, Nations are free to endorse as many proposals as they wish. This would be proven by way of a letter of endorsement.
- First Nations Economic Benefits Package. Proposals are given credit based on an assessment of the economic benefits that will accrue to First Nations during the entire life cycle of the project. Specific categories of benefits (e.g., resource royalty payments, jobs and training, community contributions) would be prioritized and given credit during the evaluation process. This would be proven by way of commercial agreements between developer and participating First Nations and may require an evaluation methodology.
- First Nations Equity Ownership. To participate in the Call, a proposal must demonstrate a percentage of First Nations ownership. The model is restricted to one form of economic participation/ benefit: ownership of the company submitting the proposal. Ownership can be held by one First Nation or a consortium of Nations and would be proven by way of an organizational chart and an ownership agreement.
Proposed First Nations Economic Participation Model
The November engagement materials propose a hybrid approach to evaluating a project's First Nation participation, requiring mandatory 25% Indigenous ownership of the project to be eligible for the RFP, and extra points for additional equity ownership or other economic benefits to non-equity-owning First Nations where the project is situated.
BC Hydro summarized the components of the proposed First Nation Proposals in the following table:7
BC Hydro will apply the credits in the table above to reduce the bid price for project proposals, effectively making their bids more cost effective in the evaluation process.
BC Hydro is calling this an "Equity Plus" model that strikes the appropriate balance, responds to the feedback it received during public engagement sessions and reflects the unique circumstances of various First Nations by providing flexibility.
Other First Nations-Specific Terms
EPA Term Sheet
The EPA Term Sheet suggests that the EPA will include First-Nation-specific conditions, including BC Hydro's "typical" EPA rights and Seller obligations regarding consultation and accommodation.
Looking at the Looking at the Specimen EPA released under BC Hydro's EPA Renewal Program in January 2023 as an example, this will likely include limited rights to invoke Force Majeure in certain instances where BC Hydro fails (or is alleged to have failed) to adequately consult and/or accommodate First Nations,8 and limited rights for the parties to terminate the EPA in the event of an "Aboriginal Claim" against the project and the ability for BC Hydro to delegate consultation and accommodation responsibilities to the IPP.9
The Term Sheet also suggests that there may be specific provisions to enforce the minimum First Nations ownership of the project or specify other benefits to be provided to the community.
RFP Terms
Project proposals must provide details on the First Nations Economic Participation Model and First Nations consultation. The RFP terms include 25% First Nations ownership as an eligibility criterion while adequacy of First Nations consultation, additional equity ownership and other economic benefits will be assessed as optional evaluation criteria.10
Notably, this means a letter of support from non-equity owning First Nations on whose lands the project is located is not currently a mandatory criterion.
Comparison to SaskPower Indigenous Participation Requirements
For comparison, recent procurements of solar and wind power by SaskPower in Saskatchewan also use an "Equity Plus" model to evaluate proposals, with some differences.11 SaskPower is requiring only 10% minimum participation but will provide evaluation points for additional equity ownership up to 51%. Proponents can receive up to 5 points for Indigenous ownership above the 10% minimum on a pro-rated sliding scale as follows: (1) equity ownership between 10% and 30% will be worth between 0 to 4 points, respectively; and (2) in addition, equity ownership greater than 30% and up to 51% or greater will be worth 0 to 1 point, respectively.
For other economic benefits, SaskPower will evaluate projects on their use of "Indigenous Person Hours" in project construction (which will be an express requirement under the awarded SaskPower power purchase agreement). Proponents will receive a score based on the percentage of Indigenous Person Hours used during construction relative to the highest percentage proposed by a proponent (the highest percentage will receive full marks and set the bar for all other proponents).
In contrast, BC Hydro has not included any parameters around minimum Indigenous work requirements or community capacity building. It seems that BC Hydro's proposed approach is to allow parties to negotiate these details privately, assuming that First Nations will provide a letter of support in exchange for these kinds of benefits.
SaskPower will also consider an "Indigenous Engagement and Community Benefits Plan" submitted by each proponent describing plans to engage Indigenous communities and how benefits will flow to the community. The Indigenous Engagement and Community Benefits Plan must be accompanied by a letter of support from the applicable community. SaskPower's RFP materials do not provide a formula for scoring Indigenous engagement and community benefits, and simply state that proponents will "receive a score" on their Indigenous Engagement and Community Benefits Plan based on its effectiveness in achieving the prescribed objectives.12
What SaskPower's engagement and community benefits assessment lacks in an objective evaluation metric, it makes up for in providing better guidance on what constitutes engagement and community benefits and requiring proponents to submit a detailed engagement and benefits plan, not just a letter of support. In contrast, BC Hydro's use of bid price adjustments may provide a measure of certainty and transparency in its evaluation of submissions (i.e., $1 per MW for each letter of support), but provides zero guidance as to what constitutes a community benefit.
Moreover, BC Hydro's proposed requirement for a letter of support is not mandatory and can only come from non-equity-owning First Nations on whose lands the project is located. Meanwhile SaskPower's Indigenous engagement and community benefits requirements are mandatory and expressly includes both equity-owning and non-equity-owning communities. It is not clear to us why BC Hydro proponents cannot receive credit for letters of support provided by equity-owning First Nations. It appears that BC Hydro's stance is that equity-owning First Nations support for the project is implied by their equity ownership and they are only considering "additional economic benefits, other than equity ownership".13 However, in our view, there is no principled reason to exclude First Nations from other economic benefits simply because they hold equity in a project. Equity ownership and community benefits are distinct and deserve separate evaluation given the importance of capacity building and participation in project beyond merely economic interest.
To be fair, BC Hydro's draft First Nations Economic Participation Model is still in early form and will be refined and expanded before the Call for Power RFP is released next year. But the lack of detail around other economic benefits is surprising given the extensive engagement that has already taken place and the comments BC Hydro has already received.
For example, BC Hydro received feedback in its First Nations workshops that community endorsement is desirable because it provides flexibility to IPPs and First Nations to privately agree on benefits behind-the-scenes, but, on the other hand, several concerns were raised including First Nations' capacity to negotiate a good agreement without set parameters, that an endorsement from First Nation leadership does not necessarily equate to community benefits, and the risk that a bare requirement for a community endorsement could incentivize IPPs to shop for First Nations willing to take the lowest financial benefits.14
Conclusion
Overall, both BC Hydro and SaskPower have adopted an "Equity Plus" First Nation participation model, but there are some key differences, and we expect to see more details come from BC Hydro in the early months of 2024. In particular, we hope to see better guidance around community benefits including minimum parameters for a letter of support from First Nations (e.g., minimum Indigenous employment and training requirements or other community capacity-building investment) and for this to become a mandatory requirement.
Interested parties can submit comments on the draft First Nations Economic Participation Model through BC Hydro's public engagement survey here.
If you are an IPP or First Nation interested in participating in BC Hydro's Call for Power or looking for further information, please reach out to us. Our Energy Group lawyers have experience and expertise in public procurement and renewable energy development across Canada and can provide a wide range of advice and services.
Footnotes
1 BC Updated IRP was filed in response to an order of the BC Utilities Commission (Order No. G-75-23).
2 As defined in the Clean Energy Act (BC): "biomass, biogas, geothermal heat, hydro, solar, ocean, wind or any other prescribed resource".
3 June 15, 2023, BC Hydro 2021 Integrated Resource Plan Application Signposts Update, online (pdf): BCUC <https://docs.bcuc.com/documents/proceedings/2023/doc_71932_b-39-bch-signposts-update.pdf>, pp 73.
4 Ibid, Section 5.2.5.
5 BC Hydro 2024 Call for Power October Engagement Package A: Call Elements and Draft Terms for Feedback, online (pdf): BC Hydro < https://www.bchydro.com/content/dam/BCHydro/customer-portal/documents/corporate/independent-power-producers-calls-for-power/independent-power-producers/CFP-October-2023-Engagement-Guide-Package-A.pdf>.
6 Ibid, p 4.
7 BC Hydro 2024 Call for Power November Engagement Package B: First Nations Participation Model, EPA Term Sheet and RFP Summary, online (pdf): BC Hydro < https://www.bchydro.com/content/dam/BCHydro/customer-portal/documents/corporate/independent-power-producers-calls-for-power/independent-power-producers/cfp-november-2023-engagement-package-b.pdf>, p 2.
8 Specimen EPA, Section 8.9.
9 Specimen EPA, Article 9.
10 BC Hydro 2024 Call for Power November Engagement Package B: First Nations Participation Model, EPA Term Sheet and RFP Summary, online (pdf): BC Hydro < https://www.bchydro.com/content/dam/BCHydro/customer-portal/documents/corporate/independent-power-producers-calls-for-power/independent-power-producers/cfp-november-2023-engagement-package-b.pdf>, p 22.
11 SaskPower Request for Proposals, Two 200 MW South-Central Wind Generation Inquiry #1011031 [SaskPower Wind RFP]; SaskPower Request for Proposals Two 100 MW South-Central Solar Generation Inquiry #1011473 [SaskPower Solar RFP].
12 SaskPower Solar RFP, pp 90 – 91; SaskPower Wind RFP, pp 87 – 88.
13 BC Hydro 2024 Call for Power November Engagement Package B: First Nations Participation Model, EPA Term Sheet and RFP Summary, online (pdf): BC Hydro < https://www.bchydro.com/content/dam/BCHydro/customer-portal/documents/corporate/independent-power-producers-calls-for-power/independent-power-producers/cfp-november-2023-engagement-package-b.pdf>, p 2.
14 BC Hydro Phase 2 First Nations Workshops Engagement Summary, online (pdf): BC Hydro https://www.bchydro.com/content/dam/BCHydro/customer-portal/documents/corporate/independent-power-producers-calls-for-power/independent-power-producers/phase-2-first-nations-workshop-engagement-summary-report.pdf.
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