4.17. The feed-in tariff programme (FIT Programme)394 is a scheme implemented by the
Government of Ontario in 2009 to increase the supply of electricity generated from certain renewable sources of energy into the Ontario electricity system.395 It is the third in a series of
initiatives adopted by the Government of Ontario since 2004 to diversify its energy supply-mix and help replace coal-fired facilities.396 The FIT Programme was formally launched by the OPA in 2009
pursuant to the Direction of the Ontario Minister of Energy and Infrastructure397 (Minister's 2009
FIT Direction) acting under the authority of the Electricity Act of 1998, as amended by the Green Energy and Green Economy Act of 2009.398 Generators participating in the FIT Programme "are
paid a guaranteed price per kWh of electricity delivered into the Ontario electricity system under 20-year or 40-year contracts with the OPA".399 Participation in the FIT Programme is open to
388 Panel Reports, para. 7.298.
389 Panel Reports, para. 7.60 (referring to IESO, Settlement Statements and Invoices: Marketplace Training (December 2010) (Panel Exhibit JPN-62), p. 1).
390 Panel Reports, para. 7.57. 391 Panel Reports, para. 7.57.
392 Panel Reports, para. 7.57. (fn omitted) The Panel further noted that RPP prices vary according to the type of meter used by the customer (conventional or smart). (Ibid., para. 7.58)
393 Panel Reports, para. 7.59 (referring to IESO webpage, "Global Adjustment" (Panel Exhibit JPN-75), available at: <http://www.ieso.ca/imoweb/b100/b100_ga.asp>).
394 The complainants challenge the WTO-consistency of the FIT Programme, the individual FIT Contracts utilizing wind and solar PV sources and the individual microFIT Contracts utilizing a solar PV source executed by the OPA since the FIT Programme's inception. The complainants argue that the FIT Programme is evidenced by a number of measures listed supra in para. 1.2.
395 Panel Reports, para. 7.65.
396 The Panel found that the two earlier initiatives were the RES I (2004), II (2005), and III (2008), and the RESOP (2006). The Panel further determined that:
[u]nder the RES initiative, the OPA awarded supply contracts through a competitive bidding process which set prices for delivered electricity at the levels of the lowest bids meeting the specified conditions. ... Under the RESOP, the prices paid to solar PV generators are based primarily on the principle of cost recovery. For non-solar RESOP generators, prices are based on those applied under the RES initiative.
(Panel Reports, para. 7.29 (fn omitted))
397 Direction dated 24 September 2009 from George Smitherman, Deputy Premier and Minister of Energy and Infrastructure, to Colin Andersen, Chief Executive Officer, Ontario Power Authority (OPA), directing the OPA to develop a feed-in tariff (FIT) programme (Panel Exhibit JPN-102), and to include a requirement that the applicant submit a plan for meeting the domestic (i.e. Ontario) content goals in the FIT Rules.
398 An Act to enact the Green Energy Act, 2009 and to build a green economy, to repeal the Energy Conservation Leadership Act, 2006 and the Energy Efficiency Act and to amend other statutes, Service Ontario 2009, Chapter 12 (Panel Exhibit JPN-101). See Panel Reports, paras. 7.65 and 7.195.
facilities located in Ontario that produce electricity from the following renewable energy sources: wind, solar PV, renewable biomass, biogas, landfill gas, and waterpower.400
4.18. The FIT Programme is divided into two streams: (i) the FIT stream – for all renewable energy projects with a capacity to produce electricity over 10 kilowatts (kW), except for solar PV projects, which must have a capacity of over 10 kW and no more than 10 MW, and waterpower projects, which must have a capacity of over 10 kW and no more than 50 MW; and (ii) the microFIT stream – for projects having a capacity to produce up to 10 kW of electricity. Participants under the microFIT stream are typically small household, farm, or business generation projects.401
4.19. The OPA implements the FIT Programme through the application of a standard set of rules, standard contracts (i.e. FIT and microFIT Contracts) and, for each class of generation technology, standard pricing. The standard rules are found in a series of instruments, including the FIT and microFIT Rules developed by the OPA402, the IESO Market Rules403, and the IESO Market
Manual.404 The Panel found that, in order fully to understand the parties' contractual rights and
obligations, the FIT and microFIT Contracts must be read together with, respectively, the FIT and microFIT Rules.405
4.20. An entity that enters into a FIT or microFIT Contract is required to, inter alia, build, operate, and maintain the approved generation facility in accordance with all relevant laws and regulations, and deliver the electricity produced into the Ontario electricity system. In return for performing these and other contractual obligations, such entity will be remunerated, over the term of the particular contract, in accordance with a formula that is based on a standard "Contract Price" established by the OPA.406
4.21. In addition to these obligations, the FIT Programme imposes "Minimum Required Domestic Content Levels" that must be satisfied in the development and construction of solar PV electricity generation facilities participating in both streams of the FIT Programme and of windpower electricity generation facilities taking part in the FIT stream. The Minimum Required Domestic Content Levels do not apply to qualifying projects using any of the other renewable energy sources covered by the FIT Programme.407 The applicable Minimum Required Domestic Content Levels
prescribed under both streams of the FIT Programme are summarized in Table 1 at paragraph 1.4 of these Reports.
4.22. Under the FIT stream, the "Domestic Content Level" of a facility is calculated pursuant to the methodology set out in Exhibit D of the FIT Contract. Exhibit D contains four different Domestic Content Grids, each of which identifies a range of different Designated Activities and an associated qualifying percentage.408 The two Domestic Content Grids under the microFIT stream
are set forth in Appendix C to the microFIT Contract.409 For each Designated Activity that is
performed in relation to a "Contract Facility", an associated qualifying percentage will be
400 Panel Reports, para. 7.66. Under the FIT Programme, all renewable fuels other than waterpower are awarded 20-year contracts. Waterpower facilities are awarded 40-year contracts. (Ibid., paras. 7.64
and 7.195)
401 Panel Reports, para. 7.66 (referring to FIT Rules Exhibit (version 1.5.1), Section 2.1(a)(iii); and microFIT Rules (version 1.6.1), Section 2.1(a)(iv)).
402 The FIT and microFIT Rules set out, inter alia: (i) the project eligibility and application requirements; (ii) the tests for the connection of the project to the Ontario electricity system; and (iii) an overview of some of the key aspects of the respective contract, such as the duration, price, and settlement of payments. (Panel Reports, paras. 7.199 and 7.210)
403 The Panel found that "[t]he IESO Market Rules govern the IESO-controlled grid, including the terms and conditions pursuant to which payments due to electricity generators participating in the 'IESO-
administered markets' will be settled." (Panel Reports, para. 7.204)
404 Panel Reports, para. 7.67. The Panel found that Part 5.5 of the IESO Market Manual provides detailed instructions on how the GA is to be determined and settled. (Ibid., para. 7.54 (referring to IESO Market Manual, Part 5.5 (Panel Exhibit JPN-82), Sections 1.6.7 and 1.6.11))
405 Panel Reports, paras. 7.199 and 7.210.
406 Panel Reports, para. 7.68 (referring to FIT Rules (version 1.5.1), Sections 7.1(a), 7.1(b),
and 10.1(a); FIT Price Schedule, 3 June 2011 (Panel Exhibit JPN-30); FIT Contract (version 1.5.1), Article 3.1 and Exhibit B; and microFIT Price Schedule, 13 August 2010 (Panel Exhibit JPN-31).
407 Panel Reports, para. 7.64.
408 Panel Reports, para. 7.159 (referring to FIT Contract (version 1.5.1), Exhibit D).
409 Panel Reports, paras. 7.159 and 7.161 (referring to microFIT Rules (version 1.6.1), Definitions, pp. 14-16).
achieved.410 A project's Domestic Content Level is determined by adding up the qualifying
percentages associated with all of the Designated Activities performed in relation to that particular project. The Panel found that, pursuant to the Minimum Required Domestic Content Levels imposed by the FIT Programme, at least some Ontario-sourced goods (in particular, renewable energy generation equipment and components) must be used by FIT and microFIT suppliers utilizing solar PV technology and by FIT generators using windpower technology.411
4.23. The FIT and microFIT Contract Prices are established by the OPA and published in the FIT and microFIT Price Schedules.412 Such prices are intended to cover the development costs plus
a reasonable rate of return over the duration of the FIT and microFIT Contracts.413 The Panel found
that "[t]he after tax rate of return on equity used to develop the FIT Price Schedule in 2009 was 11%."414 The OPA has ultimate contractual liability for all FIT and microFIT "Contract Payments".
However, in practice, the actual payments are made by a combination of the OPA, the IESO, and relevant LDCs.415 In particular, under the settlement process for payments to transmission-
connected FIT suppliers, in the event that the GA is positive, the IESO transfers the MCP/HOEP directly to FIT generators, while the GA is paid to generators by the OPA.416 By contrast,
distribution-connected FIT and microFIT suppliers receive their full Contract Payments (i.e. the HOEP plus the GA) from the relevant LDC to which they are connected. The relevant LDC then seeks reimbursement of the GA from the OPA via the IESO.417