Canada: Québec Issues Call For Tenders To Procure 450 MW Of Wind Energy Capacity

On December 18, 2013, Hydro Québec Distribution (HQD), a division of the provincially-owned power utility, Hydro Québec, issued a call for tenders for the purchase of a 450 MW block of wind power capacity. This block is composed of 300 MW to come from wind farms in the Bas-Saint-Laurent and Gaspésie–Îles-de-la-Madeleine regions and 150 MW from projects across Québec.

This call for tenders follows the publication by the Government of Québec of the regulation and Order in Council that confirmed the procurement of this block of wind energy capacity and mandated HQD to proceed with the call for tenders for that purpose by December 31, 2013. Please see our earlier commentary here http://www.gowlings.com/KnowledgeCentre/article.asp?pubID=3086 for more detail on the regulation and Order in Council.

THE CALL FOR TENDERS PROCESS

The document released by HQD for this call for tenders (A/O 2013-01) provides details on the tendering process and the deadlines for its various stages. It also provides the forms to be used by bidders who wish to participate in the tendering process.

Developers and investors should be aware that, in assessing the bids received, HQD must follow a selection process made up of three steps:

1. an evaluation of the bids according to the minimum requirements;
2. a ranking of bids; and
3. a simulation of bid combination scenarios.

Step 1: Evaluation of the Bids according to Minimum Requirements

In the first step of the selection process, each bid is evaluated to determine if it meets the minimum requirements described in the call for tenders document. These 'threshold' requirements include, among other things, the following:

• the price for electricity, excluding the cost of balancing and complementary power service, must not exceed $90.00/MWh (9 cents/kWh) in 2014 dollars, indexed annually to the Consumer Price Index;
• demonstration of local participation in the control of the project representing 50% or more and that the project is recognized by a resolution of the regional county municipality and the local community where the project is located;
• copies of the signed agreements confirming the payment of an annual sum of $5,000 per MW installed on the territory of the local municipality, the regional county municipality or the local "Native" community;
• demonstration of the project capability and experience of the bidder;
• certification that the proposed wind turbines chosen for the project can be installed and operated in cold temperatures and;
• confirmation the proposed project will meet both minimum regional content and broader Québec content requirements.

Step 2: Ranking of Bids

After the threshold requirements of Step 1 have been met, the second step in the selection process involves a ranking of the bids. This is to be carried out according to the proposed weighting table that HQD has submitted for approval to the Régie de l'énergie (Régie), the provincial energy regulator. This weighting table outlines the criteria, and their relative weight out of a total of 100 points, that HQD intends to use to evaluate bids. The highlights of this weighting table are as follows:

• Up to 40 points are allocated to the cost of electricity and
• Up to 60 points are allocated to non-price criteria, including:
• • up to 20 points allocated for the manufacture of strategic components in Québec, including electronic converters, generators, control systems, braking systems, gearboxes, rotor hubs, nacelle orientation systems and pitch systems;
  • up to 5 additional points allocated where the provincial content exceeds 60% of the total costs of the project;
  • up to 15 additional points allocated where the regional content (from the Matanie regional county municipality or the administrative region of Gaspésie-Îles-de-la Madeleine) exceeds 35% of the cost of the wind turbines;
  • up to 20 points awarded for other non-price related criteria, including financial capacity, project feasibility, financing plan, relevant past experience and a consideration of the worldwide market share of the designated wind turbine manufacturer.

Unlike the last call for tenders for wind energy, this call does not include a sustainable development criterion in the weighting table.

Régie Decisions

The weighting table proposed by HQD will be finalized further to hearings before the Régie, which are scheduled to begin on February 10, 2014. The proposed table is subject to the final decision of the Régie, and any changes required by the Régie may be made by HQD by means of an addendum.

In its submissions to the Régie with respect to the evaluation criteria, HQD has emphasized that, at this stage, the Régie's mandate is strictly to ensure that the criteria and weighting for evaluating bids respect the regulation and Order in Council. HQD also submitted that other matters, such as the time frame for the tendering process or the maximum price, are outside the scope of this initial approval by the Régie.

It is also worth noting the Association québécoise des consommateurs en électricité (Québec Association of Electricity Consumers) has challenged the validity of the Order in Council relating to this tendering process to the Régie. This challenge is based, among other things, on the argument that the government cannot proceed with the procurement of additional energy capacity in the context of Québec's significant energy surplus. The hearings for this matter are also due to begin on February 10, 2014.

Step 3: Simulation of Bid Combinations

In the final step of the selection process, the bids with the highest point rankings that meet minimum requirements are analyzed according to their possible combinations with one another to achieve the required procurement of 450 MW of wind energy capacity. These combinations are assessed in detail to identify those that provide the most cost-effective solutions. The combination of these bids that attain the 450MW procurement objective with the lowest average cost, including transmission costs, will be retained.

TIMETABLE

In the call for tenders documents, HQD has included the following timetable, which shows the main milestones of the call for tenders. Please note that, at this stage, the following dates are tentative and may be modified by HQD through an addendum to the call for tenders document.

Duly registered bidders may submit questions concerning the call for tenders to HQD. HQD will be posting answers to these questions online, to make them publicly available.

The call for tenders document and related comments and forms are available on the website of Hydro Québec at the following link: http://www.hydroquebec.com/distribution/en/marchequebecois/ao-201301/index.html.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.