Electricity Filing Manual – Chapter 7 – Economics

Table of Contents

7.1 Economics

Goal

The application provides sufficient economic information to demonstrate that the applied-for facilities will be used, will be useful, and that the project will contribute to Canadians benefiting from efficient energy infrastructure and markets.

Filing Requirements

The application could include the following economic information:

  • a description of the supply, demand and load conditions of the markets at the origin and terminus points of the proposed IPL and any other markets that the proposed IPL would service.

The Commission must be satisfied that there is, or will be, an adequate supply and markets available to the IPL that the applied-for facilities could be expected to be used at a reasonable level over their economic life and would contribute to Canadians benefiting from efficient energy infrastructure and markets. Information should include demonstration that the capacity of the applied-for facilities is appropriate for the volumes that would be transported on the IPL.

7.2 Finance

Goal

The application provides sufficient financial information to demonstrate that the applicant has the capability to finance the project.

Filing Requirements

The application could include the following financial information:

  • an overview of the company and a description of its financial strength;
  • a copy of the most recent annual report or financial statements of the owner and the operator of the international power line;
  • a description of the intended methods and sources of financing for the proposed facilities; and
  • any changes to the financial risk of the company associated with its intended methods of financing the facilities.

The overall purpose for filing information on facility economics is to demonstrate that the applied-for facilities will be used, will be useful, and that demand charges will be paid and that sufficient funds will be available for abandonment requirements.

Meeting climate change commitments could influence the market, supply, and economic conditions in which the project will operate. Climate change laws, regulations and policies enacted to meet Canada’s commitments may affect markets and consequently may influence the need for the project and its economic feasibility. Therefore, in addition to the filing guidance below, the following information is also requested.

Table 7-1:
Economics and Financing

Economics and Financing

Filing Requirements

Guidance

Provide an explanation of how current climate change laws, regulations and policies, and financial risks or other uncertainties around commitments and future changes have been incorporated in the economic analysis of the project.

As noted in the Filing Manual section A.2.4 Level of Detail, the depth of analysis should be commensurate with the nature of the project and the potential for effects.

For all projects, the applicant should, at a minimum, describe how current climate change laws, regulations and policies have been considered in assessing the expected utilization of the project, and discuss if and how the economic feasibility of the project may be impacted by financial risks and other uncertainties around changes to such climate change laws, regulations and policies.

For all projects, the applicant should, at a minimum, describe how current climate change laws, regulations and policies have been considered in assessing the expected utilization of the project, and discuss if and how the economic feasibility of the project may be impacted by financial risks and other uncertainties around changes to such climate change laws, regulations and policies. For a larger project, the applicant should also describe how existing climate change laws, regulations and policies have been included in relevant analysis and assumptions. Also include those laws, regulations, and policies which have been drafted and tabled at a provincial or federal level but which although not yet in force, may reasonably become so and are not purely speculative. Discuss implications of these laws, regulations, and policies for supply and markets in any scenario analysis or risk assessment of these factors (e.g., applicant may consider doing a sensitivity analysis of supply and markets based on carbon pricing levels). Applicants should also describe the extent to which climate change commitments have been considered. Environment and Climate Change Canada’s Strategic Assessment of Climate Change should be consulted for its project requirements and the potential implications for the project’s economic analysis.

Applicants should describe how the credible plan to achieve net-zero emissions by 2050 may impact the economic feasibility of the project.

7.3 Level of Detail

In order for the Commission and interested parties to properly evaluate the proposed facilities, sufficient and clear information is required from the Applicant. However the amount of information and its level of detail required from the Applicant to describe the economics and financing of proposed facilities may vary. This could depend upon:

  • whether the Applicant is a well-established entity;
  • the magnitude of the proposed project, and;
  • the extent of public interest in the proposed project.

FYI – Example...

For comparison, a project such as the replacement of an existing power line by a long-established utility might only require the submission of an annual report. In contrast, a project by a new consortium, and for which significant public interest in the project has been identified, may require more information and detail about its economics and financing.

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