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Memorandum of Understanding Between the Government of Ontario and the Government of Québec Regarding Continued Energy Collaboration and Potential Opportunities for Ontario-Quebec Electricity Trade Agreement

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Memorandum of Understanding Between the Government of Ontario and the Government of Québec Regarding Continued Energy Collaboration and Potential Opportunities for Ontario-Quebec Electricity Trade Agreement

Office of the Premier

Memorandum of Understanding

Regarding Continued Energy Collaboration and Potential Opportunities for Ontario-Quebec Electricity Trade Agreement to Support Greenhouse Gas Reductions During Ontario's Nuclear Refurbishments 

BETWEEN:

THE GOVERNMENT OF ONTARIO

Represented by Mrs. Kathleen Wynne, in her capacity as Premier of Ontario, and by Mr. Bob Chiarelli, in his capacity as Minister of Energy (referred to as "Ontario") 

AND:

LE GOUVERNEMENT DU QUÉBEC

Represented by Mr. Philippe Couillard, in his capacity as Premier ministre du Québec, by Mr. Jean-Marc Fournier, in his capacity as Ministre responsable des Affaires intergouvernementales canadiennes et de la Francophonie canadienne and by Mr. Pierre Arcand, in his capacity as Ministre de l'Énergie et des Ressources naturelles (referred to as "Québec"). 

WHEREAS Ontario and Québec (collectively, the "Parties") have significant complementarities with regards to energy needs and resources;

WHEREAS on November 21, 2014, Ontario and Québec signed a Memorandum of Understanding to collaborate on concerted climate change actions;

WHEREAS Ontario and Québec have made significant progress enhancing electricity collaboration through the establishment of a Capacity Sharing Agreement, concluded by the Independent Electricity System Operator (IESO) and HQ Energy Marketing Inc. (HQEM) on May 8, 2015;

WHEREAS Québec has surplus clean, low-carbon hydroelectric electricity supply;

WHEREAS Ontario anticipates, over its nuclear refurbishment period, temporary increased electricity sector carbon emissions as a result of greater electricity production from its natural gas-fired generating resources during that time;

WHEREAS Ontario wishes to mitigate any increase in electricity sector greenhouse gas emissions over the nuclear refurbishment period, in accordance with its stated greenhouse gas reduction targets and climate change policies;

WHEREAS, on March 2, 2015, the IESO and HQEM jointly signed a letter of common understanding (the "IESO/HQEM Letter") indicating their mutual interest in exploring the potential for sales arrangements to provide reliable, economic and low-carbon electricity supply from HQEM to IESO in order to support Ontario's nuclear refurbishment program;

WHEREAS, on April 13, 2015, Ontario announced its intention to adopt a cap and trade system, the specific design of which would have significant implications for the trade of electricity;

NOW THEREFORE, the Parties hereby set out their mutual understanding as follows:

  1. CONTINUING COLLABORATION

Ontario and Québec recognize the potential for mutual benefits to both Provinces, now and in the future, from maintaining open and on-going dialogue on opportunities for bilateral energy collaboration.

Ontario and Québec will mandate their ministers responsible for energy and their Deputy Ministers to undertake to meet on a quarterly basis. These meetings will serve as a forum for on-going Ontario and Québec energy collaboration and to discuss and explore opportunities for greater electricity trade.

The ministers will also mandate their respective energy agencies, the IESO and Hydro Québec (HQ), to continue to meet on a quarterly basis to share best practices, lessons learned and identify emerging opportunities, with regards to electricity trade.

  1. BENEFITS OF AN ELECTRICITY TRADE AGREEMENT

Consistent with the IESO/HQEM Letter, Ontario and Québec acknowledge that Québec's clean, reliable hydraulic resources could prove to be an economic choice to meet a portion of Ontario's needs during Ontario's nuclear refurbishment period, resulting in lower costs to Ontario ratepayers.

Ontario and Québec recognize that:

  • Québec's provision of electricity to Ontario could reduce greenhouse gas emissions by decreasing the amount of natural gas-fired generation during Ontario's nuclear refurbishment period.
  • Selling Quebec's hydroelectricity to Ontario would allow Quebec to benefit from its surplus electricity.

Ontario and Québec will mandate their ministers responsible for energy to direct their respective energy agencies, the IESO and HQEM, to engage in discussions and make necessary efforts to conclude a medium-term electricity trade agreement that aligns with Ontario's nuclear refurbishment period, where such an agreement would:

  • On the basis of HQ's commitment to deliver clean electricity, mitigate anticipated increases in electricity sector greenhouse gas emissions by structuring the delivery of electricity from Québec to Ontario to displace Ontario natural gas-fired generation;
  • Provide savings to Ontario ratepayers, and provide value to Québec;
  • Complement other electricity wholesale market and policy initiatives in Ontario and Québec.
  1. IMPLEMENTATION

i.       The Parties charge their ministers responsible for energy with directing their respective energy agencies, the IESO and HQEM, to make necessary efforts to conclude a medium-term electricity trade agreement, as set forth in this Memorandum of Understanding (MOU), and present such an agreement to their respective authorities for their consideration, no later than 120 days following the finalization of the design of Ontario's cap and trade system, as it relates to or impacts Ontario's electricity sector. 

This process shall not limit the ability of the parties to reach agreements, where appropriate and agreed to, before the above mentioned timeline.

ii.     For greater clarity, regardless of the outcome of 3.i above, following the conclusion of discussions regarding a medium-term electricity trade agreement, Québec and Ontario will continue to hold the quarterly meetings for Ontario and Québec electricity collaboration and to discuss and explore, on an ongoing basis and where warranted, opportunities for greater electricity trade, as referenced in Section 1.

  1. GENERAL PROVISIONS

This MOU does not create legally binding obligations on the Parties.

The Parties may amend this MOU by a written document signed by each Party.

Either Ontario or Québec may terminate this MOU by providing at least 6 months written notice to the other Party.

Signed in Québec City, this 11th day of September, 2015, one in French and the other in English, both versions being regarded as equally authentic.

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