First Nation to acquire partial ownership of Hydro One transmission line

Ontario’s Hydro One and the Saugeen Ojibway First Nation have signed a first-of-its-kind agreement through which the First Nation will acquire a 30% ownership interest in a 500-kV transmission line that crosses its traditional territory.

The commercial partnership agreement, which establishes the “B2M Limited Partnership” for the 112-mile Bruce to Milton transmission line, has been in the works for several years, beginning about the time the province of Ontario issued its long-term energy plan in 2007.

“We started engaging with Hydro One in 2007 when they initially proposed the line,” Randall Kahgee, chief of the Saugeen Ojibway First Nation told TransmissionHub May 14. The agreement was signed in June 2012 and the application requesting permission from the Ontario Energy Board (OEB) was filed on March 28, 2013.

The province’s energy plan called for phasing out of coal-fired generation in favor of more renewable and nuclear generation. The Bruce to Milton line, which was completed and placed into service in June 2012, was deemed necessary to transport power generated by large-scale construction of wind and solar energy farms including many in western Ontario, as well as power from two idled nuclear generating units at Bruce Power that could be returned to service.

When the First Nation’s leaders began examining the plan, it became clear that a number of proposed facilities would be sited in its traditional territory, which stretches from the tip of the Bruce Peninsula on the eastern shore of Lake Huron south to the area of Goderich, Ont., and east to the Nottawasaga River. Tribal leaders then began looking for ways to become engaged in the decision-making process and to develop a method to derive long-term benefits from the projects that would ultimately be built.

“We wanted to make sure there was a lasting legacy for our people and our communities, so it became very clear the only way to do that was to have an ownership interest in the line,” Kahgee said.

Discussions that resulted in the formation of the commercial partnership agreement began in 2011.

“This commercial partnership model … is a first for Hydro One and a first for transmission projects in Canada,” a Hydro One spokesperson told TransmissionHub. “It positions Hydro One as a leader in working with First Nations in the energy transmission sector and creates a new way to do business with First Nations.”

Kahgee agreed, saying, “It’s a good example of how First Nations can be part of these discussions but also look at how we can build stronger, healthy economies for our people.”

Under the agreement, the Saugeen Ojibway First Nation will hold a 30% interest while Hydro One will indirectly control 70% of the partnership. Hydro One Networks operates and maintains the line that runs from the Bruce nuclear power station on the eastern shore of Lake Huron near Tiverton, Ont., to Milton, west of Toronto. Approximately 75% of the line is sited on First Nation’s territory.

The First Nations’ equity interest in the limited partnership is valued at C$72m according to Hydro One, and Kahgee said the community has raised the capital it will need to be a part of the partnership.

“There will be revenues that flow on an annual basis to both communities,” Kahgee said, referring to the Chippewas of Saugeen and the Chippewas of Nawash, which are both part of the Saugeen Ojibway First Nation.

While neither Kahgee nor Hydro One would estimate how much revenue the First Nation will realize from its investment, the OEB allows a return on equity of close to 10% on other transmission assets.

The agreement is consistent with the provincial government’s long-term energy plan, which calls for aboriginal communities to be included in transmission projects that cross their traditional territories. However, it must still be approved by the OEB, which has all required applications with the exception of a rate approval that will be filed in the fall, the Hydro One spokesperson said.

While the limited partnership is a first in the transmission arena, commercial agreements are not completely without precedent. Ontario’s other big hydro firm, Ontario Power Generation (OPG), has also worked with aboriginal partners, notably signing a deal with the Moose Cree First Nation for up to a 25% interest in OPG’s 438 MW Lower Mattagami River generation project.

Although proud of the groundbreaking nature of the agreement, Kahgee said he is most pleased about the lasting legacy created for his people.

”The good thing is that it’s a sustainable benefit,” he said. “This is something my grandchildren and my great-grandchildren will drive a benefit from. As long as that line is there, there will be something flowing to the communities.”