Taxes and charges on the gross revenues of hydro-electric generating stations under section 92.1 of the Electricity Act, 1998

• This bulletin contains important information for owners of hydro-electric generating stations and waterpower leaseholders liable to pay the taxes and charges on the gross revenues of hydro-electric generating stations under section 92.1 of the Electricity Act, 1998 (the Act).
• An amendment to the Act was made in 2006, as described below in the Background section.
• The information in this bulletin does not replace the law found in the Act and related regulations.

Background

Gross Revenue Charge (GRC)

In November 2000, legislation was introduced to encourage the development and expansion of environmentally friendly hydro-electric generating stations in Ontario. Effective January 1, 2001, the existing property taxes and water rental charges paid by hydro-electric generating station owners and waterpower leaseholders were replaced with taxes and charges on the gross revenues of hydro-electric generating stations. These taxes and charges on gross revenues represent separate components of what is known as the Gross Revenue Charge (GRC).

GRC Components

There are three GRC components:

• The GRC Property Tax Component Payable to the Minister of Finance,
• The GRC Property Tax Component Payable to the Ontario Electricity Financial Corporation (OEFC), and
• The GRC Water Rental Component Payable to the Minister of Finance.

GRC Property Tax Components

The GRC Property Tax Component Payable to the Minister of Finance is payable by hydro-electric generating station owners liable for the tax under subsection 92.1 (1) of the Act on the gross revenues of generating stations. The GRC Property Tax Component Payable to the Minister of Finance applies to all stations in Ontario except those stations that were, on or before December 31, 2000, subject to the property tax Payment in Lieu under subsection 92 (1) of the Act, whether or not there has been a change in ownership after that date. Stations that were, on or before December 31, 2000, subject to the property tax Payment in Lieu under subsection 92 (1) of the Act (i.e. stations owned by Ontario Power Generation or by municipal electricity utilities prior to 2001) are now subject to the GRC Property Tax Component Payable to the OEFC under subsection 92.1 (2) of the Act.

GRC Water Rental Component

The GRC Water Rental Component Payable to the Minister of Finance is payable by every holder of a waterpower lease liable for the water rental charge under subsection 92.1 (5) of the Act. The GRC Water Rental Component applies to the gross revenue of the hydro-electric generating station subject to the waterpower lease.

New Regulation 

On April 4, 2002, Ontario Regulation 124/02 was filed. O. Reg. 124/02: defines "gross revenue" for the purposes of the section 92.1 of the Act; prescribes how to calculate a station's annual generation; provides for certain exemptions and deductions; and, sets out the basic administrative requirements for hydro-electric generating station owners and waterpower leaseholders required to pay one or more of the GRC components.

Legislative amendment in 2006

Subsection 92.1 (2.1) of the Electricity Act was repealed in 2006. As a result of the amendment, Ontario Power Generation, Hydro One and Municipal Electric Utilities were required, as of January 1, 2009, to remit the GRC Property Tax Component to the OEFC instead of the Minister of Finance in respect of hydro-electric stations located in unorganized territory (i.e., territory without municipal organization that is outside the jurisdiction of a school board).

Deduction for Eligible Capacity Available for 120 Months (GRC Deduction)

In order to encourage investment in the generation of electricity from waterpower, subsection 92.1 (6) of the Act provides that the gross revenue from the generation of electricity from eligible capacity may be deducted from gross revenue for the purposes of calculating the GRC amounts payable. The deduction for eligible capacity (also known as the GRC Holiday) is available for the first 120 months after the eligible capacity is put into service, as determined by the Minister of Natural Resources.

To qualify for and receive the full 120-month GRC holiday, the station owner or holder must submit a statement issued by the Minister of Natural Resources (Section 7 Statement) to MOF within the normal reassessment period for the tax year the eligible capacity came into service. Pursuant to subsection 80 (10) of the CTA, the normal reassessment is four (4) years from the date of the original Notice of Assessment (NOA) for Canadian controlled private corporations (CCPC) and five (5) years for non-Canadian-controlled private corporations. See below for an example.

Definitions

Definitions for the Purposes of this Bulletin

For the purposes of this bulletin:

• generator means a person who owns or operates a generation facility that is a hydro-electric generating station
• holder of a waterpower lease means a person who has entered into an agreement, lease or other writing respecting the use of water under subsection 42 (2) of the Public Lands Act, or under the Niagara Parks Act, or The St. Lawrence Development Act, 1952 (No. 2), or who is required to enter into such agreement, lease or writing in order to be entitled to occupy public lands
• hydro-electric generating station includes any building or structure in which electricity is generated through the use of waterpower or from the movement of water
• new station means a station that first generates electricity after December 31, 2000
• owner includes a tenant of land owned by the Crown or a municipality on which a hydro-electric generating station is located or a tenant of land owned by any other person if the tenant is the generator of electricity from the hydro-electric generating station
• redeveloped station means a station at which improvements come into service after December 31, 2000 that include a substantially replaced power house and associated physical infrastructure for the conveyance and utilization of water
• station means a hydro-electric generating station
• upgraded station means a station at which improvements come into service after December 31, 2000 that increase the station's generation of electricity by at least two per cent on an annual basis.
• eligible capacity of a new or redeveloped station refers to the station's total annual generation. The eligible capacity of an upgraded station refers to the incremental increase in the amount of electricity generated annually by the upgraded station as a result of the upgrade.

GRC Rates

Graduated Rates

GRC rates for both property tax components are graduated based on the annual generation of a station as follows:

Every station owner benefits from the lower rates on the gross revenue from the first 700 gigawatt hours of annual generation for each station.

Water Rental Charge Rate

The GRC water rental charge rate is fixed at 9.5% of a station's gross revenue from annual generation.

Annual Generation

Annual Generation of a Station not Engaging in Water Transfers

The annual generation of a station whose owner or operator does not, with respect to that station, pay or receive compensation for the transfer of water to or from another generator during the year, is the amount of electricity generated by the station during the year, other than electricity that is consumed directly in the generation of electricity at the station without being conveyed through a transmission or distribution system.

Annual Generation of a Station Engaging in Water Transfers

The annual generation of a station whose owner or operator, with respect to that station, pays or receives compensation for the transfer of water to or from another generator during the year, is the amount of electricity generated by the station during the year, other than electricity that is consumed directly in the generation of electricity at that station without being conveyed through a transmission or distribution system, plus the net amount of compensation, in the form of electricity or other compensation converted to electricity, received from other generators for the use of water associated with that station.

Measuring Electricity by Means of an Approved Electricity Meter

Station owners or operators must determine the amount of electricity generated by the station by measuring the amount of electricity generated by means of a meter that would either: satisfy the market rules established by the Independent Electricity Market Operator or the requirements of a distributor licensed under the Ontario Energy Board Act, 1998 to whose distribution system the station is connected; or satisfy the requirements for a meter to be used for the purposes of obtaining the basis of a charge for the electricity under the Electricity and Gas Inspection Act (Canada) and the regulations under that Act.

As an exception, where the Minister has authorized the owner or operator to determine the amount of electricity generated by the station without the use of the meter, or if the meter described above did not accurately measure the electricity generated, the owner or operator may determine the amount of electricity generated by making a reasonable estimate. Such estimates may be reviewed.

As a further exception, and only for the period prior to the opening of the electricity market to competition, in situations where there is no meter, the owner or operator of a station may determine the amount of electricity generated by the station by making a reasonable estimate of the amount of electricity generated during the year. Such estimates may be reviewed.

GRC Registration and Payments

The station owner or holder of the waterpower lease must first register the corporate entity with the Ontario Business Registry and then register the corporate entity with the MOF to file the station returns from the date the operation commences. To register for GRC, clients must contact 1-866-668-8297.

Registration and filing GRC returns is still required even if the station is considered a new or upgraded station and would be approved for the full GRC deduction (meaning no GRC is payable). Station owners and waterpower leaseholders must claim the deduction in their annual return (see Claiming the GRC Deduction below).

Station owners and water power leaseholders are required to make their GRC payments on a monthly or quarterly basis. Station owners and water power leaseholders should refer to the GRC Instalment Instructions for detailed instructions on making GRC instalments.

Quarterly Instalments

If the total of all GRC amounts payable for all stations for the immediately preceding year is more than $1000 but less than $10,000, the owner or the holder of a water power lease may make quarterly instalments on the 16th day of March, June, September and December of the year, equal to one-quarter of the lesser of:

• the total of the amounts payable for the year, and
• the total of the amounts payable for the previous year.

For example, if you owe $12,000 for 2024 and $13,500 from 2023, your quarterly payment would be $3,000 for 2024 ($12,000/4= $3,000) or $3,375 from the previous year in 2023 ($13,500/4=$3,375).

Your total quarterly payment would be $ 3,000, not including interest as it is the lesser of the two calculations stated above.

You also have the option to pay monthly.

Monthly Instalments

If the total of all GRC amounts payable for all stations for the immediately preceding year is $10,000 or more, the owner or the holder of a waterpower lease is required to make a monthly instalment on the 16th day of every month, equal to the lesser of:

For January and February, you’ll need to pay the lesser of:

• 1/12th of the total of the amounts payable for the year, and
• 1/12th of the total of the amounts payable from two years before

For example, if you owe $12,000 for 2024 and $13,500 from 2022, your monthly payment would be $1,000 for 2024 ($12,000/12 = $1,000) or $1,125 for 2022 ($13,500/12).

Your total monthly payment would be $1,000, not including interest as it is the lesser of the two calculations stated above.

From March to December, you’ll need to pay the lesser of:

• 1/12th of the total of the amounts payable for the year, and
• 1/12th of the total of the amounts payable from the previous year  

For example, if you owe $14,400 for 2024 and $12,000 from 2023, your monthly payment would be $1,200 from this year ($14,400/12 = $1,200) or $1,000 from 2023 ($12,000/12 = $1,000)

Your total monthly payment would be $ 1,000, not including interest as it is the lesser of the two calculations stated above.

With your monthly instalment, you must the submit the personalized instalment voucher that was issued to you.

Remittance Advice Forms

GRC payments are to be made using one or a combination of the remittance advice forms provided by the Ministry of Finance. Station owners and waterpower leaseholders are asked to complete and detach the applicable remittance advice form(s) and send it to the Ministry of Finance, together with their GRC payment(s), in the self-addressed envelope also provided by the ministry.

All returns, payments and remittance advice forms are to be submitted to the Minister of Finance, including cheques that are made payable to the MOF or OEFC for charges under subsection 92.1(2) of the Act.

Interest

Debit interest is calculated and charged daily on the unpaid portion of any amount payable, from the day on which the payment is due to the day on which the amount plus interest is received. Credit interest is allowed on instalment payments in the same manner interest is allowed on instalment payments under the Corporations Tax Act.

5 per cent Penalty

Station owners and waterpower leaseholders may be liable to a penalty equal to 5 per cent of any unpaid amount or $6, whichever is greater, if they do not make full payment by the GRC Annual Return due date.

GRC Annual Return

For 2002 and subsequent years, the GRC Annual Return is due on or before March 16th of the year following the year to which the Annual Return relates.

The Ministry of Finance will mail you a personalized tax return during the last month of your tax year. If you need a return for tax years before 2002, please contact the ministry at 1 866 ONT-TAXS (1 866 668-8297).

Exemptions and Deductions

Exempt Stations

The following stations are exempt from the GRC:

• Every station that is exempt from provincial, municipal and school taxes and fees under section 12 of The Ottawa River Water Powers Act, 1943.
• Every station that is a work erected by a conservation authority, as referred to in subsection 33 (1) of the Conservation Authorities Act.
• The Stan Adamson Power House on the Ottonobee River in the City of Peterborough, while it is owned and operated by Trent University.
• The Prairie Portage Generating Station in Quetico Provincial Park, while it is owned and operated by the Crown in right of Ontario.
• Other time limited exemptions, for details see: O. Reg 124/02 Section 5.1.

Exemptions from Water Rental Charges

The holder of the waterpower lease for each of the following stations is exempt from the water rental component of the GRC on the gross revenue derived each year from the following amount of annual generation of the station:

• 270.608 gWh or, in a leap year, 271.35 gWh of annual generation of the Francis H. Clergue Generating Station on the St. Mary's River in the City of Sault Ste. Marie.
• 58.03062 gWh or, in a leap year 58.189608 gWh of annual generation of the Big Eddy Generation Station on the Spanish River in the City of Greater Sudbury.

Claiming the GRC Deduction

In order to claim the GRC deduction, the station owner or the holder of the waterpower lease must provide the Minister of Finance with a statement issued by the Minister of Natural Resources (Section 7 Statement), and any amended statement issued by the Minister of Natural Resources, that contains the following information:

• Whether the work carried out was to construct a new station, to redevelop the station or to upgrade the station.
• That the work was carried out in accordance with an approval issued by the Minister of Natural Resources under the Lakes and Rivers Improvement Act.
• The date that the eligible capacity was put into service.
• If the work was to upgrade the station, the projected percentage increase in the amount of electricity generated annually by the upgraded station as a result of the upgrade.

Learn more about how to apply for the Section 7 Statement.

To qualify for and receive the full 120-month GRC holiday, the station owner or holder must submit the Section 7 Statement to MOF within the normal reassessment period for the tax year the eligible capacity came into service. Pursuant to subsection 80 (10) of the Corporations Tax Act (CTA), the normal reassessment is four (4) years from the date of the original Notice of Assessment (NOA) for Canadian-controlled private corporations (CCPC) and five (5) years for non-Canadian-controlled private corporations.

For example, a station’s eligible capacity was determined to have come into service by MNR on January 1, 2020. The station owner or holder (a CCPC) filed a GRC return with MOF for the tax year ending on December 31, 2020, and subsequently received a NOA from MOF on March 18, 2021. The station owner or holder must submit the Section 7 Statement from MNR to MOF by March 18, 2025, in order for MOF to reassess the GRC filing for the tax year ending on December 31, 2020, apply the GRC deduction and issue refunds (if applicable).

Additional Information

If this bulletin does not completely address your particular situation, refer to the Electricity Act, 1998 and related regulations, visit our website at ontario.ca/finance or contact:

Ministry of Finance
Advisory, Objections, Appeals and Services Branch
33 King Street West
PO Box 625
Oshawa ON  L1H 8H9

• 1-866-ONT-TAXS (1-866-668-8297)
• 1-800-263-7965 for teletypewriter (TTY)