Securities Law & Instruments








UPON the application of the Independent Electricity Market Operator (the " IMO ") to the Ontario Securities Commission (the " Commission ") for an order pursuant to section 147 of the Act exempting the IMO from the requirements to file forms and fees with the Commission pursuant to Part 7 of Commission Rule 45-501;

AND UPON considering the application and the recommendation of the staff of the Commission;

AND UPON the IMO having represented to the Commission that:


1. the IMO is an independent, not for profit, non share capital corporation created by statute pursuant to Part II of the Electricity Act, 1998 (Ontario) (the " Electricity Act ");

2. the Government of Ontario has assigned the responsibility for creating and administering the IMO-administered markets to the IMO;

3. the IMO has been allocated the statutory mandate of meeting the following objects as set out in subsection 5(1) of the Electricity Act:

(a) to exercise and perform the powers and duties assigned to the IMO under the Electricity Act, the Market Rules and the OEB Licence as issued by the OEB;

(b) to enter into agreements with transmitters giving the IMO authority to direct the operations of their transmission systems;

(c) to direct the operations and maintain the reliability of the IMO-controlled grid to promote the purposes of the Electricity Act;

(d) to establish and operate the IMO-administered markets to promote the purposes of the Electricity Act;

(e) to collect and provide to the public, information relating to the current and future electricity needs of Ontario and the capacity of the integrated power system to meet those needs;

(f) to participate in the development of standards and criteria relating to the reliability of Ontario's transmission systems; and

(g) to work with the responsible authorities outside of Ontario to efficiently and effectively co-ordinate the IMO's activities with their activities;

4. the markets administered and operated by the IMO in accordance with the Electricity Act consist of both physical and financial markets;

5. the physical markets govern the real-time operation of the power system, allowing load and generation to be balanced, flows on the transmission system to be within limits and voltage and frequency to be maintained;

6. the financial markets consist of: (i) the Energy Forward Market (the " EFM "), wherein market participants can acquire financial contracts linked to the real-time energy market on a forward basis; and (ii) the Transmission Rights Market (the " TRM "), wherein market participants can acquire financial contracts linked to locational price differences across the interties;

7. in carrying out its objects, the IMO is empowered to and has developed a codified set of rules to govern the wholesale electricity marketplace in Ontario (collectively, the "Market Rules" );

8. the provisions of the Market Rules are intended to be complete codes, covering the form and content of the transactions (collectively the " Contracts ") to be entered into by market participants in the EFM and the TRM (collectively, the Financial Markets ");

9. the Contracts are issued by the IMO through the auction processes stipulated in the Market Rules;

10. all persons interested in becoming authorized market participants in either or both of the Financial Markets (whether as electricity industry participants or otherwise) must be approved in advance by the IMO. Trades made to or among authorized market participants in the Financial Markets are exempt from the prospectus and registration requirements in Ontario since all authorized market participants will be required to meet financial thresholds that are equal to those to be applied under Commission Rule 45-501 dealing with "accredited investors";

Regulatory Oversight

11. The IMO has made an application pursuant to National Policy 12-201 for a decision under the securities legislation of certain jurisdictions that the IMO be exempt from the requirements to be registered to trade in a security and to file a preliminary prospectus and a final prospectus and to receive receipts therefore (the " MRRS Application "). The IMO anticipates receiving a favourable decision with respect to the MRRS Application.

12. The IMO has made a separate application (the " Exchange Application ") to the Commission for exemptive relief related to the operation of the Financial Markets as a stock exchange and a clearing agency. This relief was sought only in Ontario, since the trading facilities of the IMO will exist only in Ontario and all trading through the IMO will be executed only through the facilities of the IMO in Ontario. This relief was granted pursuant to an order of the Commission dated March 6, 2002 (the " Exchange Order ");

13. the IMO operates pursuant to the licence (the " OEB Licence ") granted to it by the Ontario Energy Board (the " OEB ") under the Ontario Energy Board Act , 1998 (the " OEB Act "). The OEB is the sole regulatory body under the Electricity Act vested with the powers of oversight in connection with the business and/or aim of the IMO, including its operation of the Financial Markets;

14. the IMO is bound to make certain reports to the Minister of Energy, Science and Technology (the " Minister ") pursuant to the Electricity Act and to the OEB pursuant to the terms of the OEB Licence;

15. the IMO, its operation of the Financial Markets and the Financial Markets themselves shall not be subject to the regulatory oversight of any provincial securities commission or security regulatory authority;

16. section 32 of the Electricity Act permits the IMO to make rules "establishing and governing markets related to electricity". As part of its efforts, the Market Design Committee prepared a set of "Market Rules for the Ontario Electricity Market" in early 1999. Since that time, the IMO has been refining those rules. The approval process at the present time requires any new rule or rule amendment to be approved by the Board of Directors of the IMO by a least a two-thirds majority and then submitted to the Minister for final approval. The Market Rules are publicly available and are accessible on the Internet and may be downloaded from the IMO's web site at: ;

17. pursuant to subsection 32(6) of the Electricity Act, upon opening of the IMO-administered markets, the Minister will transfer formal rule making authority to the IMO, subject at all times to the appeal rights to the OEB, as set out in the Electricity Act. In addition, the IMO has the power to amend the Market Rules on an urgent basis pursuant to section 34 of the Electricity Act, subject at all times to the appeal rights to the OEB, as set out in the Electricity Act;

18. all Contracts concluded within the Financial Markets will conform to the Market Rules, and all market participants will receive transaction confirmations from the IMO in accordance with the provisions thereof; and

19. the IMO has the mandate to administer, supervise and enforce all aspects of the IMO-administered markets and has put in place employees and diagnostic software to fulfill this function.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS HEREBY ORDERED by the Commission that, pursuant to section 147 of the Act, the IMO and all authorized market participants in the Financial Markets are exempt from the requirements to file forms and fees with the Commission pursuant to Part 7 of Commission Rule 45-501, provided that:

(a) the IMO continues to operate pursuant to a valid licence issued by the OEB; and

(b) that the Exchange Order remains in force and effect;

March 6, 2002.

"D. A. Brown"       "Paul Moore"