Proposed amendment of Ontario Regulation 541/05: Net metering, or a new regulation (to be determined), to be made under the Ontario Energy Board Act, 1998

ERO number
013-1913
Notice type
Regulation
Posted by
Ministry of Energy
Transferred to
Ministry of Energy, Northern Development and Mines
Notice stage
Decision Updated
Decision posted
Comment period
November 29, 2017 - January 18, 2018 (50 days) Closed
Last updated

Update Announcement

Amendments made on April 20, 2018 to O. Reg. 541/05 and O. Reg. 389/10 have been revoked. The revoked amendments would have enabled third party ownership of net-metered facilities, provided flexibility for virtual net metering demonstration projects, harmonized the consumer protection framework with the new third party ownership business models, and introduced standard disclosures for customer owned net metering. The government intends to consider any future improvements to Ontario’s net metering regulatory framework in the context of its broader energy policy priorities for the province.

September 26, 2018

This consultation was open from:
November 29, 2017
to January 18, 2018

Decision summary

Ontario Regulation 273/18, a regulation amending Ontario’s net metering regulation (O. Reg. 541/05: Net Metering) under the Ontario Energy Board Act, 1998 has been revoked.

Decision details

Updated September 25, 2018

The following two regulatory amendments made to Ontario’s net metering framework that were to come into effect on October 1, 2018 have been revoked.

  • Ontario Regulation 273/18, a regulation amending Ontario’s net metering regulation (O. Reg. 541/05: Net Metering) under the Ontario Energy Board Act, 1998.
  • Ontario Regulation 275/18, a regulation amending Ontario’s energy consumer protection regulation (O. Reg. 389/10: General) under the Energy Consumer Protection Act, 2010.

The government intends to consider any future improvements to Ontario’s net metering regulatory framework in the context of its broader energy policy priorities for the province.

Ontario Regulation 273/18 would have enabled third party ownership of net-metered facilities and provided flexibility for virtual net metering demonstration projects, as well as required distributors to seek confirmation that customers seeking a net metering agreement had received standard disclosures for customer owned net metering projects.

But for the above-noted revocations, Ontario Regulation 275/18 would have updated Ontario’s Energy Consumer Protection Act, 2010 to recognize third party ownership business models for net metering.

Revoking Ontario Regulation 273/18 and Ontario Regulation 275/18 will maintain the requirements of the current net metering regulation wherein net-metered facilities must be owned or operated by the customer and be located behind the customer’s meter.

Original decision details 

Third Party Ownership

Enabling third party ownership

To date, in order to be eligible for net metering a customer was required to own or operate a renewable energy generation facility and to generate electricity primarily for their own use.

The Ministry has made amendments to the net metering regulation to enable customers to sign power purchase agreements with third parties, and for those third parties to own or operate renewable energy generation facilities, for the purposes of generating electricity to be used to net meter the customer.

The amendments introduced new concepts of an eligible customer and an eligible third party generator and established the conditions under which eligible customers can use an eligible third party generator to generate electricity on their behalf for the purposes of net metering. These conditions include:

  • That the customer and generator have entered into an agreement for the purchase of electricity by the customer from the generator;
  • That the generator generates the electricity solely from a renewable energy generation facility that is owned or operated by the generator;
  • That the generator generates the electricity primarily for the customer’s own use;
  • That the generator conveys the electricity directly from the point of generation to another point for the customers consumption without reliance on the distributor’s distribution system (i.e. the renewable energy generation facility must be located behind the customer’s meter);
  • That the generator conveys any excess electricity into the distributor’s distribution system on behalf of the customer;
  • That neither the customer nor the generator is party to a contract or agreement, other than the power purchase agreement or net metering agreement, for the sale of the electricity that the generator conveys into the distributor’s distribution system; and
  • That the electricity conveyed may be stored in an energy storage device for any period of time.
Credit valuation and billing

Amendments to specify that credit valuation and billing in net metering arrangements where there is a third party generator will occur in-line with the existing regulation. Credits for electricity conveyed into the distributor’s distribution system by the eligible third party generator will be based on the volumetric charges for electricity applicable to the eligible customer.

Interaction with retail contracts

Several amendments have been made to clarify existing sections of the regulation that set out requirements and billing processes for situations wherein an eligible generator or eligible customer has an existing contract with a retailer.

The intent of these sections has not changed. The amendments serve to differentiate existing types of electricity retailers from an eligible third party generator.

Other requirements for third party generators under O. Reg. 389/10

Stakeholders should note that there are additional requirements for eligible third party generators that have been added under O. Reg. 389/10. A link to the Decision Notice for amendments to O. Reg. 389/10 is available below.

Virtual net metering demonstration projects

New sections to the regulation have been added to define parameters within which distributors, generators, and customers can develop and take part in virtual net metering demonstration projects.

New definitions have been added for participating distributor, participating generator and participating customer to identify parties participating in a virtual net metering demonstration project, and to differentiate them from distributors, generators and customers that are involved in customer owned/operated or third party ownership net metering.

Other criteria for virtual net metering demonstration projects have been divided into four main sections: the project; the virtual net metering agreement; eligible participants; and billing.

The project

In order for a project to be eligible as a virtual net metering demonstration project, it must meet certain criteria, including:

  • Generation facilities used in a virtual net metering demonstration project must be renewable energy generation facilities;
  • There may be more than one renewable energy generation facility used in a virtual net metering demonstration project; however, all facilities must be owned or operated by the same participating generator;
  • Any renewable energy generation facilities must be connected to a participating distributor’s distribution system (either directly connected, or, connected behind the meter of a participating customer). Facilities may not be connected to the transmission system;
  • The virtual net metering demonstration project must have been selected by the Independent Electricity System Operator (IESO) to participate in an IESO initiative designed to select virtual net metering demonstration projects (note: the IESO’s forthcoming Renewable Distributed Generation Integration (RDGI) Fund has been identified for this purpose); and
  • The IESO and the participating generator must have entered into an agreement in respect of the project and neither party may be in default of that agreement.

Stakeholders should note that the RDGI Fund will incorporate other project requirements that will be determined by the IESO through stakeholder engagement on the design of the fund itself. The Ministry encourages all interested parties to take part in that engagement process.

Virtual net metering agreement

In order for a project to be eligible as a virtual net metering demonstration project, there must be a virtual net metering agreement between the participating distributor(s), participating customer(s) and participating generator. If there is no participating distributor for the project, the project will be ineligible to be deemed a virtual net metering demonstration project.

This agreement must also meet certain criteria, including:

  • The agreement must be for billing purposes; 
  • If there is only one participating customer, the agreement must specify that all of the electricity from the project is allocated for credit to that participating customer;
  • If there are more than one participating customers, the agreement must specify that all of the electricity from the project is allocated for credit to the participating customers and specify the amount of electricity from the project that is allocated for credit to each participating customer;
  • The agreement must specify a mechanism for changing the allocation of credits amongst participating customers if the number of participating customers changes;
  • No amount other than the credits mentioned above may be provided to a participating customer or any other person in respect of the electricity from the project;
  • The agreement must specify a date when it begins applying to each participating customer;
  • The agreement may be amended from time to time, including (but not limited to) to add, substitute, or remove participating customers;
  • The full term of the agreement may not be longer than 20 years; and
  • No amendments made to the agreement may extend the term of the agreement beyond 20 years.
Eligible participants

In order for a project to be eligible as a virtual net metering demonstration project, the project participants must meet certain criteria, including:

  • Any participating customers must have entered into a power purchase agreement with the participating generator;
  • Any participating customers must not have an existing contract with a retailer of electricity;
  • The participating generator must be the owner or operator of the renewable energy generation facility;
  • The participating generator must convey electricity into the participating distributor’s distribution system and may store that electricity in an energy storage device for any period of time.
Billing

Credit valuation and billing of virtual net metering demonstration projects will occur in-line with the existing regulation. Credits for electricity conveyed into the distributor’s distribution system by the participating generator will be based on the volumetric charges for electricity applicable to each participating customer.

Standard disclosures for eligible generators

A list of standard disclosure items that will be applicable to eligible generators has been added. Eligible generators are customers who generate electricity behind the meter primarily for their own use. These customers are those that were originally eligible for net metering under the previous version of the regulation (i.e.. does not include net metered customers pursuing arrangements with newly eligible third party generators, who will have disclosure requirements provided for under O. Reg. 389/10).

Eligible generators who have an agreement that is (i) related to the renewable generation facility (e.g. a lease, financing or rental agreement etc.), and (ii) not associated with a net metering agreement entered into before October 1, 2018, will be required to confirm to their electricity distributor that the listed standard disclosure items have been disclosed to them.

This new requirement will help ensure that eligible generators looking to enter into net metering arrangements with their distributors are aware of important information related to any other agreements connected to the renewable energy generation facility, and are positioned to make informed decisions about these arrangements. The list of information to be disclosed includes such things as length of agreement term, costs and payments to other parties, warranty or insurance obligations, and estimated electricity cost savings, etc.

Comments received

Through the registry

22

By email

15

By mail

0
View comments submitted through the registry

Effects of consultation

Feedback from stakeholders on the Ministry’s proposal to amend O. Reg. 541/05 was generally positive and supportive.

Key stakeholder groups, including distributors and industry, encouraged and informed the direction to enable third party ownership and virtual net metering demonstration projects. Stakeholders also expressed a need for clarity and guidance regarding the new relationships being enabled. Taking this feedback into account, the Ministry sought to address certain requests for clarity and guidance to key stakeholders within the regulation, as well as to respond to certain other specific requests for modifications to the proposal.

Roles and responsibilities of customers, third party generators, and distributors

Stakeholders expressed a need for clarity around the roles and responsibilities of third party generators, customers, and distributors, which the Ministry has sought to provide in the regulation, including:

  • specifying that a request to a distributor to engage in net metering using a third party generator must come from the customer;
  • clarifying that the third party generator is conveying electricity into the distributor’s distribution system on behalf of the customer; and
  • specifying that the connection of the third party generator’s generation facility, and any associated costs of that connection, would be charged to the customer.

These changes are designed to maintain the relationship between the customer and the distributor with regards to the connection and the net metering agreement, including in cases where the customer is using a third party generator to participate in net metering arrangements.

Virtual net metering demonstration projects

Stakeholders expressed a desire for clarity on how net metering agreements for virtual net metering demonstration projects should be structured, how potential cross-distributor settlement would occur, and generally how billing and settlement should be conducted. Other stakeholders advocated for open eligibility for virtual net metering demonstration projects to ensure any entity was eligible to participate.

The Ministry has sought to address this feedback by:

  • Ensuring that a project will only be eligible as a virtual net metering demonstration project if there is a participating distributor as a party to the virtual net metering agreement.
    • In effect, this will mean that a distributor must be involved in the project if it is to move forward. If a distributor does not wish to be a participating distributor, the project would be ineligible to proceed within that distributor’s service territory. This requirement will also mean that distributors can make a decision on whether to participate in a project based on their own internal evaluation criteria.
  • Not specifying any particular type of entity that may be the participating generator, other than the requirement that the participating generator own or operate the renewable energy generation facility. This will provide flexibility for many types of entities to be the participating generator.
  • Not specifying any particular type of entity that may be a participating customer, other than the requirement for the customer to be a customer of a distributor (i.e. transmission connected/wholesale market customers would be ineligible to be a participating customer.) This is in keeping with the current requirements for net metering.
  • Specifying how billing and settlement is to occur by referencing the section of the existing regulation and including instructions on how to use the provisions for the purposes of billing and settlement for virtual net metering agreements.

Unit Sub-Meter Providers (USMPs) involvement in virtual net metering demonstration projects

The Ministry received input from stakeholders in support of involvement by USMPs in virtual net metering demonstration projects, which could allow for participation in virtual net metering by suite-metered residents, such as apartment or condominium occupants.

The Ministry has determined that no changes to the net metering regulation (O. Reg. 541/05) would be required for USMP involvement in virtual net metering demonstration projects.

Standard disclosures for eligible generators

The inclusion of standard disclosures for eligible generators was included to ensure a baseline level of awareness about key aspects of any agreement for the renewable energy generation facility and to help position customers to make informed choices. Some stakeholders cited a lack of need for distributors to be party to information about agreements between the eligible generator and another party relating to the renewable energy generation facility, as well as a distributor’s ability to rely on that information.

The amended regulation makes it clear that it is the eligible generator themselves that confirms to the distributor that this information has been disclosed to them, and that distributors can rely on the eligible generator’s confirmation when determining whether this requirement has been met.

In-force date of the regulatory amendments

Industry stakeholders expressed a strong interest in having the amendments to the regulation come into force on July 1, 2018 so they could make use of the provisions for third party ownership as quickly as possible.  However, it was determined that in order for interested parties to make use of new third party ownership opportunities, distributors and the Ontario Energy Board (OEB) will require sufficient time to make modifications to their processes, rules, codes etc. to accommodate this new model of net metering. Further, the OEB will need time to conduct stakeholder engagement and implement changes to accommodate changes to O. Reg. 389/10 which will support robust consumer protection for third party ownership models.

The amended regulation will therefore come into force on October 1, 2018.

Analysis of Regulatory Impact

Electricity distributors are the primary businesses impacted by the regulatory changes. The Ministry has estimated total annual costs per distributor to be approximately $7,035.00. Compliance costs are based on estimated administrative costs for distributors to adjust net metering application processes as required to accommodate standard disclosures for eligible generators. No upfront or ongoing operating costs are anticipated for proposed regulatory changes related to third party ownership net metering as these new models of net metering would go through the same process as customer owned or operated net metering, and the distributors would not be involved in the licensing of third party generators.

No upfront or ongoing operating costs for distributors related to regulatory changes for virtual net metering demonstration projects are included because the regulation would not obligate distributors or renewable energy development companies to pursue these projects. Participation in the IESO's  RDGI Fund is entirely voluntary. As well, the IESO will be providing funding to participants in the RDGI Fund. This funding is intended to offset project costs.

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Original proposal

ERO number
013-1913
Notice type
Regulation
Posted by
Ministry of Energy
Proposal posted

Comment period

November 29, 2017 - January 18, 2018 (50 days)

Proposal details

Description of regulation

Enhancements to Ontario’s Net Metering Framework

The Province’s 2017 Long-Term Energy Plan (LTEP) commits to enhance Ontario’s net metering framework to give customers new ways to participate in clean, renewable electricity generation. In accordance with this commitment, the Ministry of Energy intends to expand net metering eligibility to include new ownership models and to ensure appropriate consumer protection provisions and siting restrictions are in place.

Legislative amendments to the Ontario Energy Board Act, 1998, required to expand the scope of eligible net metering ownership models, were tabled on November 14, 2017 through Bill 177, Stronger, Fairer Ontario Act (Budget Measures), 2017. Pending the passing of the proposed legislative amendments, the Ministry of Energy intends to propose regulatory changes to enable these new ownership models, as well as other regulatory measures in support of an expanded and enhanced net metering framework, as follows:

  • Enable third-party ownership of net-metered generation facilities and virtual net metering demonstration projects;
  • Adapt and enhance the existing energy consumer protection framework to support the introduction of third-party ownership arrangements; and
  • Ensure that prescribed types of renewable energy generation facilities are sited appropriately.

The Ministry of Energy invites input on this regulatory proposal and corresponding regulatory proposals (posted separately and linked in the Additional Information section of this posting) to inform changes to Ontario’s net metering framework.

A plain language description of the proposed regulation follows:

Enabling Third-Party Ownership of Net-Metered Generation Facilities and Virtual Net Metering Demonstration Projects

In accordance with commitments made in the Province’s 2017 Long-Term Energy Plan (LTEP), ENERGY is proposing to amend Ontario’s Net Metering Regulation (O. Reg. 541/05) or to provide for a new Regulation, if approved, contingent on the passage of certain legislative amendments to the Ontario Energy Board Act, 1998, to:

  • Enable third-party ownership of net-metered renewable generation facilities; and
  • Provide flexibility for distributors to enable virtual net metering demonstration projects through participation in a targeted Independent Electricity System Operator (IESO) administered program.

Third Party Ownership (TPO)

Ontario’s existing net metering regulation centres on an eligible generator who must also be the customer. This requirement means the customer must own or operate the renewable generation facility in order to be eligible to net meter.

The Ministry of Energy is proposing to amend the net metering regulation to allow other entities to own and operate the renewable generation facility in the following manner:

  1. Eligible customers could request to be billed on a net-metered basis by their distributor. An eligible customer would no longer be required to be an eligible generator. The intent would be to permit other parties (other than the customer) to own and operate the renewable generation facility, if desired by the customer.
  2. A customer could enter into an agreement with a generator to purchase electricity generated from a renewable energy source. This arrangement would allow surplus electricity that is not consumed by the customer to be conveyed into the distributor’s distribution system, and the customer would receive a credit on their bill for the value of the electricity conveyed into the distribution system.
  3. The renewable generation facility, owned or operated by a third party generator, would be required to be located behind the customer’s meter (i.e. electricity is conveyed directly from the point of generation to another point for the eligible customer’s consumption without relying on the distributor’s distribution system to convey electricity).
  4. The customer would confirm whether an agreement between the customer and a third party generator exists for the sale/financing/leasing and installation of the generation facility.
  5. If an agreement between the customer and a third party generator for the sale/financing/leasing and installation of the generation facility exists, the customer would acknowledge that the following information has been disclosed to them:
    1. Name and contact information of the owner of the renewable generation facility;
    2. Type of agreement between customer and the owner of the renewable generation facility (PPA, lease, financing etc.), if any;
    3. Capacity of the renewable generation facility (kW);
    4. Estimated energy output of the renewable generation facility (kWh);
    5. Treatment of excess generation beyond the customer’s annual consumption, if any;
    6. All ongoing customer payments associated with the agreement including but not limited to: payments for electricity, lease payments, or loan payments;
    7. Estimated savings realized by the customer, if any;
    8. Estimated cost of electricity purchased from the distribution system utilized, if any;
    9. Any costs for which the customer will be responsible, including but not limited to: Ongoing operation and maintenance costs, connection costs, if any;
    10. Warranty provisions for the renewable generation facility, if any;
    11. Termination provisions and associated penalties, if any;
    12. Transfer/assignment provisions, if any;
    13. If the third-party generator could put a lien on the customer’s property and under what circumstances, if any; and
    14. Term of the agreement.
  6. All other requirements prescribed in the existing net metering regulation (O. Reg. 541/05) would continue to apply (i.e. length of credit rollover period, eligibility to use energy storage etc.).

Virtual Net Metering (VNM) Demonstration Projects

In a VNM arrangement, customers are billed on a net-metered basis for eligible electricity generated from a generation facility that is not connected directly to the customers’ load (i.e., not located behind the customer’s meter). The generation facility may be located behind a ‘host’ load customer meter, or directly connected to a distribution system. Credits accrued from electricity conveyed to the distribution system from the generation facility are applied to associated customer accounts to reduce their electricity bills.

The Ministry of Energy is proposing provisions that will permit electricity distributors to facilitate VNM demonstration projects in the following manner:

  1. Electricity distributors would be permitted to enter into net metering agreements with customers to implement VNM demonstration projects, if the project is participating in a prescribed program administered by the IESO and in accordance with criteria set out in that program.
  2. A generation facility utilized for a VNM demonstration project would be required to be a renewable generation facility.
  3. A VNM renewable generation facility would be required to be connected to a distributor’s distribution system at a voltage not to exceed 50 kV, and could not be connected to the transmission system.
  4. Subject to the discretion of any involved distributors, customers associated with a VNM demonstration project may be located in a distributor’s distribution system other than the distribution system in which the generation facility is located.
  5. Distributors implementing VNM demonstration projects would be required to value credits for any electricity conveyed by the generator into a distribution system based on similar principles (affecting only volumetric charges) as currently specified in the existing net metering regulation.

Other Matters

The Ministry is further considering how unit sub-meter providers could be involved in the TPO net metering activities being contemplated and in VNM demonstration projects. The Ministry is also considering the same issue for consumers in bulk-metered buildings where the units are individually metered by a licensed distributor rather than a unit sub-meter provider. Unit sub-meter providers are entities, licensed by the Ontario Energy Board, (OEB) and subject to OEB Code, and could include a distributor that works with or for the management of a multi-unit residential complex, such as an apartment or condominium, to provide invoice and other related activities (billing) to consumers in bulk-metered buildings. The Ministry invites comment on these matters as well as any other matters relevant to TPO net metering and VNM.

Purpose of regulation

The proposed changes to Ontario’s net metering framework are intended to give customers new opportunities to participate in clean, renewable electricity generation and to reduce their electricity bills.

The new ownership models being proposed would, if this regulatory proposal is approved, allow for more innovative approaches to net metering to be accommodated in Ontario. They would be expected to help reduce load on the electricity system, and support initiatives under the Government’s 2016-2020 Climate Change Action Plan.

TPO and VNM models can offer increased access for Ontario electricity customers to participate in net metering by reducing the upfront costs of purchasing or installing a renewable energy system. They will allow innovative business models that could reduce electricity costs for Ontarians while also providing value to the grid.

Public consultation

This proposal was posted for a 50 day public review and comment period starting November 29, 2017. Comments were to be received by January 18, 2018.

All comments received during the comment period are being considered as part of the decision-making process by the Ministry.

Please Note: All comments and submissions received have become part of the public record.

Other public consultation opportunities

ENERGY held public consultations to gather feedback on a policy proposal to enhance Ontario’s net metering framework. Stakeholder feedback has been incorporated into the proposal presented in this posting.

ENERGY is not planning any additional public consultation outside of this posting.

Comment

Commenting is now closed.

This consultation was open from November 29, 2017
to January 18, 2018

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