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

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regulatory amendments made to Ontario’s net metering framework that were to come into effect on October 1, 2018 have been revoked.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