Changes to Ontario’s Net Metering Regulation to Support Community-Based Energy Systems

ERO number
019-2531
Notice type
Regulation
Act
Ontario Energy Board Act, 1998
Posted by
Ministry of Energy
Notice stage
Decision
Decision posted
Comment period
October 8, 2020 - November 22, 2020 (45 days) Closed
Last updated

This consultation was open from:
October 8, 2020
to November 22, 2020

Decision summary

On September 28, 2021 Ontario filed O. Reg. 679/21, Community Net Metering Projects, and other consequential amendments to provide a framework for community net metering (CNM) and authorize the West Five development as a CNM demonstration project. The new regulation will support innovation and learning for community-based energy systems in Ontario.

Decision details

On September 28, 2021, Ontario filed a new regulation, O. Reg. 679/21 (Community Net Metering Projects) under the Ontario Energy Board Act, 1998 (OEBA), along with supporting consequential amendments to O. Reg. 161/99 (Definitions and Exemptions) and O. Reg. 90/99 (License Requirements – Electricity Retailers and Gas Marketers), to enable community net metering (CNM) demonstration projects. The new regulation and consequential amendments came into effect upon filing and are expected to support community-based energy projects and innovative approaches to community energy planning by enabling a framework for CNM, while authorizing the West Five development as a demonstration project under the CNM model.

CNM regulation:

The new regulation provides a framework for CNM arrangements involving a central customer (CNM generator) who manages and operates load facilities, renewable generation facilities and any energy storage facilities participating in a CNM project. The regulation prescribes important aspects of the CNM model and the requirements for a CNM demonstration project, including eligibility (such as limits on the project term and size), project components, billing, reporting, connection requirements, and consumer protection. Further, an agreement between the eligible CNM generator and participating distributor is required. The new regulation also authorizes the implementation of the West Five development as a CNM demonstration project.

Consequential regulatory amendments:

The consequential amendments to O. Reg. 161/99 exempt an eligible CNM generator from requiring a license for distribution activities related to a prescribed CNM demonstration project, provided the relevant eligibility criteria continue to be met. An eligible CNM generator would be required to obtain a license from the Ontario Energy Board with respect to other applicable licensable activities being carried out as part of a CNM demonstration project.

Consequential amendments to O. Reg. 90/99 exempt eligible CNM generators from certain electricity retailer license requirements that are not applicable in the context of CNM demonstration projects. The purpose is to ensure appropriate levels of consumer protections and oversight are in place for a CNM demonstration project authorized under the new regulation.

Description of the CNM business model:

The CNM model enables bill credits to be shared across the accounts of participating loads, allowing for optimal integration of renewable generation and other distributed energy resources (e.g., storage), throughout a mixed-use development. In alignment with the current net metering regulatory framework, generation must be from a renewable energy source and for the generator’s own use. For CNM, this electricity use includes distribution and retailing to unit sub-metered customers in multi-unit complexes and retail customers supplied by the CNM generator. A CNM project must involve more than one load facility, of which at least one must have an eligible generation facility connected to it. Load facilities without connected generation may be included in a project as well, however, there are limits on the amounts of bill credits that can be allocated amongst the participating load facilities so as to encourage integration of generation within various load types.

Demonstration project requirements:

A CNM demonstration project is limited to up to 10 megawatts (MW) in size, including generation and storage capacity, and is limited to a maximum term of 10 years. Projects must be prescribed in the regulation and must comply with other eligibility requirements, including billing limits for retail customers by the CNM generator and reporting requirements for the CNM generator and participating distributor.

Authorization of the West Five development:

The West Five development and its proponents, Sifton Properties Limited and London Hydro Inc., are authorized as a CNM demonstration project. West Five is a 70-acre multi-use community in advanced stages of development in London, Ontario with a goal to achieve net-zero energy and water consumption, and electric vehicle readiness. The CNM model will provide a billing platform that will enable bill credits to be shared across accounts of participating load facilities and allow for integration of renewable generation and other technologies throughout the community. Both Sifton Properties and London Hydro will report to government over the term of the demonstration, including reporting on best practices for administration of CNM arrangements, planning and integration of renewable and distributed energy resources into community settings, and technical and regulatory challenges and barriers.

Consultation on the CNM proposal:

The CNM regulatory proposal was informed by public and stakeholder feedback. The preliminary proposal was posted on the Environmental Registry of Ontario (ERO) and Regulatory Registry of Ontario (RRO) for 45-days for public review and comment from October 8, 2020 to November 22, 2020. During the public posting period, 38 written comment submissions were received through the ERO, and Ministry staff met with 14 stakeholders to collect input on the proposal.

Outcomes and objectives:

These regulatory changes will allow testing of the CNM model on a demonstration basis to inform future policy on these types of arrangements. These learnings will benefit Ontario’s energy sector as well as builders and planners interested in developing more sustainable communities. It will also inform policy and decision-makers about impacts of these types of arrangements on consumers and electricity system cost impacts to inform potential future policy and decisions about implementing CNM and other net metering models more broadly in Ontario. This approach aligns with Ontario’s energy policy objectives for rate fairness, consumer protection, innovation in the electricity sector and minimizing impacts to electricity system costs.

Analysis of Regulatory Impact

The new regulation will provide an opportunity for the CNM model to be tested on a demonstration basis. Ontario businesses in the sector and in development and planning industries as well as utilities and government will benefit from the demonstration learnings in the form of improved policies and practices, while costs and other impacts are expected to be minimal. Key stakeholders directly impacted include the demonstration project proponents – the CNM customer (for the West Five development, Sifton Properties Limited) and the participating electricity distributor (London Hydro Inc. for the West Five development) – as well as electricity end-use consumers, and the provincial electricity regulator (Ontario Energy Board).

The overall compliance and administrative costs to the CNM demonstration project proponents are estimated to be approximately $77,700 over the 10-year term of the project. Actual costs may vary.

  • The compliance costs include upfront and ongoing licensing fees for the CNM generator paid to the Ontario Energy Board; and upfront and ongoing operating costs of billing and settlement software for the host distributor and CNM customer to accommodate CNM credit allocation.
  • The administrative costs include ensuring regulatory compliance through learning about the new regulation; legal fees associated with drafting of a CNM agreement; and recordkeeping and reporting costs associated with reporting requirements.

The Ministry estimates that a project involving 10-megawatts (MW) of embedded renewable generation would increase electricity system costs by a negligible amount relative to total system costs of Ontario’s overall electricity system. The regulation currently authorizes one CNM demonstration project with a total capacity limit of 10 MW.

 

Comments received

Through the registry

30

By email

8

By mail

0
View comments submitted through the registry

Effects of consultation

The Ministry received 38 written comments representing the following 43 entities: utility associations (3); utilities (9); municipalities (5); energy co-operatives (5); renewable energy companies/associations (5); energy companies/associations (3); not-for-profit and environmental organizations (5); other organizations (2); private companies (2); and anonymous individuals (4). While many comments were generally supportive of the CNM proposal, there were some comments received that noted concerns.

All comments were considered, and while some were ultimately deemed out of scope, the Ministry addressed concerns related to the potential for system cost and rate impacts and risks to consumers involved in a CNM demonstration project through the regulatory design, as follows:

  • Regarding concerns about potential local cost impacts (i.e., distributor costs recovered through rates), the Ministry notes that distributor participation in CNM is voluntary. Further, distribution charges are excluded from the charges that may be reduced through the CNM arrangement and from the rate used to calculate bill credits. In addition, a participating distributor is not restricted from charging fees to the CNM generator to recover administrative or other costs associated with implementing a project. This ensures that the CNM generator is responsible for its distribution charges and any other costs for the participating distributor are not recovered from its customers outside of the CNM project.
  • To minimize potential system-wide impacts, CNM is currently limited to a single 10-MW demonstration project for a 10-year term. The Ministry’s internal analysis of impacts to electricity system costs for this added net-metered generation capacity estimated that the impact would be negligible relative to total system costs.
  • Consumer protection risks and rate fairness for participating consumers were also important considerations in the regulatory design. These concerns were addressed by limiting the invoice amounts that the CNM generator may charge end-use consumers to what they would have been charged under the participating distributor’s rates for the same consumption of electricity. Consumer awareness mechanisms were also included in the CNM regulation, including requirements for the CNM generator to inform retail customers of the billing limits and provision of a bill comparison upon request. Where applicable, consumer protection would also be ensured through retailer licensing requirements overseen by the Ontario Energy Board.

Comments that were out of scope of the CNM proposal and could not be addressed included:

  • Some stakeholders advocated to broaden the scope of the proposed CNM model and its applicability to other types of net metering arrangements of stakeholder interest, such as virtual net metering arrangements involving generation connected in front of meters and not co-located with the loads. Broader types of net metering arrangements were excluded from consideration, as were options outside of the scope of demonstration projects. However, the CNM regulatory framework does offer some flexibility for different arrangements and configurations that align with the CNM model (e.g., projects not involving unit sub-metering and retailing, and projects involving some loads without generation connected behind their meter), provided that all eligibility criteria are met.
  • Stakeholder requests for a process to select projects could not be fully addressed. The Ministry assessed interest and alignment of potential CNM demonstration projects as part of the development of the regulatory proposal, and it was determined that the West Five development was the only project that aligned with the CNM model and at an advanced stage of development to proceed at this time.
  • Although no Indigenous communities submitted written responses to the ERO posting, four written submissions included general feedback related to potential Indigenous participation in CNM. After the ERO posting period ended, the Ministry was made aware of two Indigenous communities with an interest in CNM. Ministry staff met with both groups to discuss the CNM proposal and projects under development in the communities. The discussions were informative; however, the projects were not considered to be aligned with the CNM model being proposed, since the proposed CNM model focuses on bulk-metered multi-unit complexes. The Ministry will continue to assess opportunities for application of the CNM model for Indigenous communities as part of evaluation of the CNM model.

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Ministry of Energy, Conservation and Renewable Energy Division, Renewables Policy Unit
Address

77 Grenville St., 5th floor
Toronto, ON
M7A 2C1
Canada

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Contact

Cassandra Rosen

Phone number
Office
Ontario Ministry of Energy, Conservation and Renewable Energy Division
Address

77 Grenville Street
Toronto, ON
M7A 2C1
Canada

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Original proposal

ERO number
019-2531
Notice type
Regulation
Act
Ontario Energy Board Act, 1998
Posted by
Ministry of Energy, Northern Development and Mines
Proposal posted

Comment period

October 8, 2020 - November 22, 2020 (45 days)

Proposal details

Net metering is a billing arrangement between an electricity utility and a customer, such as a home owner or business. Under a net metering arrangement, the customer generates electricity from a renewable source for their own use while still drawing electricity from the grid when needed. Net-metered generators are eligible for credits on their electricity bills for renewable electricity generation they send to the grid. Credits are valued at the same rate customers are charged for their electricity drawn from the grid.

The Ministry of Energy, Northern Development and Mines is seeking input on a proposal for community net metering demonstration projects. Community net metering refers to a net metering arrangement that allows for the transfer or sharing of credits from generation facilities within a community across multiple metered accounts. Enabling community net metering demonstration projects would provide customers and developers more options to participate in net metering initiatives that may help lower the community’s costs and meet sustainability goals.

Embedded renewable generation would be a key feature of the net-metered community, generating power for local use and sending generation exceeding the community’s needs to the grid in exchange for credits that are applied to energy consumed from the grid. Electricity bill credits would be shared among participating accounts, and the community would draw power from the grid when there is insufficient local generation.

The proposed community net metering model would be prescribed in regulation and include the following requirements:

  • Electricity utilities enter into a net metering arrangement with the customer leading the community net metering demonstration project;
  • The customer who leads the community net metering demonstration project can use more than one meter to manage generation and loads within the community, and generation credits are transferrable between these meter billing accounts;
  • Behind the meter renewable generation, and potentially energy storage, are part of the community electrical system serving customers within the community;
  • Billing of sub-metered customers within the community is in accordance with Ontario’s Energy Consumer Protection Act, 2010, the Unit Sub-Metering Code, and any other applicable codes and rules;
  • Limited participation in the demonstration (e.g., total number of projects; capacity limits for individual projects and/or all projects);
  • Reporting requirements to measure performance;
  • Net metering agreements that describe the roles, responsibilities, and obligations between the utility and lead community net metering customer; and
  • Compliance with all applicable electricity codes and rules in Ontario.

The community net metering model would align with Ontario’s broader electricity policy objectives, including: rate fairness for all customers; consumer protection for sub-metered customers; mitigation of local impacts by ensuring generation matches the community’s power needs; ensuring meaningful opportunities exist for Indigenous participation and economic development in Ontario’s energy sector and, enabling new business opportunities.  Ontario is interested in hearing from Indigenous peoples and communities about how this model could be applied for communities and is seeking feedback on interest in this demonstration or future related opportunities.

The proposed regulatory changes, if approved, would provide an opportunity to test how net metering could provide a framework for integrating generation and other distributed energy resources, such as energy storage, in a local community setting. The Ministry is seeking input on the proposed community net metering requirements, including flexibility that may be needed to encourage innovation in integration of distributed energy technologies and applications.

The Ministry intends to monitor and evaluate the performance of the demonstration projects to inform future policy development. Enabling these demonstration projects will also help define regulatory challenges for net metering at a community level and would inform the Ministry and the sector about how larger net metering projects could provide capacity relief to the grid, or potentially avoid costly upgrades by integrating distributed energy resources. Results from this initiative could guide potential future enhancements to the net metering framework.

To support specific program design elements, and overall administration of community net metering demonstration projects, additional regulatory changes may be required.
 

Analysis of Regulatory Impact:

The proposed model would aim to remove regulatory barriers to enable business opportunities and spur innovation in the sector. Demonstration projects could test the potential for innovative energy solutions to provide benefits to customers and address grid issues (e.g., reduce demand in a local distribution company service territory). 

Electricity utilities administering community net metering demonstration projects may incur costs associated with billing and settlement of participating customers and from meeting potential reporting requirements.

As part of its evaluation process and monitoring of community net metering demonstration projects, the Ministry would assess cost to electricity utilities and broader system impacts resulting from implementation of the proposed regulatory changes. These findings would improve knowledge and understanding of regulatory challenges for net metering at a community level to inform future policy development.

The Ministry is interested in input on any potential benefits, impacts, and costs to electricity utilities and other stakeholders related to the proposed regulatory changes and community net metering demonstration projects.

Comment

Commenting is now closed.

This consultation was open from October 8, 2020
to November 22, 2020

Connect with us

Contact

Cassandra Rosen

Phone number
Office
Ministry of Energy, Northern Development and Mines, Conservation and Renewable Energy Division
Address

77 Grenville St.
5th Floor
Toronto, ON
M7A 2C1
Canada