Supporting Residential Roof-Top Solar and other renewable resources by clarifying eligibility of third-party leasing and financing net metering arrangements

ERO number
019-4554
Notice type
Regulation
Act
Ontario Energy Board Act, 1998
Posted by
Ministry of Energy
Notice stage
Decision
Decision posted
Comment period
November 1, 2021 - December 16, 2021 (45 days) Closed
Last updated

This consultation was open from:
November 1, 2021
to December 16, 2021

Decision summary

On April 14, 2022, Ontario filed amendments to O. Reg. 541/05 (Net Metering) and consequential amendments to O. Reg. 389/10 (General) to clarify eligibility of third-party ownership arrangements for net metering, align regulatory requirements related to electricity retailing, and enhance consumer protection.

Decision details

Ontario is supporting the adoption of rooftop solar and other renewable energy resources like battery storage by making it easier for customers to participate in net metering. Reducing barriers to net metering cuts red tape and increases customer choice by enabling more tools for customers to manage electricity costs and achieve sustainability goals.

On April 14, 2022, Ontario filed O. Reg. 386/22, a regulation to amend O. Reg. 541/05 (Net Metering), made under the Ontario Energy Board Act, 1998, and O. Reg. 387/22, a regulation to amend O. Reg. 389/10 (General), made under the Energy Consumer Protection Act, 2010.

These regulatory changes, set to come into force July 1, 2022, clarify that customers can access third-party ownership arrangements like leasing, renting, financing and power purchase agreements for the provision of renewable generation equipment or to purchase renewable electricity for the purposes of net metering. Third-party ownership net metering arrangements allow a customer to participate in net metering while not owning or operating the renewable generation facility that is generating the electricity. These changes also address regulatory barriers for third-party generators to sell the electricity to a customer for net metering and introduce consumer protection measures for this type of electricity retailing and other third-party net metering ownership arrangements.

Our amendments enable more options for homeowners, farms, and businesses to participate in net metering without having to finance the upfront capital costs of purchasing or installing a renewable generation system themselves. This also creates new opportunities for renewable energy businesses, including installers, developers, and service providers to offer distributed energy solutions that better meet customer needs, such as power purchase agreements that allow customers to pay based on the amount of electricity the installation generates.

Third-party ownership arrangements, including those involving power purchase agreements, do not change the relationship between the customer and their electricity distributor for net metering. A customer who is a party to an agreement with a third party, related to renewable energy generation equipment or purchasing electricity from a renewable energy generation facility used for net metering, will maintain a net metering agreement with their electricity distributor and be billed on a net metering basis in the same way as a customer who is not party to a third-party arrangement.

Amendments to O. Reg. 541/05 (Net Metering)

Definitions and requirements for “eligible customer” and “eligible third party generator” have been added to the regulation to allow customers, who purchase electricity from a third-party generator, to be eligible for net metering.

An “eligible customer” is not required to own or operate the generation facility, but similar to requirements for an “eligible generator”, the following requirements in relation to the generation facility must be met:

  • The electricity must be generated from a renewable energy source;
  • The generator must be generating primarily for the customer’s use;
  • The renewable generation facility must be connected behind the customer’s meter in such a way that the electricity is conveyed to the customer without reliance on the distributor’s distribution system;
  • The electricity that is generated in excess of what the customer consumed is conveyed to the distributor’s distribution system, and;
  • There can be no other sale of the electricity that is conveyed into the distributor’s distribution system.

New disclosure requirements have been added for situations where the customer has a third-party agreement to lease, rent or finance the renewable energy generation equipment. The customer, as an “eligible generator”, would be required to confirm to their electricity distributor that the third party, with whom they have an agreement, has disclosed certain information about the agreement, which includes:

  • The name and contact information of any other parties to the agreement.
  • Whether the agreement is a lease, financing, hosting, licensing or other arrangement.
  • The term of the agreement.
  • The date on which the agreement begins to apply to the generator.
  • For the associated renewable energy generation facility, the rated maximum output capacity as stated on the nameplate of the machinery or equipment that is used to produce electricity.
  • Any insurance, warranty rights or obligations, including any obligation to pay a deductible, related to the renewable energy generation facility or related equipment, systems and technology, and any limitations or exclusions in respect of coverage.
  • The terms of payment, including any terms related to deposits, interest or any other financial or legal obligations under the agreement that affect the terms of payment.
  • Any options or obligations to purchase the renewable energy generation facility or related equipment during or at the end of the term, including any relevant dates and costs associated with the options or obligations.
  • Any other costs for which the generator will be responsible, including costs related to administration and account billing, insurance or warranty rights, leasing, rental, installation, connection, ongoing operation, maintenance and removal of the renewable energy generation facility or related equipment, systems and technology.
  • Any right to terminate, suspend, amend, extend or renew the agreement.
  • Any penalties under the agreement and the circumstances in which the generator would be liable to pay the penalties.
  • Any right to transfer or assign the agreement.
  • Any authority to put a lien on the generator’s property and the circumstances that would give rise to such a right.
  • Any maintenance and operation obligations the generator has with respect to the renewable energy generation facility or related equipment, systems and technology.
  • An estimate of the annual energy production of the renewable energy generation facility measured in kilowatt hours.
  • An estimate of the annual electricity cost savings to the generator under the agreement.

Amendments to O. Reg. 389/10 (General)

Building on existing provisions and requirements, amendments to the regulation include the addition of the following defined terms defined terms:

  • “associated agreement”;
  • “associated renewable energy generation facility”;
  • “renewable energy generation facility”; and
  • “third party generator”.

These additions enable third-party generator retailing that would encompass power purchase agreements between the third-party generator and the customer. They also distinguish between the retail contract and an associated agreement related to the renewable energy generation facility, such as solar panels and inverters, that would be installed at the customer’s premises but owned and/or operated by the third-party generator.

Several amendments have been made to align requirements for electricity retailers and retail contracts with this new type of energy retail activity, as follows:

  • The definition of “additional energy charges” has been amended to exclude charges under an associated agreement, so that the charges in an associated agreement are controlled for separately;
  • Unfair Practices rule prohibiting retailers from requiring a consumer return equipment provided by the retailer, even if the consumer cancels the retail contract, has been amended to exclude associated generation equipment provided by the third-party generator under the associated agreement;
  • Contract requirements relating to a consumer’s right to cancel a retail contract without penalties or fees up to 30 days after receiving the second bill have been amended to allow for penalties or other charges payable by a consumer under an associated agreement with a third-party generator;
  • A provision relating to a contract deemed to be void if the supplier does not notify the energy distributor that the retail contract has been cancelled by the consumer have been amended so that it does not apply to contracts where the supplier is a third-party generator; and
  • A provision has been added to the regulation to exempt a third-party generator from the requirement under the Act to notify the distributor when a consumer cancel.

New disclosure requirements have been added for third-party generators engaging in retailing to disclose certain information about an associated agreement to the customer, including:

  • The name and contact information of any other parties to the associated agreement;
  • Whether the associated agreement is a lease, financing, ho
  • The date on which the associated agreement begins to apply to the consumer;
  • For the associated renewable energy generation facility, the rated maximum output capacity as stated on the nameplate of the machinery or equipment that is used to produce electricity;
  • Any insurance or warranty rights or obligations, including any obligation to pay a deductible, related to the equipment, systems and technologies and any limitations or exclusions in respect of coverage;
  • The terms of payment, including any terms related to deposits, interest or any other financial or legal obligations under the associated agreement that affect the terms of payment;
  • Any options or obligations to purchase the renewable energy generation facility or related equipment during or at the end of the term, including any relevant dates and costs associated with the options or obligations;
  • Any other costs for which the consumer will be responsible, including costs related to administration and account billing, insurance or warranty rights, leasing, rental, installation, connection, ongoing operation, maintenance and removal of equipment;
  • Any right to terminate, amend, suspend, extend or renew the associated agreement;
  • Any penalties under the associated agreement and the circumstances in which the consumer would be liable to pay the penalties;
  • Any right to transfer or assign the associated agreement;
  • Any authority to put a lien on the consumer’s property and the circumstances that would give rise to such a right;
  • Any maintenance and operation obligations the consumer has with respect to the associated renewable energy generation facility;
  • An estimate of the annual energy production of the associated renewable energy generation facility measured in kilowatt hours; and
  • An estimate of the annual electricity cost savings to the customer under the associated agreement.

Other amendments have been made so that the following rules apply to third-party generators and retail contracts between third-party generators and consumers:

  • Charging more for the removal of an associated renewable energy generation facility than the amount for removal set out in the associated agreement is an unfair practice;
  • A third-party generator retail contract must state that it does not include charges related to an associated agreement for equipment to produce the electricity; and
  • A third-party generator retail contract must state that if a customer moves, the customer may be liable for the cost set out in an associated agreement for the removal of equipment that the supplier provided.

Comments received

Through the registry

16

By email

2

By mail

0
View comments submitted through the registry

Effects of consultation

We received 18 written comments on behalf of the following 19 organizations and individuals: utilities (4); utility associations (3); renewable energy companies/associations (5); not-for-profit and environmental organizations (1); companies (1); other organizations (2); and anonymous individuals (2). All comments were considered.

Overall, feedback supported clarifying eligibility of third-party ownership arrangements in the net metering regulation. Feedback focused on the need for greater clarity on the eligibility of third-party ownership arrangements involving power purchase agreements. Stakeholder feedback also highlighted that power purchase agreements models provide the benefit of making net metering more accessible for consumers by reducing or removing the customer’s upfront capital cost of installing renewable energy generation systems. 

Some stakeholders, including electricity distributors, raised concerns about consumer protection related to third-party ownership arrangements and identified a need for increased consumer protection measures to avoid potential issues, such as misrepresentation of financial costs or savings, financial penalties in third-party contracts, hidden liens on properties and high-pressure sales tactics, especially for more vulnerable consumers.

Stakeholders interested in providing products and services to consumers under third-party ownership arrangements, such as renewable energy businesses, were supportive of ensuring adequate levels of consumer protection for third-party ownership arrangements. This included support for leveraging the Energy Consumer Protection Act, 2010 framework to require businesses engaging in third-party ownership arrangements involving power purchase agreements to be required to be licensed as electricity retailers for this new type of retailing activity.

In response to stakeholder feedback, we expanded the scope of proposed regulatory amendments to address eligibility of power purchase agreements and related electricity retailing and consumer protection issues. We also considered the potential for the regulatory amendments to have an impact on electricity system costs as a result of increasing uptake of net metering. We will monitor adoption of third-party ownership arrangements for net metering as well as potential consumer protection issues.

We engaged with the Ministry of Government and Consumer Services, the Canadian Renewable Energy Association and the Ontario Energy Board to consider consumer protection needs and will continue to engage during implementation of the regulatory changes to assess the need for any additional steps to be taken to ensure appropriate levels of consumer protection, including consumer awareness actions.

Some stakeholders also provided feedback on issues that were not within the scope of the proposal, including comments about virtual net metering, community net metering and costs associated with the connection process for renewable generation facilities for net metering. Stakeholders were interested in opportunities to pursue virtual net metering models to support renewable energy projects and identified the cost of connection impact assessments for small renewable generation facilities (greater than 10 kW but less than 100 kW) as being prohibitive and unnecessary. This additional stakeholder feedback may be considered in the context of future net metering initiatives.

Supporting materials

View materials in person

Important notice: Due to the ongoing COVID-19 pandemic, viewing supporting materials in person is not available at this time.

Please reach out to the Contact listed in this notice to see if alternate arrangements can be made.

Connect with us

Contact

Sign up for notifications

We will send you email notifications with any updates related to this consultation. You can change your notification preferences anytime by visiting settings in your profile page.

Follow this notice

Original proposal

ERO number
019-4554
Notice type
Regulation
Act
Ontario Energy Board Act, 1998
Posted by
Ministry of Energy
Proposal posted

Comment period

November 1, 2021 - December 16, 2021 (45 days)

Proposal details

Net metering is a billing arrangement between an electricity distributor and a customer, such as a homeowner or business. Under a net metering arrangement, the customer generates electricity from a renewable source of energy, such as residential roof-top solar panels, for their own use while still drawing electricity from the grid when needed. The customer is billed only for the amount of electricity they consume from the grid, plus any applicable fixed or demand-based charges, and the customer receives a credit on their bill for any electricity they generate that they do not consume and send to the grid. Credits are valued at the same volumetric rates customers are charged for electricity consumed from the grid and can be applied to any volumetric charges on the customer’s bill. To qualify for net metering, a customer must meet the requirements of an “eligible generator” as defined in the net metering regulation, O. Reg. 541/05.  This includes qualifying as a “generator” under the Ontario Energy Board Act, 1998, which is discussed in a recent Bulletin issued by Ontario Energy Board staff on October 25, 2021.  

The Ministry of Energy is proposing to amend the net metering regulation to clarify criteria for a customer to qualify as an eligible generator when they are leasing or financing the generation equipment used by the customer for net metering. This would help service providers and customers in Ontario better understand the types of third-party arrangements they could enter into.

To inform the regulatory amendments, the Ministry would like to hear input from individuals and businesses interested in leasing and financing arrangements under the net metering regulation. This may include information about the types of leasing and financing arrangements that are of interest, the role of third-party leasing and financing providers, the role of customers that would be entering into leasing and financing arrangements with third-party providers, how lease or financing payments would be structured, how the operation of the equipment would be structured, and any other relevant terms of leasing and financing agreements for the purposes of the customer obtaining renewable generation equipment for net metering, as well as any consumer protection issues or concerns. Such feedback would help to inform the Ministry of Energy’s assessment of issues of clarity in the regulation and approach to amending the regulation to clarify eligibility.  

Analysis of Regulatory Impact

This regulatory proposal is not currently expected to introduce any new administrative costs for businesses. Rather, clarification of this regulation may lead to increased interest and uptake in net metering and result in increased energy savings for the new participating residential and business customers. Clarification of eligibility criteria in the regulation as it relates to leasing and financing arrangements between the customer, who must qualify as the eligible generator, and a third-party may result in increased interest in net metering, which could have an indirect impact on system costs and risks to consumers. These potential impacts will be assessed as part of the Ministry’s consideration of feedback on this proposal. The Ministry is seeking input on any potential benefits, impacts, and costs to electricity utilities, net metering customers, and other stakeholders related to the proposed regulatory changes.

Supporting materials

View materials in person

Important notice: Due to the ongoing COVID-19 pandemic, viewing supporting materials in person is not available at this time.

Please reach out to the Contact listed in this notice to see if alternate arrangements can be made.

Comment

Commenting is now closed.

This consultation was open from November 1, 2021
to December 16, 2021

Connect with us

Contact

Sarah Heiman

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

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