Ontario Amends Net Metering Regulation for Third-Party Property

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On April 20, 2022, the Government of Ontario filed O. Reg. 386/22 and Reg. 387/22 (collectively, the amending regulation) to amend the Net billing Regulation (O. Reg. 541/06) under the Ontario Energy Board Act, 1998 (NMR) and General Regulation (O. Reg. 389/10) under the Energy Consumer Protection Act 2010 (the Consumer Protection Regulation). The amending regulation allows third parties to own metered net renewable energy generation in Ontario, as noted in an Ontario Energy Board staff bulletin [PDF] and a consultation with the Government of Ontario.

The amended regulations will open up the possibility of net metering to a much wider pool of industrial and residential electricity customers, who may not be able to own or operate their own behind-the-meter renewable energy generation equipment. The amendments confirm that electricity distribution customers can enter into a net metering contract with their electricity distributor for electricity produced by a renewable generator, subject to third party ownership agreements such as credit agreements -lease, rental, financing and purchase of electricity. The amending regulations will enter into force on July 1, 2022.

In this blog post, we discuss this latest development in the evolving regulation of net metering projects in Ontario and its potential to promote greater use of connected renewable energy generation behind the consumer’s electricity meter. electricity connected to distribution in Ontario.

Background

RMN was originally introduced in 2006. Subject to the technical constraints of a distributor’s distribution system, the RMN requires a distributor to (i) allow its customers to install renewable energy generation “behind” their electricity meter to primarily supply the customer’s own electrical load and (ii) provide customers with credits on their electricity bill for excess electricity delivered into the distributor’s distribution system. Credits can be used to reduce the consumption portion of a customer’s future electricity bills, subject to clearing all credits in a customer’s account at least every 12 months. Since the introduction of NMR, more than 2,000 net-metered generation facilities, representing 38 megawatts of renewable generation capacity (wind, hydro, solar and biomass), have been connected to Ontario’s electricity grid.[1]

As we discussed in a previous blog post, in the fall of 2021, the Ontario government introduced the Net Metering Community Projects regulation, Reg. 679/21 (the CNMPR). The regulation allows the net metering of a renewable energy generator located “behind” a customer’s meter with the loads of other customers who are not directly connected “behind” the same customer’s meter as the generator. renewable energy. However, the net metering project must (i) be an approved pilot project (having a maximum capacity of 10 megawatts and a maximum duration of 10 years, among other limitations) listed in an appendix to the CNMPR and (ii) involve a single entity (for example, a landowner) operating the renewable energy generation and holding the accounts for all net metered customer loads. Currently, the CNMPR only applies to one project, the development of the “West Five” project in London, Ontario, by Sifton Properties Limited.

Amendments

The amending regulation will sound familiar to industry participants, since it repeats all but the last section of an earlier regulation, O. Reg. of Ont. 273/18 (the repealed regulation). This regulation had been approved to amend the net metering regulation, but was revoked by the then newly elected provincial government in the fall of 2018, before taking effect.

By adding the definitions of “eligible customer” and “eligible third-party producer” to the NMR, the amending regulation provides that a distributor must allow a qualifying third-party generatorwith whom a eligible customer has contracted for the purchase of electricity “behind” the eligible customer meter, transmit eligible electricity in a distributor’s distribution system. The distributor is then required to provide eligible customer with such credit eligible electricity on their electricity bill. This allows electricity consumers connected to the distribution network (the “eligible customer”, in accordance with the amending regulations), who were previously unable to obtain the benefits of net metering due to the requirement that the customer be the owner of the production equipment connected behind his meter, to seek personalized solutions. commercial structures with third parties to finance the capital cost and address other challenges and barriers associated with installing, hosting and operating renewable energy generation behind the meter of a eligible customer. Similar to existing requirements included in the NMR for eligible generatorsthe amending regulation does not require that either a eligible customer neither one qualifying third-party generator be a party to any other contract that provides for the sale, in whole or in part, of the electricity that qualifying third-party generator conveyed through the distributor’s distribution network under a net metering contract.

The amending regulations also introduce new consumer protections for these new renewable energy equipment agreements. Retailers entering into a Power Purchase Agreement and Renewable Energy Generation Equipment Agreement (defined as an “Associated Agreement”) will be subject to new consumer protection-focused requirements targeting unfair practices. These requirements include obligations to disclose cancellation fees, insurance and warranty obligations, maintenance obligations, equipment removal costs and estimated electricity savings, as required by the amended consumer protection. The amended NMR also requires that the distribution system customer who is party to an agreement (other than a net metering agreement) related to the renewable energy generating equipment behind their meter (i.e. . a leasing, rental or financing agreement relating to production equipment) to confirm to its authorized distributor that it has received the disclosure of the prescribed information relating to this agreement.

No amendment to virtual net metering

Similar to net metering regulations, virtual net metering regulations require a distributor to credit the consumption portion of a customer’s electricity bill based on the electricity delivered into the utility’s distribution system. distributor from a net-metered virtual generator. A key difference, however, is that virtual net metering regulations do not restrict the connection of a net-metered virtual generator to physically connected locations “behind” a load customer’s meter and do not limit virtual generators with net meter to generate electricity which is mainly for their own use. This provides developers of virtual net meter projects increased access to a pool of customers that can be grouped together for a single project, expanding the possible sites for generators and allowing them to be sized and sited to achieve economies of scale. beyond those of individual net meter projects. .

Although they establish additional flexibility and funding structures for net metering projects compared to the status quo, the most interesting aspect of the regulatory changes for many industry participants is their exclusion from the metering section. virtual net of the repealed regulation. Although CNMPR permits community net metering projects that closely parallel virtual net metering projects in several respects, its requirement that a single entity (e.g., owner) hold all metered net customer accounts with the distributor limits its reach to residents. and businesses located in areas where a single owner is interested in developing net-metered renewable energy generation. This significantly limits the potential of community net metering projects to promote greater use of renewable energy generation compared to the potential created by virtual net metering projects which provide open access to all customers and generation developers. renewable energy, where the benefits of net metering can be shared and distributed. between several separate customers of an electricity distributor.

Conclusion

As the cost of grid-based electricity in Ontario is poised to continue to rise, electricity consumers are increasingly interested in net metering opportunities. The amending regulation supports the expanded use of net-metered renewable energy generation to meet Ontario’s electricity needs. By allowing third-party ownership of net-metered renewable energy generators, the Amending Regulation increases the options available to both load customers looking to add a renewable energy generator “behind” their meter that they not own and for renewable power generation developers seeking additional sites for projects (such as on the rooftop or grounds of a host facility). However, the failure of the amending regulation to enable virtual net metering represents another conscious choice of Ontario electricity policy in recent years to limit the adoption of net metering projects compared to the wider potential adoption of net metering with generation equipment not physically connected to the customer’s load meter. .

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