Canada: Ontario Energy Board Clarifies Smart Sub-Metering Rights For Multi-Unit Buildings

In the past year, the Ontario Energy Board (OEB) has issued two important decisions that provide clarity to condominium developers and landlords in Ontario on their rights to sub-meter individual units in their buildings using smart meters. As discussed below, there is also new legislation concerning smart sub-metering on the horizon that will be of interest to developers and landlords in Ontario.

At the core of this issue are the smart-metering provisions of the Electricity Act, 1998 and the related regulations, in particular Ontario Regulation 442/07. Regulation 442/07 required all new condominium buildings constructed in Ontario after August 1, 2007 to include a smart meter for each unit. Under the regulation, a condominium developer has the choice whether to have individual units metered directly by the local distributor, or to have the distributor provide a bulk interval meter for the building while having individual units sub-metered by an alternate provider. The smart sub-metering provider must be licenced by the OEB and comply with the requirements of the OEB's Smart Sub-Metering Code. Existing condominium buildings are not required to install smart meters for each unit, but can do so at the option of the condominium corporation and also enjoy the right to use the services of a licenced smart sub-metering provider.

Notwithstanding this regulation, the province's largest municipal electricity distributor, Toronto Hydro Electric System Limited (THESL) adopted a policy of refusing to connect new condominium buildings unless the developer agreed to allow the distributor to smart-meter each unit in the building. The policy had the effect of forcing each unit owner to become a customer of THESL and undermined the competitive sub-metering market provided for in the legislation. The OEB brought a compliance proceeding against THESL in August 2009, alleging that THESL's policy was in breach of the distributor's obligation to connect and of the regulatory regime. In a decision released on January 27, 2010, the OEB found that THESL's policy was in breach and ruled that a distributor cannot frustrate a developer's right to use the services of a smart sub-metering provider. The OEB issued a compliance order requiring THESL to implement measures to ensure that developers are aware of and have access to the services of licenced smart sub-metering providers.

The situation for residential rental buildings or industrial, commercial or office buildings differs from that of condominiums. Although the practice of smart sub-metering such buildings in Ontario has been widespread for several years, the practice was not authorized by Regulation 442/07 and ran contrary to the prohibition on discretionary metering activities in the Electricity Act, 1998. After receiving complaints about the activities of landlords and smart sub-metering providers, the OEB initiated a proceeding in 2009 to consider the issue of discretionary metering further.

In a decision released on August 13, 2009, the OEB recognized that while the smart sub-metering of residential rental buildings is not authorized by legislation, it is consistent with the provincial government's policy objectives. In this respect the OEB noted that the government had made statements supportive of smart sub-metering in rental buildings and was drafting new legislation to address the issue. However, because of the time necessary to pass such legislation and the "aggressive pursuit of smart sub-metering by landlords," the OEB determined that it was necessary to provide interim regulation. Therefore, the OEB authorized the installation of smart sub-metering systems in residential rental buildings and imposed a number of terms and conditions to protect the interests of tenants. In the same decision, the OEB authorized the smart sub-metering of industrial, commercial and office buildings, subject to terms and conditions less demanding than those required for residential rental buildings.

As noted above, new legislation is forthcoming that will further impact smart sub-metering activities. In December 2009 the provincial government introduced Bill 235, the Energy Consumer Protection Act, 2010. If passed in its current form, the Bill would provide the OEB with authority to make orders approving or fixing rates for sub-metering and impose a number of consumer protection measures on smart sub-metering providers, including a requirement that landlords reduce rents when installing a smart sub-metering system and provide tenants with information related to energy usage and conservation. Bill 235 recently passed second reading and has been ordered for third reading.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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