As published in the Summer 2006 edition of CondoVoice Magazine.
Soaring energy costs, which often form the largest expenditure of the budgets of condominium corporations, have led boards of directors to evaluate energy conservation initiatives. However, provisions in the Condominium Act, 1998 have often prevented condominium corporations from accomplishing such initiatives. The Energy Conservation Responsibility Act, 2006 (the “ECLA”), which received Royal Assent on March 28, 2006, is designed to, among other things, remove the impediments created by the Condominium Act, 1998 to promote opportunities for energy conservation in condominiums.
The ECLA legislates two further initiatives proposed by the Ontario Government, which are aimed at establishing a “culture of conservation” to reduce the demand for energy in Ontario. Specifically, the ECLA establishes the legislative framework for conservation leadership and the implementation of a smart metering program, which will facilitate the installation of smart meters in every home and small business in the province.
Although the specific details of how the initiatives will be carried out are left to be determined by the regulations (which were not released with the proclamation of the ECLA), of particular significance for condominium corporations, is that the ECLA will remove the barriers that have otherwise prevented the individual metering of condominium units.
The Smart Metering Initiative
The ECLA amends the Electricity Act, 1998 to provide for the mandatory installation of smart meters or smart sub-meters, metering equipment, systems and technologies by local electricity distributors. The regulations to the ECLA will ultimately establish:
- the circumstances under which such devices, systems and technologies will be installed;
- the types of devices, systems and technologies to be installed;
- the property or classes of properties and locations where such devices, systems and technologies will be installed;
- the consumers or classes of consumers that will be affected by the installation of such devices, systems and technologies; and
- deadlines for installation.
In order to facilitate the smart metering initiative for condominiums, the provisions of the ECLA will override any provision in the Condominium Act, 1998, any other legislation, as well as, any provision in a registered condominium declaration that would otherwise prevent condominium corporations from using such devices, services and technologies. For instance, the ECLA overrides the requirements for unit owner approval in Section 97 of the Condominium Act, 1998 for changes to the common elements or to services provided by condominium corporations.
The greatest impact that the ECLA will have on condominium corporations (and their budgets) is the legislation’s provisions regarding the responsibility for the cost of electricity consumption. Currently, most condominium corporations are bulk metered and their declarations require corporations to provide electricity to the individual units and to charge the cost to the corporation’s general fund. Obviously, the current situation does little to promote energy conservation. For instance, let’s say one unit owner consumes more electricity than another unit owner; the unit owner with greater consumption is not required to pay anything extra in common expenses for his or her higher energy use. Nor does the energy conscious unit owner receive a rebate or a reduction in common expenses. In fact, the energy conscious unit owner bears the cost of the unnecessary energy consumed by others. The result is that there is no incentive to conserve energy on the part of each individual owner, since no direct benefit is actually received.
Any change to a condominium corporation’s declaration that would transfer the responsibility for the cost of electricity to the individual unit owner would, if not for the ECLA, require the written consent of at least 80% of the owners of all the units, which, for most condominium corporations is an impossible task to achieve.
By overriding the provisions of the Condominium Act, 1998, the ECLA shifts the responsibility for the cost of electricity from the condominium corporation directly to the unit owner without the need to comply with the unit owner approval requirements of the Condominium Act, 1998. Condominium corporations will continue to be responsible for the cost of electricity to the common elements and any unit(s) they own. However, by shifting the cost, unit owners will now have an incentive to conserve energy. When people understand that their actions impact their costs, they are more likely to be energy conscious.
In order to carry out the smart metering initiative, the ECLA also amends the Electricity Act, 1998 to create a “Smart Metering Entity”, the objects of which will include:
- planning, implementing, overseeing, administering and delivering any part of the smart metering initiative as required by regulation or by a directive from the Minister of Energy to the Ontario Energy Board (the “OEB”);
- collecting information and data relating to the consumption of electricity;
- establishing, owning or leasing and operating databases to facilitate collecting, storing and retrieving smart metering data;
- engaging in competitive procurement activities necessary to fulfil its objects;
- procuring meters, metering equipment and technologies and associated technologies and systems on behalf of electricity distributors; and
- fixing the costs for its activities by charging rates approved by the OEB.
The Smart Metering Entity will also have the authority to establish the cost of the devices, systems and technologies, which will then be passed on to the individual consumer in the form of higher rates.
Conservation Leadership Initiative
In order to promote conservation leadership in Ontario, the ECLA authorizes the Lieutenant Governor in Council to require “public agencies”, including a ministry of the Government of Ontario, municipalities and entities that will be prescribed by regulation, to carry out conservation measures. The conservation measures contemplated by the ECLA would require “public agencies” to:
- develop periodic energy conservation plans to address energy-consuming technologies and operations, annual energy usage, current and proposed conservation activities, and achievements in energy conservation;
- achieve energy conservation targets prescribed by regulation; and
- consider energy conservation and energy efficiency when making capital investments or acquiring goods and services.
The ECLA also promotes conservation in the private sector by permitting the use of goods, services and technologies (to be designated by the regulations) that would allow for energy conservation, but which are otherwise currently restricted.
In order to ensure compliance with the conservation measures created by the ECLA, the Ministry of Energy is authorized to designate enforcement officers who would be permitted to issue compliance orders where a person does not comply with the statutory requirements.
The regulations to the ECLA will, once passed, clarify the specific details of the smart metering initiative, and, in turn, determine the practical impact of the legislation on condominium corporations. In order for the smart metering initiative to be effective in all condominiums, the regulations to the ECLA must address several practical issues, including how smart meters will be implemented in buildings that were not designed for individual metering, if at all, the significant costs to install smart meters in such buildings, and alternative solutions.