The introduction of competition into Ontario’s utility metering environment was a measured move towards providing utility customers with the service they deserve, and an effort to keep administrative fees from increasing astronomically. It was clear that real change was needed to enhance protection for residents and improve service delivery, and that new players could shake things up. Given the complexities of Ontario’s utility and rental housing markets, on January 1, 2011, a comprehensive regulatory framework was set out to usher in submetering in a fair and transparent way. Over time, these regulations have evolved to meet customers’ needs, as unit sub-meter providers (
Ontario Energy Board (OEB)
The OEB was established by the Ministry of Energy in an effort to regulate the electricity and natural gas markets. Accordingly, the OEB has jurisdiction over regulating the activities of
The OEB grants licenses to
The Code is quite extensive and it is not unusual for clients, when reviewing agreements with
Energy Consumer Protection Act (ECPA)
While the main purpose of the ECPA is to provide guidelines to energy retailers as to how they can market contracts to individual consumers, it also provides some rules to USMPs and building owners setting out installation schedules for individual suite metering depending on building type (ie existing rental buildings, condominiums, new construction projects, non-profit housing, etc).
Section 38 of the ECPA Regulations sets forth the circumstances under which individual suite meters may be installed, whilst Section 39 sets forth the circumstances under which suite meters are required.
Further, the Regulations under this legislation mandate that
Specific to Landlords:
Residential Tenancies Act (the “RTA”)
The main takeaway for Landlords is that if they wish to submeter tenants in a building, they must obtain tenant acknowledgement and consent in the rental application or lease, specifying that electricity or water or other utilities are excluded from rent and that the tenant will be responsible for payment of those utilities to a third party provider at the commencement of his/her lease. Further, where the Landlord has electricity consumption data for the previous 12 months in a unit, the Landlord must provide such information to prospective tenants. The LTB website offers a sample form that may be used by Landlords for their convenience when providing the
Though the governing bodies and legislation mentioned in this article are the main source of authority for providing a code of conduct to USMPs and building owners, there are other regulatory bodies and/or legislation which provide additional guidelines for USMPs to comply within the submetering industry, including but not limited to: Measurement Canada, privacy acts and regulations, Electrical Safety Authority and individual municipal regulations.
While the regulatory landscape may continue to evolve, it is helpful for building owners interested in submetering programs to become familiar with the sound, customer-focused fundamentals upon which this industry is built.
By Malvina Sternak
In-house Counsel, Wyse Meter Solutions
When you pair the rising cost of electricity in Ontario with a historical disconnect between the tenant’s use of the electricity and the costs they incur, submetering is quickly becoming a real estate owner or manager’s new best friend. While utility submetering is becoming increasingly common for buildings in Toronto and other metropolitan areas, smaller market cities like Hamilton, Guelph and St. Catharine’s with independent, family owned buildings have been a little hesitant to join the trend. There are benefits on both the tenant and landlord side, given that independent submetering allows each resident to pay only for their own consumption, and not compensate for the fluctuations in their fellow residents’ usage. Naturally, this is more beneficial for some than others. However, our chronic over consumption as a population at large is having a severe environmental impact, and it should be a focus of every citizen to reduce excessive energy consumption. Submetering is one important step toward resolving this issue. As such, landlords should embrace utility submetering providers and the expertise they can offer to reduce related costs and administration related to this transition.
“We recently completed the transition of over 4,000 residential units to sub-meters. The organizational savings to our firm in terms of execution, administration and tenant servicing through the outsourcing of this project to a professional submetering company was the most efficient and effective method of accomplishing our objective.” Matt Organ, President of Skyline Residential
As a building owner or manager, you can count on your utility submetering provider to liaise with your residents regarding monthly billing issues and / or concerns, and provide efficient and effective customer service to inquiring residents that might otherwise become a burden to your hard working staff. By bringing on a utility submetering provider, you will allow your staff to focus on their jobs without time consuming billing issues and customer service distractions. There is an underrated customer service aspect to the utility submetering business, which can provide relief and comfort to the owner. Make sure when selecting your submetering service that you choose a client-focused provider who is adequately equipped to satisfy both your needs and the needs of your bill-paying residents. Below are five key benefits that a submetering provider with effective customer service can provide.
1. Transparent and Accurate Billing
A private utility submetering service will take the hassle out of submetering for a landlord. This includes initial calculation of utility credits, to tenants being transitioned, right through to billing and collections. In short- submetering provides transparency. By independently measuring each unit’s usage, there is little room for argument on the tenant side after delivering accurate, carefully calculated bills on a strict month-to-month basis.
2. Accessible & Efficient Customer Service
By bringing on a professional service to handle your electricity submetering, you are also adopting a professional grade of customer service, with access to call centers that offer responsive customer service in multiple languages to reflect our province’s multi-cultural population. Call centers also mean more representatives which means faster service and lower call wait times. Be sure to do your research in this department when selecting your utility submetering service. Make sure they offer an in-house call center as opposed to outsourcing, check out their call-center wait times, as well as the quality of training given to their customer service representatives. This will ensure that your residents really do benefit from their services, and that they don’t come seeking out your staff if their needs aren’t immediately met.
3. Self-Monitoring Resources and Tools for Residents
Submetering offers the opportunity for residents to take their consumption into their own hands. By giving them access to user friendly, self-monitoring resources, they can effectively manage their usage as well as their monthly costs. These tools will increase transparency and allow them to answer any of their own questions about their consumption and billing history that might arise. For residents that wish to reduce their consumption, there are many reference materials available. Be sure to ask your provider about communications and assistance for residents regarding the Ontario Electricity Support Program (OESP) and various other government programs.
4. Resources and Support for Owners and Managers
Landlords and building managers can look forward to developing invested, long-term relationships with a quality utility submetering provider who can provide expertise, guidance and timely market knowledge on a regular basis. To ensure you are going to be as well-supported as possible, make sure your provider’s executive team is directly accessible. Also ensure that your account manager is knowledgeable of rate structures and consumption patterns for your type of property(s). Finally, be sure that they have an effectual web portal that provides timely data and reporting on consumption across your portfolio.
5. Staff Training
A legitimate provider will educate your staff on utility submetering, billing, and the use of their web portal so that they can effectively interact with your residents, and answer initial questions regarding enrollment and the use of self-monitoring resources. However, it is important that your staff is trained not to play the middle man between your tenant and your utility provider. All billing queries should be directed straight to the submetering company. The benefit? This protects your staff’s time.
Submetering has become an accepted strategy across the province for most landlords. When you decide it’s time to make the transition, remember the benefits of a professional submetering company outweigh the costs for both the landlord, and their tenants. Be sure to do your research when selecting a utility submetering provider, taking into account factors like billing transparency, the quality of their tools and resources, training, and their customer service reliability. For further information on utility submetering services and the customer service benefits, contact your local submetering provider.
For the multi-unit property at 15 Orton Park Road, Direct Properties Inc. (DPI) identified a business case for a conversion to a cutting-edge, electrical submetering program. The transition to Wyse’s class-leading platform was found to better align with DPI’s long-term objectives:
Description of Activities
Wyse seamlessly transitioned 147 residential suite accounts onto its sophisticated platform, already in use in over 2 million multi-residential units in North America. The client-focused approach included in-depth training for the entire DPI team to effectively use the portal and analysis tools for bulk data access, as well as to handle new enrolments. Additional education and outreach detailed the customer service features available for residents – notably a web portal that provides access to suite billing data, and an expert call centre that provides immediate answers in 26 languages, 14 hours a day.
“We have been in the multi-unit residential rental property management business for over 40 years and dealt with several companies who more often than not did not live up to expectations. I am thrilled to conclude that our experience with Wyse has been exemplary! Wyse made submetering extremely easy for us and we cannot be happier with the professionalism, dedication, and expertise the entire Wyse team has shown us.”
- Annette Mincer, President of Direct Properties Inc.
Many property owners across Canada have discovered the benefits of submetering. With utility costs rising at 10% annually, many have accelerated their plans to convert “utilities included” buildings to individual billing utilities. The primary motivation has been the immediate improvement in net operating income, but there are other reasons. This article is intended to provide some background about submetering – what it is, how it is implemented, and a summary of the benefits.
Firstly, what is submetering? For those unfamiliar with it, submetering takes place when individual meters for each unit are installed behind the local distribution company’s (LDC’s) bulk meter. These meters are then used by a submetering company to individually bill and collect from tenants, whether commercial or residential, just like the LDC would if they had individually metered the building.
When you look around the world, bulk utility buildings, where utilities are included in rent, are unusual. Ontario in particular stands out within Canada because LDC’s had an aversion to individual billing of electricity: they didn’t want to deal with tenants, so thought it would be easier for them to deal with landlords. They didn’t want the headache of dealing with tenants. So Ontario has this unique situation where the majority of rental buildings in the province are not individually metered for electricity. In the rest of the country (and the world), individual billing is the norm. However, there are still some bulk-metered buildings in all jurisdictions.
The process of moving from bulk billing to individual billing is quite simple. For the majority of installations, which are uncomplicated, a submetering company will usually install the meters often at no cost to the owner. The submetering company will recover the cost of the installation through a monthly customer charge, which is typically the same or lower than the LDC would charge. The residents will not see this customer charge: it will only be one element of a line called “Delivery Charge” as required by provincial rules – the same practice that the LDC’s must follow.
In Ontario, billing of individual tenants for electricity would only happen on turnover, because under the Residential Tenancies Act, an existing tenant’s consent is required before you can convert them to individual billing, and they often will not grant consent. So individual billing commences as each suite turns over. Also in Ontario, individual billing for electric heat is not allowed, but just like gas-heated buildings, you can meter the lights and plug-load in the units, which is significant. In other provinces, these restrictions do not apply, so an entire building can be converted within 1 year, and you can meter electric heat. Currently, legislation in Quebec and Manitoba, which both have one monopoly provincial electricity utility, electrical submetering of residential properties is currently not allowed.
Once individual billing commences, the change in resident behavior is quite shocking. As soon as residents are exposed to a bill for a utility, their consumption drops dramatically. Wyse recently analyzed a portfolio of over 1500 units and found that bill payers consume on average 48% less electricity than non-bill payers. There is a huge environmental benefit to submetering.
And the other benefits? Our current clients tell us that they do not change their rents once they submeter. Therefore, the entire utility cost per unit goes straight to their bottom line in savings. In a typical suite, that’s $50 per month in cost savings. However, in the case of electricity, rates in some provinces are forecast to rise by 10% annually for years. So by 2020, $50 per month will become $90 per month. If cap rates are at 6%, that is $18,000 in additional value created per unit by 2020 through submetering.
And with utility costs rising the way they are, there is another beneficiary – most residents. Individual billing means that residents who economize on utility consumption no longer have to effectively subsidize big users in their building. By conserving, they save. And they get to see directly the benefit they are having on the environment.
One of the first things they teach you in economics is the law of demand: the more the price of a good declines, the more people will demand or consume that good. It’s one of the basics in Economics 101. In the specific case of utilities, when you provide electricity or water at a low price, people are going to use more than if you charged a high price.
When a landlord includes a utility in rent, it means that utility becomes a free commodity for the tenant. The tenant can consume as much as they want with no financial consequence. It is an unusual choice for an expensive commodity, but it nonetheless is still commonplace in Canada. So we know that people consume more of a good when it has a lower price – how about when it is free? Now that a number of landlords in Ontario have experience with submetering of utilities, more and more data is available which gives us a sense of just how responsive utility consumption is to changes in prices (that’s the elasticity of demand, another economics 101 lesson).
One company that was quick to move to address the lack of pricing for electricity in its portfolio was Starlight Investments Ltd. Starlight is a company that looks for innovative approaches to create value, and saw early that electricity submetering would help improve net operating income.
To determine the impact submetering was having on Starlight’s portfolio, I recently undertook an analysis of four Starlight properties using data readily available in Wyse’s utility billing web portal. I chose buildings with higher penetration rates of bill-payers so we could fairly compare bill-payers with non-bill-payers. While we have known about consumption reductions in response to billing for years, the results were still surprising.
Non bill-payers, on average, were using 135% more electricity than bill payers in these four buildings. Looked at the other way, bill payers were using 58% less electricity than non-bill-payers. Back to our economics terminology, electricity consumption is highly responsive (elastic) to changes in price. While this example is for electricity, we see similar behavioral differences for other utilities.
The implications for Starlight are very straightforward. The average non bill-payer is using 530 kWh, compared to 225 kWh for bill-payers. Given an RPP Tier 1 electricity cost of 14.2 cents per kWh, it means that every time a unit turns over and a non-bill-payer is replaced with a bill payer, Starlight’s costs are reduced by about $76 per month.
John Lucic, Starlight’s Executive Director of Energy & Technical Maintenance, has been pleased with the results. “Our submetering program has been a tremendous boost for our energy cost reduction efforts” said John. “Overall we have seen concrete reductions in our electricity bills, without seeing any impact on expected rent revenues or vacancy rates”. In addition to bottom line benefits, Starlight staff have found that access to more detailed utility consumption data better helps them meet management objectives. “We find it useful to be able to see electricity consumption activity in all the suites, so we can be alerted if there are any issues in the building that may need management’s attention” said Penny Colomvakos, Starlight’s Manager of Residential Administration.
While we often focus on the bottom line benefits, what is not often discussed are the implications for the environment. From the data above, each time a non-bill-payer is replaced with a bill-payer, monthly consumption is dropping by about 300 kWh on average. That is the equivalent savings of 2.5 metric tons of carbon dioxide put into the environment. That’s 63 trees grown for 10 years, or the equivalent carbon sequestration of 2 acres of forest in one year. That’s for one unit.
What’s interesting is the potential of Ontario’s rental industry to benefit the environment. Starlight is one of the early adopters of submetering, so is a leader in the greening of our industry. However, many rental housing providers have yet to even consider submetering. Wyse estimates that there are still some 750,000 rental residential units in Ontario that are bulk metered for electricity. Even if the savings are half of what we found in the four Starlight buildings, say 150 kWh monthly, it means that the rental industry has the potential to contribute potential savings of 1,350,000,000 kWh. To put this in perspective, that is the equivalent to the annual greenhouse gas emissions/savings from one of the following:
Data has just been released by NASA and the National Oceanic and Atmospheric Administration showing that 2014 was the warmest year on record, and that greenhouse gas emissions were the primary driver. Ontario’s rental housing sector has a great opportunity to make a major contribution to greenhouse gas emission reductions, while improving its bottom line at the same time. Talk about a win-win.
Grow revenue. Help the environment. Invest more wisely in efficiency. These are a few of the positive changes that the Ontario government hopes to accomplish, along with large building owners, by passing its flagship 2015/2016 energy bill, Bill 135. Though schedule 2 of Bill 135 portends major changes in Ontario energy policy and planning, owners need to focus now on the requirements made of large building owners as a result of Schedule 1. Schedule 1 deals with large building Energy and Water Reporting & Benchmarking (EWRB). In preparation of this role out, we hope to give owners and managers of covered buildings some context regarding Bill 135 as well as the expected compliance requirements, and details regarding the most common compliance programs.
Measuring and reporting on energy and water consumption, as Bill 135 directs the Ministry of Energy to implement, is part of a larger global trend that is showing up in more and more jurisdictions each year. Already in the United States, at least 9 major cities and 1 state have EWRB requirements. These jurisdictions believe that the health and other benefits of a cleaner environment and better long term utility management are enough in the public interest to require EWRB. There can also be the added benefit of giving owners and managers insight and control into their utilities in addition to providing the reporting necessary to make informed and cost saving choices. While Bill 135 is the first of its kind in Canada, we would anticipate seeing more such laws across Canada in the coming years.
By passing Bill 135, Ontario joins the growing number of global communities taking steps toward environmental responsibility. As an additional benefit, Bill 135 provides tools to allow Ontario to gain knowledge on how to reduce the costs surrounding utility expenses for its citizens, which is badly needed. For one thing, by understanding what is being used, apartment owners gain greater insights into their utility expense and tend to find ways to cut costs merely by having the information, which would reduce the burden on the energy grid and lower expense to the utility providers that can be passed onto the rate payers and tax payers. Also, by collecting information about utility usage by industry type, Ontario will be better equipped to make proactive, versus reactive, energy decisions. Such planned decisions tend to provide better solutions for a lower cost than reactive solutions.
Ontario’s current plan to implement EWRB involves phasing in requirements over a number of years.
Utility costs are expected to continue their steady rise over the next five years. If these costs are not effectively managed by your condominium, they can have a negative impact on your condominium’s value.
For many condominium buildings, utility costs are part of the common element fee – condo fees. Condominium purchasers are increasingly conscious of condo fees, and high fees can negatively impact on condo values. An independent study comparing two neighbouring buildings suggests that suites in the building with higher condo fees than its neighbours sold for $229 less per square foot. Conversely, a condominium that reduced its maintenance fees by 30 percent experienced sale price increases greater than neighbouring properties.
Utility cost can represent as much as 50 percent of a condominium’s common element costs. Any effective strategy to reduce those costs will benefit your pocket book and the future sale value of your home.
One simple way for many condominium corporations to reduce their energy consumption is sub-metering. Sub-metering can be implemented at no capital cost to the condominium corporation. Once implemented, in-suite electricity consumption is eliminated from common element fees and should lead to a condo fee reduction.
When individual households are billed based on their personal consumption, numerous studies have shown dramatic decreases in consumption levels - as much as 60 percent. Overall, a building’s energy consumption will experience a significant decrease from sub-metering which also benefits the environment.
There is also a fairness benefit. Lower energy users are no longer required to subsidize high energy users through their condo fees after sub-metering is implemented.
Sub-metering is one of many approaches condominium corporations can explore to lower utility consumption in their building and potentially reduce condo fees. Some approaches may require a capital investment by the corporation and offer a quick payback – such as lighting retrofits. Regularly reviewing utility efficiency measures remains an effective way to increase the value of one’s condo building and home.
Most major Canadian rental markets are experiencing extremely low vacancies, yet under tight rent control policies, and upcoming regulatory changes (i.e. provincial cap and trade systems), owners and operators cannot keep pace with sharply increasing utility costs. As a
Submetering Basics: Cost Control
Submeters measure in-suite utility consumption. Residents are billed individually and pay only for their consumption of any given utility being metered. Electricity is the most commonly metered utility and is the easiest utility to retrofit in an existing building. A growing number of existing buildings also meter for water, especially in markets like Vancouver and Ottawa where the building profile is particularly conducive to this retrofit, and the supply and cost of water
Submetering Results in Reduced Utility Consumption
Depending on the building configuration roughly 60% of the electricity bill is associated with in-suite use. In
What’s Involved: Focus on Retrofit
The rules and regulations around metering for electricity are the most stringent and are the focus here. When it comes to any utility metering project it’s always best to work with a provider that works with multiple meter manufacturers and can tailor a project to your specific building requirements.
Smart Meter versus Submeter?
The term “submeter” refers to any meter that is installed after the bulk meter to read a specific area (a suite for example) or even a piece of equipment on a property. It can be nothing more than a simple “dial under glass” meter. “Smart meters” incorporate any number of additional capabilities:
Whatever the meter type it’s important to ensure that meters are using
Submetering providers supply and install the meters at no charge to the building owner under a comprehensive billing agreement. Other options are available but this is the most popular model. There are a few exceptions, for example in Ontario buildings that had submeters installed prior to 2011 may bill for all electricity use, including heating. After this date
Easy, Fast Installation
Installing meters is a simple exercise when dedicated crews are used. They understand the working environment in a residential building and legislative requirements. There is very little disturbance to the building and the residents. Meter panels are quite compact and are easily installed within existing electrical closets in the building corridor – a critical feature for markets like Vancouver where every square foot counts. Other than a few minutes to verify the suite is properly connected to the submeter, there is no in-suite work. Disruption to power in-suite is just a few hours. Depending on building configuration the installation of water meters may occur either outside or within the suite itself, with all other associated equipment installed in common areas.
The Billing Process
Every provider bills a little
A quality submetering provider will strive to exceed these standards. Accurate, transparent and timely billing and reporting is the most critical component of any submetering program as it directly impacts the resident experience in your property and the owner’s internal accounting processes.
Your Customers and Ours: The Residents
In most Canadian jurisdictions building owners may enroll existing residents after their current lease term expires and have been successfully doing so for years. If your buildings are in Ontario, the legislation allows for the enrollment of new tenants to the building only. Your submetering service provider should deliver education, training and ongoing support for your staff so that they can properly enroll tenants and answer some basic questions. In
RECAP: Submetering Benefits