Electricity Providers’ Requirement for a Security Deposit

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The Ontario Energy Board Distribution System Code (the “OEB Code”) provides that all local electricity distributors’ Conditions of Service must fall within the framework of the OEB Code when requiring electricity security deposits from their customers.

Given the above, when a condominium is presented with the requirement from an electricity distributor (ex. local municipal hydro corporation) to pay a security deposit, the Conditions of Service of the electricity distributor should be reviewed to ensure the request complies with the OEB Code.

In short, the OEB Code does not always require new residential condominiums (as residential customers) to provide security deposits to electricity distributors.

Section 2.4.10 of the OEB Code provides residential customers are deemed to have a “good payment history” (the absence of which allows for requiring a security deposit), unless one of the enumerated default events in section 2.4.9 has occurred.  Being a new customer is not one of the listed events.

More specifically, a condominium should be aware of some of the following provisions under the OEB Code:

1. Residential Condominiums are residential customers: under section 2.4.30A of the OEB Code condominiums with units predominantly used for residential purposes are “deemed a residential customer for the purposes of section 2.4.9” which provides the basis for the electricity distributor’s requirement of a security deposit.

2. Requirement for Security Deposit: section 2.4.9 of the OEB states in part (see below) that a security deposit can be required by the electricity distributor unless a residential customer has a good payment history of one (1) year subject to restrictions regarding calculating the good payment history period and reasons requiring the security deposit form the customer:

2.4.9 A distributor may require a security deposit from a customer who is not billed by a competitive retailer under retailer-consolidated billing unless the customer has a good payment history of 1 year in the case of a residential customer, 5 years in the case of a non-residential customer in a <50 kW demand rate class or 7 years in the case of a non-residential customer in any other rate class. The time period that makes up the good payment history must be the most recent period of time and some of the time period must have occurred in the previous 24 months. A distributor shall provide a customer with the specific reasons for requiring a security deposit from the customer.

*Note: recent amendments to section 2.4.9 that came into effect March 1, 2020, provide that before requiring a security deposit from a residential customer that has not been serviced by the electricity distributor in the previous twenty-four (24) months, the customer shall have the option to enroll in an equal payment plan, pre-authorized payment plan, or both.  If one of such enrollment options is chosen no security deposit can be required unless there is default by the customer.

2.4.9A Before requiring a security deposit under section 2.4.9 from a residential customer who has not been served by the distributor in the previous 24 months, a distributor shall offer the customer the option of enrolling in an equal monthly payment plan in accordance with the Standard Supply System Code, a preauthorized payment plan, or both, and where the customer elects to enroll, no security deposit shall be required

3. Deemed Good Payment History: section 2.4.10 (see below) provides that in the absence of certain default events a customer shall be deemed to have a good payment history for the purposes of requiring a security deposit:

2.4.10 For the purposes of section 2.4.9, a customer is deemed to have a good payment history unless, during the relevant time period set out in section 2.4.9, the customer has received more than one disconnection notice from the distributor, more than one cheque given to the distributor by the customer has been returned for insufficient funds, more than one pre-authorized payment to the distributor has been returned for insufficient funds, a disconnect / collect trip has occurred or the distributor had to apply a security deposit in accordance with section 2.4.26A and required the customer to repay the security deposit in accordance with section 2.4.26B. If any of the preceding events occur due to an error by the distributor, the customer’s good payment history shall not be affected.

A plain reading of this section suggests condominiums should push back against electricity distributors requiring payment of a security deposit on the grounds they are already deemed to have a good payment history and have not committed any of the events of default listed in 2.4.10. This argument could be resisted by the fact the new customer is deemed to have a good payment history but 2.4.10 does not say the good payment history is deemed to be for the time period required by 2.4.9. However, 2.4.10 does note that the deeming of a good payment history is “for the purposes of 2.49”.

As noted, not having a payment history is not one of the listed items that contradicts the deeming of a good payment history.

This provision can also be especially important when electricity distributors try and require developers or condominium corporations to pay a security deposit for each subsequent phase after the initial registration of a standard condominium plan.

It is possible the above position will be considered overruled by the amendment to the OEB set out in 2.4.9A and a new condominium may be forced to elect to enrol in one of the payment methods set out in that subsection.

If this argument is resisted because of there being no payment history, the condominium should choose to enroll in an equal payment plan, pre-authorized payment plan, or both in light of the provisions in 2.4.9 that provide if one of such enrollment options is chosen no security deposit can be required.

4. Amount of Security Deposit: Effective March 1, 2020 section 2.4.12 which sets out the formula for the maximum security deposit an electricity distributor can require reads:

The maximum amount of a security deposit which a distributor may require a customer to pay shall be calculated by multiplying the distributor’s billing cycle factor and the customer’s estimated bill (which shall be based on the customer’s average monthly load with the distributor during the most recent 12 consecutive months within the past two years). Where relevant usage information is not available for the customer for 12 consecutive months within the past two years or where the distributor does not have systems capable of making the above calculation, the customer’s average monthly load shall be based on a reasonable estimate made by the distributor.

Also, important to note is section 2.4.16 which establishes the billing cycle factor used in the formula:

2.4.16 For the purposes of sections 2.4.12, the billing cycle factor is 2.5 if the customer is billed monthly, 1.75 if the customer is billed bi-monthly and 1.5 if the customer is billed quarterly.

5. Payment of Security Deposit: If the condominium for some reason agrees to pay the electricity distributor’s security deposit, the condominium should be aware that sections 2.4.20 and 2.4.20A permit condominiums to pay the deposit in equal installments over at least 6 months rather than as a single lump-sum payment.

6. Review/Return of Security Deposit: sections 2.4.22-23 of the OEB Code provide that a customer’s security deposit must be reviewed by the electricity distributor at least once in a calendar year to confirm if the customer should be returned the deposit as it is now exempt in accordance with section 2.4.9.  If payment of the deposit was made via equal installments the distributor’s review shall occur on the anniversary of the calendar year in which the customer made their first payment.

Note: Section 2.4.28 contains provisions for returning the deposit to a 3rd party in situations where a 3rd party (ex. developer) paid the security deposit on behalf of a customer (ex. condominium)

The electricity distributor also should have Conditions of Service that may provide further arguments against a requirement for a security deposit depending on how the Conditions of Service are written. If the local Conditions of Service contradict the OEB Code, the OEB Code overrides the local Conditions of Service according to Sections 1.4 and 1.5 of the OEB Code.

It is therefore important for condominiums and developers to confirm if their electricity distributor’s Conditions of Service comply with the OEB Code’s standards when requiring a security deposit.

If an electricity distributor continues to insist on a security deposit from a residential condominium or proposed residential condominium, the Consumer Complaint Response Process set out in Section 10 of the Code should be implemented. This process sets out some relatively short time periods for the electricity distributor to respond to the complaint.

Condominiums must also ensure no default in payment occurs to their electricity distributor as default in payments opens the condominium up to having to pay a security deposit.

Kitec Claims: Deadline to Submit is Almost Here

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We previously highlighted the fast approaching Kitec claim deadline this past spring. Here is a final friendly reminder for condominiums in Ontario that the deadline to submit a claim form to be eligible to be included in the Kitec Settlement is 10 days awayJanuary 9, 2020.

You can find the claim form, information regarding the case/settlement, and FAQs here:  http://www.kitecsettlement.com/index.cfm

See our previous post https://ontcondolaw.com/2019/04/23/kitec-dont-forget-the-deadline-to-submit-a-claim/ for a few key reminders about completing the claim form and providing supporting documentation to file a claim.

Top Condo Lessons of 2019

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As 2020 approaches I find myself reflecting on the most important news, cases, and events from this past year. There were several notable decisions released this year and a few that I’m sure we would all like to forget! The hardest part of these lists is selecting only ten to speak about. Here is my list of the top ten condo lessons for 2019:

Counting Isn’t as Easy as 1, 2, 3

The Court confirmed the 10 day notice requirement for liens can be calculated by excluding the date the notice of lien is mailed and including the date of registration. Sending the notice of lien on January 21 and registering the lien on January 31 was acceptable. (Note: this is the minimum; more time is generally better). See CCC 476 v. Wong (2019). Continue reading

Coming January 1, 2020…

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We are still early into the Fall season, but there have already been a few announcements about changes coming January 1, 2020. More changes are expected to be announced, but here’s what we know so far.

Condo Authority of Ontario (CAO) 

The CAO announced that it will again have a 25% reduction in its fee for the 2020-2021 year. The fee will be $0.75/month per voting unit. The annual fee was initially set at $1/month per voting unit, but the costs to operate the CAO have been less than initially projected (in part because the CAT’s jurisdiction has not been expanded as originally anticipated under the previous government).

(Note: the Government of Ontario has proposed making the CAO responsible for 19 of the prescribed forms under the Act and its regulations, including information certificates, preliminary and notice of meeting, proxy, and forms related to record requests. These changes could take effect as early as January 1, 2020. Stay tuned on this one as it hasn’t been confirmed yet!).

Court Changes

The Government of Ontario announced some key changes to the court system in Ontario. The changes are aimed at increasing access to justice, reducing legal costs, and making the process quicker. On January 1, 2020 we will see the following changes:

  1. Increase in the monetary limit for Small Claims Court from $25,000 to $35,000.
  2. Increase in the monetary limit for Simplified Procedure actions in the Superior Court of Justice from $100,000 to $200,000.
  3. Other changes designed to reduce costs and speed up the process.

For those with claims with limitation periods expiring after January 1, 2020, you should discuss the pros and cons of commencing your actions now or waiting.

Get to Know the Team: Daniel Brockenshire

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Practice Areas

Daniel works with both the condominium management group and the condominium and subdivision development group.

Daniel is currently working with the condominium and subdivision development group on a variety of development projects with clients across Ontario including residential condominiums, commercial condominiums, condominium conversions, and subdivisions. He also chairs turnover meetings for clients’ registered condominium projects.

Recently, Daniel has been spending much of his time with the condominium management group working on borrowing by-laws for condominiums across Ontario as well as amalgamations for condominiums in Waterloo and London. The amalgamation process is time-consuming, but the goal is helping clients achieve significant cost savings within a few years following amalgamation by consolidating previously duplicated costs (ex. reserve fund studies, audited financials, AGMs, service contracts, etc.).

Involvement

Daniel is involved in the Canadian Condominium Institute (CCI) especially the London and Grand River Chapters. You may have seen him recently at one of the conferences enthusiastically recruiting visitors at the firm’s booth to try the golf putting challenge. Keep an eye out for its return at a future conference!

Personal

Daniel enjoys spending time with family and friends and as most major sports seasons have now kicked off – cheering on his beloved Manchester United, Toronto Maple Leafs, and Oakland Raiders. He also loves traveling and recently had a fantastic hiking experience in Cornwall, England.

Contact

E-mail or phone.

For more information, please see the firm’s website: www.rcllp.ca

 

Condo Stats – Toronto & Area

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Earlier this year I posted updated statistics for the Grand River and Golden Horseshoe areas. Today, I’m focusing on Toronto and surrounding areas, including York, Peel and Durham.

As of August 8, 2017, Toronto had 2602 condominium corporations. Today, that number has grown to 2714. The last one registered is a 12 floor building with 642 units (about 180 of which appear to be parking or storage units).

As of August 8, 2017, York had 1240 condominium corporations. Today, that number is 1406! The last condominium registered has 372 units.

Peel had 1021 condominium corporations on August 8, 2017. As of today, Peel has 1054 condominium corporations. The last one registered is a mammoth with 975 units over 5 floors (in several buildings).

Finally, as of August 8, 2017, Durham had 285 condominium corporations. While it has the fewest condominium corporations, Durham continues to have impressive growth. It now has 308 condominium corporations. The last registered has 224 units.

As said in previous posts,  the total number is not the number of active condominiums. Some condominiums have been terminated or amalgamated so the “real” numbers are less than those above. I understand the CAO is working on obtaining a list of the “real” number so hopefully it will be able to start releasing statistics to the public soon.

That’s it for now.  Share this post and let me know what area you want statistics for next!

Kitec – Don’t Forget the Deadline to Submit a Claim

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It seems like many years since the Ontario Superior Court of Justice entered an Order for Approval of Class Action Settlement back on November 29, 2011 and the Kitec Settlement Agreement (“Kitec Settlement”) for defective plumbing systems became effective way back on January 9, 2012.

I suppose 7 years is a long time depending on how you look at things, especially as discussions about Kitec have also seemingly faded into the background at industry events in recent years as new hot button topics  such as amendments to the Condominium Act, 1998, cannabis legalization, and electronic vehicles have all arisen.

We last wrote about Kitec in March of 2017 reminding condominiums the first step should be to contact their engineer to determine if the condominium has a Kitec plumbing system, then filing a claim and/or consulting the Condominium’s lawyer. You can read the post here: https://ontcondolaw.com/2017/03/07/kitec-piping-claims/

So here again is a friendly reminder for condominiums in Ontario that the deadline to submit a claim form to be eligible to be included in the Kitec Settlement is fast approaching: January 9, 2020.

You can find the claim form, information regarding the case/settlement, and FAQs here:  http://www.kitecsettlement.com/index.cfm

Finally, just a few key reminders about completing the claim form and providing supporting documentation to file a claim:

  1. Complete the whole form – if sections/questions are inapplicable remember to note “N/A”
  2. Make sure to provide copies of invoices and cancelled cheques for plumbing services . My understanding is banks can be quite slow to provide old archived cheques to the condominium so make sure to get on this request quickly.
  3. If possible – provide a sample of a failed Kitec fitting and an engineering report to support the condominium’s claim; and
  4. Finally, if the condominium has suffered numerous plumbing failures over the years it may be best to complete one comprehensive claim. Already made a claim but the condominium has suffered further plumbing failures? Submit a new claim. Organizational Tip: Use a spreadsheet to track the cancelled cheques and plumbing invoices to be submitted with the claim.

Condo in a Condo

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Our firm represents a growing number of condominiums that are units (or more commonly parcels of tied land) within larger condominium communities. Layer upon layer of condominium. The top layer is often a common elements condominium. The other layer could be high-rises, a cluster of townhouses, single-detached homes, or a combination of them all! As long as the developer complies with the requirements of the Act and its regulations (and other pieces of legislation) the condominium concept can be used in some very unique ways. Continue reading