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Property Management A Regional report focusing on the GTA, Hamilton & Niagara April 2012

Vol.19 No 2

Report

T12s Now a Rarity

Fine-tuning the FIT

New Rules, Limits and Solar Power Prices

By Linda L. Bertoldi and Bernadette Corpuz

Promised Tax Cuts Postponed

Contents FIT Program Revisions CDM Incentives for Commercial/Institutional Buildings Safety Measures for Diesel-Powered Equipment Business Education Taxes

1 8 12 14

released the report of its Feed-In Tariff (FIT) program review in March, and followed soon after with a Minister’s Direction to the Ontario Power Authority (OPA) for the formulation of new rules and proposed changes to the contract structure. The government is clearly affirming that it wishes the FIT Program to continue, but the changes proposed to FIT 2.0 Rules and Contract may pose significant challenges to project developers and financing parties. The FIT 2.0 Rules and Contract contain numerous amendments that developers and potential investors and participants should consider carefully. As a whole, a developer can expect greater challenges to

obtain a FIT 2.0 Contract under the new rules, which contemplate procurement limits, application windows and priority ranking based on the significant involvement of groups not historically in the business of generating electr icit y – communit y, Aboriginal and public sector groups. Unlike the initial open-endedness of the FIT Program, the issuance of contracts will now be subject to periodic procurement limits set by the OPA in its discretion. The OPA will establish the periods during which applications may be submitted, and it may also stipulate the type of FIT Project that will be considered in a particular application period. Applicants will be competing with each other Continued on page 4.


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From the Editor PUBLISHER Sean Foley EDITOR Barbara Carss barbc@mediaedge.ca Ext. 236 CONTRIBUTING WRITERs Linda Bertoldi, Bernadette Corpuz, Gord Miller, Bassem Sukkar ADVERTISING SALES

Fairness, Efficiency and Transparency in Question Ontario budget introduced plans to curtail spending and find savings through leaner provincial operations. Many of the announced measures closely copied recommendations made by the Commission on the Reform of Ontario’s Public Services, which released its report earlier in the winter. To use an energy management analogy, the Commission’s mandate might have been characterized as a recommissioning exercise in its search for programs and processes that expend unnecessary resources or simply fail to deliver intended outcomes. The provincial government then had the option of choosing which recommendations to implement – and not all of them made the cut. Hopes were dashed for some of the commentators quoted in our March feature story about the Drummond Commission’s report. Notably, the business education tax (BET) rate will not be harmonized across the province, but, rather, diverging tax rates will be stalled at a more harshly inequitable gap for at least five more years. Tax Trends highlights that disparity, in which commercial ratepayers on the south side of Steeles Avenue in Toronto will continue to be taxed at 1.54% while those on the north side in York Region are taxed at 1.2%. Elsewhere, commercial property taxpayers on the Burlington side of Highway 6 have a 1.08% BET rate, while Hamiltonians on the opposite side of the road are levied at 1.443%. Contrary to my flawed March prediction, the provincial government will fulfill its earlier commitment for the phased removal of social service costs from the property tax base by 2018. The Drummond Commission had recommended stretching out the incremental upload of those costs until 2020, which would have saved the provincial government an estimated $165 million, but, of course, simply upheld the funding burden on the municipal tax base. The budget also confirmed that the Ontario Clean Energy Benefit would remain in place for most consumers, with the exception of those consuming in excess of 3,000 kilowatt-hours (kWh) per month. This is likely to hit the farm and small business sectors the hardest among the three sectors – residential, small business and farm – that are eligible for Ontario’s Regulated Price Plan (RPP). The policy will be applied to multi-residential buildings on a 3,000 kWh-per-suite formula, but landlords and condominium corporations with bulk-metered buildings should be vigilant about required paperwork. “We were told by Ministry of Finance staff that as long as landlords continue their suite-count declarations under the RPP, they should be eligible under the 3,000 kWh/month cap,” says Mike Chopowick, Manager of Policy with Federation of Rental-housing Providers of Ontario (FRPO). “But Ministry staff also advised that this must be authorized in the Regulation so FRPO will be monitoring to make sure that happens.” Meanwhile, the RPP, itself, will be adjusted upward with the May 1 semi-annual reconciliation of prices, which factors the price of electricity over the past six months and accounts for variances between the RPP rate and actual costs. The increase is vaguely attributed to supply costs, most which remain cloaked and comingled within the indecipherable Global Adjustment. The Ontario Energy Board’s RPP forecast pegs the wholesale electricity price at 2.1 cents per kWh, while the Global Adjustment is forecast to contribute a whopping 5.77 cents per kWh to the total price. The recently announced comprehensive review of Ontario’s electricity sector has been tasked, somewhat like the Drummond Commission before it, with finding efficiencies. Some transparency would also be welcome.

Sean Foley seanf@mediaedge.ca Ext. 225 Steve McLinden stevem@mediaedge.ca Ext. 239 Paul Murphy paulm@mediaedge.ca Ext. 264 Melissa Valentini melissaf@mediaedge.ca Ext. 248 Senior Designer Annette Carlucci Wong annettec@mediaedge.ca Ext. 231 Designer Jennifer Carter jenc@mediaedge.ca Ext. 243 Production MANAGER Rachel Selbie rachels@mediaedge.ca Ext. 261 Circulation Lina Trunina circulation@mediaedge.ca Ext. 232 Property Management Report is produced as a supplement to Canadian Property Management magazine, published 8 times a year by:

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President Kevin Brown kevinb@mediaedge.ca Tel: (416) 512-8186 Fax: (416) 512-8344 E-mail: info@mediaedge.ca

Barbara Carss barbc@mediaedge.ca

PROPERTY MANAGEMENT REPORT April 2012 3


Energy Management Continued from page 1.

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and will be ranked based on points, time stamp and then availability of grid capacity. Specific procurement limits and the timing of the first application period have not yet been determined, but early calls for 50 megawatts (MW) of microFIT and 200 MW of small FIT projects (less than 500 kilowatts) are anticipated as a result of the Minister’s Direction. Particular focus will be placed on projects (small and large FIT) w i t h g re a t e r t h a n o r e q u a l t o 5 0 % community and Aboriginal equity participation, and hydroelectric projects. A number of changes have been made to eligibility requirements, some of which affect specific renewable fuels. For example, ground-mount solar photovoltaic (PV) projects may not be located on property that includes Class 1, 2 or 3 lands or organic and specialty crop lands. Ground-mount solar PV projects may not be located on or adjacent to residential lands, nor on commercial and industrial property if it is the primary use of such property. Solar projects cannot exceed 10 MW and cannot utilize inver ters and panels w ith manufacturers’ capacity ratings that exceed 120% of the proposed contract capacity. Waterpower projects continue to be l i m i t e d t o a m a x i m u m o f 5 0 M W. Incremental and behind-the-meter projects are no longer allowed. There are also specific provisions for co-locating projects and limitations on developers submitting similar projects during the same application period. In addition, a proposed project will need to be located within a certain distance from the facility’s contemplated connection point. The FIT 2.0 Rules do not yet specify this connection distance, which will be the subject of special consultations. Small FIT projects (capacity allocation exempt) must now submit application security. In addition, an applicant must provide representations and warranties that attest to an awareness of certain project requirements, such as env ironmental permitting and particular FIT Program rules, and which confirm that certain preparatory actions have been completed in respect of the project, such as obtaining all access rights and independent engineer reports. The effect is to place a greater degree of responsibility as well as additional costs on the applicant to ensure the viability of its proposed project. The draft FIT 2.0 Rules introduce a new price schedule, which, as expected, reduces the prices paid for wind and solar. The

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Energy Management

pr icing for other te chnolo g ies remains unchanged. Price adders for Aboriginal and community projects have been maintained where the economic interest of Aboriginal and c o m m u n i t y p a r t i c i p a n t s e xc e e d s 1 5 % (formerly the minimum was 10%). The draft F I T 2 . 0 Ru l e s h ave a l s o c h a n g e d ke y d e f i n i t i o n s a n d p rov i s i o n s re l a t i n g to Aboriginal and community projects, which will require careful review when structuring such projects. The Minister’s Direction also stipulates that price schedules and inflation escalators will be reviewed and updated annually in November to take effect as of January 1. In a significant departure from the existing FIT Program, an applicant offered a FIT 2.0 Contract will be offered the pricing in effect when the contract offer is made, not the price in effect when the application was filed. The FIT 2.0 Contract maintains domestic content requirements, set at 50% for wind and 60% for solar facilities. Any assig nment of an application, or change of control of an applicant, is not permitted. Any violation of these prohibitions w i l l a l l o w t h e O PA t o t e r m i n a t e t h e application and retain the application security. Under the new proposed FIT 2.0 Rules, a new priority points system will be used to rank applications with the time stamp now acting as tie breaker. An application may only proceed if the proposed project can receive at least one point. The new system clearly assigns priority to projects that have a community, Aboriginal or municipal, education or health (MUSH sector) component, whether as a dire c t par t icipant in the pro je c t or as supporting entity. Of the seven categories of points, only two categor ies do not require some t y pe of community, Aboriginal or MUSH sector involvement. One point may be awarded for the category of “system benefit” which, in a c tu a l i t y, i s a p oi n t for f u e l t y p e a n d unavailable to wind and solar projects. Two points may be awarded for “project readiness” which is narrowly defined in relation to access rights, but, as most serious applicants should be able to meet this requirement, it is unlikely that an applicant will gain significant competitive advantage through this category. The rules do not permit a project to obtain more than one type of participation project points, but do permit certain combinations of project and non-project type points under certain circumstances.

The Economic Connection Test (ECT) will no longer be part of the FIT 2.0 Rules and the existing ECT list will be terminated, but connection availability continues to be, as expected, a critical factor. Applications will first be ranked in accordance w ith the priority points system describe above. Applications will then be assessed, in order of rank, as to whether there is available transmission and/or

distribution capacity based on a transmission availability test (TAT) or distribution availability test (DAT) as applicable. The FIT 2.0 Rules urge applicants to consult with the applicable t r a n s m i t ter or d i s t r i butor pr i or to submitting an application, but the OPA reser ves its discretion to determine whether an application can pass the TAT or DAT.

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Applications that were submitted prior to April 5, 2012 will be subject to the new FIT 2.0 Rules and pricing, and not the FIT Rules in effect when the application was submitted. An applicant may resubmit a pre-existing application during an application period and will be able to maintain its original time stamp. A resubmitted application need not contain the same information as was contained in the pre-existing application subject to the requirements that (i) the project be located on the same site, and (ii) the applicant must be the same person, except that a change in ow nership is permitted for the purpose of qualifying the project as a participation project. If a pre-existing application is not resubmitted during the first application period for the applicable project size, the pre-existing application will automatically be terminated. The OPA is also offering those who hold existing FIT Contracts the opportunity to terminate those contracts and receive back the application security without being subjected to any penalty. A number of substantive changes have been made in the form of proposed FIT 2.0 Contract. Notably, the FIT 2.0 Contract prov i de s t h e O PA w i t h t h e r i g h t to terminate the contract for convenience after issuance of a Notice to Proceed. The supplier would receive sunk costs 1:06 PM a n d t h e n e t pre s en t v a lu e of f utu re re a s o n a b l y a n t i c i p a t e d p ro f i t s f ro m operation during the term of the contract, but not following. If the parties do not agree on the amount payable by the OPA in damages, then the FIT 2.0 Cont r a c t p r o v i d e s f o r m a n d a t o r y, b i n d i n g arbitration from which there are limited rights of appeal. It remains at the sole discretion of the OPA to terminate the contract prior to Notice to proceed with limited liability to pay for pre-construction development costs. In addition, there is a new concept of a “Stop Work Direction� which allows the OPA to direct a supplier to permanently cease the development and construction of a facility. It is not clear whether the OPA could invoke this remedy w ithout terminating the contract and making the compensatory payments described above. Clearly this provision detracts from the stability that a long term power purchase agreement is typically expected to provide. Developers, investors and lenders will wish to influence the OPA to remove this new clause.


Energy Management Ne w p r o v i s i o n s i m p o s e l i q u i d a t e d damages for each day that the milestone commercial operation date (COD) has been missed. The new FIT 2.0 Contract no longer contains the prov isions that previously permitted a supplier to extend the end of the term to 20 years after the actual COD in the event of a missed milestone COD for which liquidated damages have been paid. The provisions that deal with payment of compensation when certain projects have been curtailed have been deleted. A note to draft states that a provision will be inserted in conjunction with developments in the SE-91 Renewable Integration Initiative of the Independent Electricity System Operator. The representations to be provided by a s u p p l i e r h ave b e e n e x p a n d e d w i t h increased limitation on the ability to invoke a claim of force majeure. The FIT 2.0 Cont r act contains new “events of default” that relate particularly to priority project categories. It will be an event of default if a project was awarded priority points for having an education or health host, and the host ceases to qualify as such education or health host at any time prior to the tenth anniversary of COD. It will also be an event of default if a “participation project” (one comprising community, Aboriginal, education or health investment), other than a rooftop solar project, no longer qualifies as such participation project at any time during the term. For a participation project that is a rooftop solar project, it will be an event of default if, at any time prior to the fifth anniversary of COD, the participation level decreases to below 15%. i

CLEAN ENERGY ECONOMIC DEVELOPMENT STRATEGY On April 12, 2012, the Ontario Government launched its Clean Energy Economic Development Strategy, which continues the government’s platform of a green energy economy. The new strategy is intended to leverage the province’s clean energy experience to become a global leader in key areas of the energy sector. Priority areas include: • Maintaining progress in solar and wind energy by supporting companies that are looking to export their Ontario-made products and services to the world; • Leveraging global leadership in smart meters and the smart grid, including grid automation, data management and consumer engagement in energy usage; and • Exploring the potential of energy storage. In carrying out this strategy, the Government intends to: • Establish the Ontario Clean Energy Task Force to help broaden Ontario’s energy focus by facilitating collaboration within Ontario’s clean energy industry to identify export markets, marketing opportunities and approaches to demonstrate Ontario’s advanced clean energy systems; • Lead clean-tech trade missions to support domestic manufacturers by showcasing Ontario’s clean energy solutions in key markets world-wide including Asia, the Middle East and the United States; and • Deliver on the province’s Smart Grid Fund and other targeted investments to spur innovation in priority areas.

ELECTRICITY SECTOR REVIEW On April 13, 2012, the Ontario Government announced its plans to conduct a comprehensive review of the province’s electricity sector. The review will explore options to improve efficiencies, including local distribution sector (“LDC”) consolidation. Following on the 2012 Budget statements, the Government will also undertake independent benchmarking of the Province’s electricity agencies. The Government will establish an Ontario Distribution Sector Panel to be led by Murray Elston. The panel will consult with municipalities, local distribution companies and the Electricity Distributors Association, as well as other energy experts to review potential savings associated with consolidation, benefits for ratepayers, operational efficiencies and potential risks. The panel is to report to the Minister of Energy within one year.

Linda Bertoldi and Bernadette Corpuz practice in the energ y law group w ith Borden Ladner Gervais in Toronto. The preceding article is reprinted from BLG’s Electricity Markets Group Bulletin, April 2012. For more information, see the web site at www.blg.com.

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CDM Economics Outperform New Supply

T h e Env i r o n m e n t a l Co m m i s s i o n e r o f • The BOMA CDM program, operated by BOMA Toronto (Building Owners and Ontario’s annual progress report on energy Ma n a g e r s As s o c i a t i o n – To ro n to ) , c ons e r vat ion prov ides a w ide-rang ing targeted large office buildings (greater summary of targets, programs and projects, than 25,000 square feet) located in a l o n g w i t h t h e E C O ’s a n a l y s i s a n d Toronto. conclusions about effective approaches and/ or obstacles to achieving identified goals. The • T h e E l e c t r i c i t y Re t ro f i t I n c e n t i ve Prog ram (ERIP), operated by local following excerpt from his most recent report, distribution companies (LDCs), targeted re leas e d in D ec e mb e r 2011, e x amines commercial, industrial, institutional and incentive programs for the commercial and agricultural buildings outside Toronto. institutional building sectors – Editor. Three of the four programs (BOMA Between 2007 and 2010, the Ontario CDM being the exception) were also Power Authority (OPA) funded four different offered to multi-residential buildings. All programs which sought energy efficiency four programs offered financial incentives improvements in existing commercial and for building ow ners to install energ y institutional (C&I) buildings. • The Better Buildings Partnership for Existing Buildings (BBP-EB), operated b y t h e C i t y o f To r o n t o, t a r g e t e d municipal, academic, social services and health care buildings located in Toronto. • The Business Incentive Program (BIP), operated by Toronto Hydro, targeted smaller commercial buildings (less than 25,000 square feet) located in the City of Toronto.

efficiency measures, which paid a set amount per unit of expected energ y savings or peak demand savings. While the programs began with differing incentive levels, by 2010, all four programs had increased their incentives and were using the same two-tier incentive structure: $400 per kilowatt (kW) of demand savings or $0.05 per kilowatt-hour (kWh) of first year energy savings for lighting measures, and $800 per kW or $0.10 per kWh for nonlighting measures. The two-tier structure reflects the fact that higher-efficiency lighting is becoming a standard practice, and would be undertaken in many cases without an incentive.

The higher incentive may serve as a carrot to encourage deeper retrofits by building owners initially considering only lighting upgrades.

8 April 2012 PROPERTY MANAGEMENT REPORT


Energy Management Other energy efficiency measures are less common, and require higher incentives to encourage adoption by building owners. The higher incentive may serve as a carrot to encourage deeper retrofits by building owners initially considering only lighting upgrades. In addition to incentives for energ y sav ing measures, B OMA also offered funding to building owners for scoping studies that identified opportunities for energy savings, with the expectation that these would lead in many cases to energy efficiency investments. Lighting retrofits have been by far the most popular energy saving measure incented t h ro u g h t h e C & I re t ro f i t p ro g r a m s , accounting for 89% of demand savings in 2008 (a breakdown of savings by measure in later years is not available). HVAC improvements were the next most important measure. All four retrofit programs had program objectives (peak demand targets) associated with them, expressed as the ex p e c te d re d u c t i o n i n p e a k d e m a n d achieved by 2010, resulting from the projects undertaken in all four years of program operation. It was not specified whether the targets were to measure gross savings or net savings. Net savings are typically lower as they do not count energy savings from program “free r iders” (those who would have implemented the energ y conser vation measure even in the absence of a program incentive). The BIP and ERIP programs came close to or reached their targets, if gross savings is used as the target metric, while none of the four programs came close to reaching their targets, if net savings is used as the metric. All four programs delivered electricity savings at quite low cost in comparison with purchasing new electricity supply. In 2010, projects undertaken through the retrofit programs (excluding projects in multi-residential buildings) delivered energy savings at a levelized delivery cost of between 1.4 to 2.5 cents per kWh, less than the average cost of electricity and far less than alternative sources of new supply. In 2011, the OPA launched a new provincewide program, covering new and existing buildings in the commercial, institutional, multi-residential and agricultural sectors. Local distribution companies (LDCs) will have the lead in delivering this program. The new program includes an equipment replacement initiative for medium-to large existing buildings that replaces the four C&I retrofit programs previously offered.

For the new retrofit and building commissioning programs, the OPA has targeted 391.3 MW of demand savings and cumulative energy savings of 2,082 GWh by the end of 2014. The incentive structure remains unchanged ($800 per kW of demand savings, or $0.10 per kWh of first year energy savings, with lighting measures funded at only half this level). The program will also offer fixed per unit incentives for standardized energy efficiency measures such as high-efficiency lights and motors, an option also previously offered by the ERIP program. Several new initiatives have been added to the program to complement the financial incentives for investments in energy efficient equipment: • An audit incentive will cover up to 50% of the cost of a building energy audit (typically several thousand dollars, depending on building size). Additional funding is available for larger buildings that wish to conduct a detailed follow-up analysis of a potential energy efficiency investment with a large capital cost. • Incentives are provided for customers to conduct a commissioning process to optimize the performance of their chiller systems. To ensure that commissioning studies lead to actual savings, customers are required to implement any identified measure that would improve energy efficiency that has less than a two-year payback. • The OPA will fund capacity building activities, including support for energy efficiency service providers, a contractor information network, and training for HVAC contractors, building operators and energy managers. The OPA also plans to promote energy management workshops and to develop support resources, such as guides for customers, vendors and contractors to build knowledge of energy efficiency measures for specific end uses. For the new retrofit and building commissioning programs, the OPA has targeted 391.3 MW of demand savings and cumulative energy savings of 2,082 GWh by the end of 2014. These program targets are based only on projects undertaken through the new 2011-2014 program and do not count persistent savings from projects implemented in earlier years. The program

targets account for 29% cent and 35% of the overall 2014 LDC demand and energy targets, respectively. The results of C&I retrofit programs between 2007 and 2010 demonstrate that these programs can be a cost-effective means of delivering reductions in peak demand. However, program uptake to date has been lower than expected, perhaps due in part to the impact of the recession. The Environmental Commissioner of Ontario (ECO) supports the continued focus on these programs between 2011 and 2014, but believes that the targets for these programs may be overly ambitious, given that incentive levels remain unchanged. The task of reaching the targets will be made even more difficult because the C&I retrofit program has been slow to launch, r e d u c i n g t h e f o u r- y e a r w i n d ow f o r achieving program savings. If the targets are to be reached, it may be necessary to increase incentive levels to promote more cutting-edge measures. For example, it is unclear to the ECO whether the current practice of providing lower incentive levels for all lighting measures, including advanced lighting controls such as daylight harvesting sensors, is wise. The ECO also supports the new program enhancements for audits, building commissioning and capacity building. It is hoped the funding support for audits will drive building owners to undertake deeper retrofits that deliver enhanced energ y savings, rather than focusing on lightingonly retrofits, as has been the case for most projects undertaken in recent years. Seeking more savings from non-lighting measures will become necessary because the simplest lighting retrofit measure – converting from T12 to T8 lighting – has achieved more than 70% market penetration and will soon be essentially complete, locked in by changes to energy efficiency standards. More could perhaps be done to encourage deeper retrofits – for example, many successful U.S. programs provide higher incentive levels for more PROPERTY MANAGEMENT REPORT April 2012 9


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Energy Management Many of your office staff spend more waking time at their office than at their home, so the quality of the environment you provide is very crucial to their health and productivity.

comprehensive energy efficiency retrofits. As a longer-term strategy, the ECO believes that the focus of energy efficiency efforts in the C&I sector needs to be re-oriented towards measuring and improving whole building energy performance, rather than incenting individual measures. The C&I retrofit program’s new funding for building commissioning, energy managers and building operator training are useful steps in this direction, although building energy benchmarking and labelling will also need to play a role in the future. Althoug h the OPA has improved the educational and capacity building aspects of the retrofit program, some gaps may still remain. One barrier to program participation that should be addressed is the ownership of environmental attributes associated with energy efficiency projects funded through the retrofit programs. Environmental attributes are the benefits and entitlements that can be claimed due to the positive environmental impacts, such as reduced GHG emissions, that result from energy efficiency investments. Under the previous retrofit programs, the rules regarding ownership of these attributes varied. Fo r e x a m p l e , t h e B B P- E B p ro g r a m required potential program participants, other than the City of Toronto, to transfer ownership of these environmental attributes to the OPA. This was reported to be a barrier 11231_Altamira_2011.indd to program participation. Companies may be concerned that they are unable to validly claim credit for their energy conservation efforts, and publicly benefit from the goodwill associated with their reduced consumption, due to the uncertainty of what the OPA will do with the environmental attributes. For example, if the OPA sells the environmental attributes to a third party who uses them to offset real GHG emissions, only the third party buyer – not the OPA or the company that undertook the conservation action – can legitimately claim the reduced emissions. Otherwise double-counting will result. The ECO recommends that the Ontario Power Authority release claims to ownership of env ironmental attr ibutes ar ising from conservation projects funded with the aid of Ontario Power Authority incentives. i

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11:22 AM


Energy Management

Widespread Non-Compliance with TSSA Rules

emergency generators can be found in many residential and commercial buildings, where they provide a backup source of power for life and safety systems such as fire alarm panels, sump pumps, exit lights, emergency lights and fire fighters’ elevators. Fuel delivery can be halted to buildings that do not comply with code requirements fuel storage and diesel generators By-laws, codes and regulations, as well as a u t h o r i t i e s h av i n g j u r i s d i c t i o n ove r inspecting the equipment, establish the rules for installing diesel generators. In Ontario, that’s the Technical Standards & Safety Authority (TSSA), which regulates fuel suppliers, distributors, storage facilities, contractors and equipment. All diesel fuel installations must comply with CSA B139 ON 06 Ontario Installation Code for Oil Burning Equipment, which is based on the national standard CSA B139, but with Ontario-specific amendments.

A decade ago, in March of 2002, the TSSA and the Fuel Oil Industry Association jointly established an Alternative Inspection Program, which called on the fuel delivery supplier to perform an initial basic inspection of the diesel fuel system installations and identify any safety or code related deficiency. All diesel fuel installations were to have undergone a basic inspection by a certified/licensed Oil Burning Technician (OBT1) by May 2004, with a comprehensive inspection completed by May 1, 2007. Oil Burning Technicians who found deficiencies with the fuel systems were required to notify their clients that fuel would not be delivered to the building until the issues were corrected. Some of these deficiencies were classified as immediate hazards, while others were classified as nonimmediate hazards. Yet, in 2012, a significant number of building owners, operators and property

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managers may be unaware that they do not comply with code requirements for diesel fuel systems installed at their buildings – possibly because the existing generators have been running for a long period of time without any problems. The TSSA has begun to actively enforce CSA B139 ON due to several incidents of diesel spills and fires, and inspectors have found that many buildings have not had a proper comprehensive inspection completed. “This leads to interruptions of fuel delivery when fuel tanks could be critically low, causing concerns for the safety of the building and their occupants,” observes Ed Porasz, President of M & E Engineering. Some common deficiencies in noncompliant diesel installations are as follows: Day tank venting If day tanks are vented to the atmosphere without any redundant systems, there is a chance of a diesel spill to the exterior if the day tank overfills and the return line is not of sufficient size. The venting of the day tank (for elevated installations i.e. main tank in on the ground floor or P1 L e ve l a n d t h e g e n e r a t o r i s i n t h e penthouse mechanical room) should be via the return line or overflow pipe back to the main tank. Location and capacity of tanks The location of the main diesel storage tank should be installed close to an exterior wall where the distance between the tank bottom and the top of vent is less than 13’ 6”. If the distance exceeds the limit then certain safety measures must be taken. In addition, diesel storage tanks should be located in the lowest level of the building or else the capacity of the main storage tank will be limited. Generator Exhaust Stack The generator exhaust stack must be of the approved venting type (ULC stainless steel). Generators used in residential buildings have exhaust flue temperature ranging from 454°C (850°F) to 649°C (1,200°F). The TSSA requires a professional engineer to provide a stamped and signed letter certifying that the installation meets NFPA 211 (National Fire Protection section 211).

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Energy Management The code calls for a three-foot clearance for non-insulated stacks or 1-foot for insulated stack when the exhaust stack penetrates the ceiling/roof of the generator room where combustible materials may exist and/or depending on the type of roof ( w a t e r s t o p P VC m a t e r i a l s , a s p h a l t membrane). However, in some existing installations, there may not be more than a few inches around stack penetrations through the roof. In these cases, temperature measurements of the flue gas should be taken with the generator running at full load for a minimum of two hours or until the temperature stabilizes. Temperature readings should not exceed 18째C (65 째F) above ambient and the test results must be submitted to the TSSA by a Professional Engineer. For safety and due diligence, other items such as the ventilation system, fusible links, approved flexible connections, ULC-rated filters, and potential leaks should also be investigated. i Bassem Sukkar, P.Eng, is an Associate with M & E Engineering. For more information, see the web site at www.me-eng.com. The preceding article is reprinted from CondoBusiness, March 2012.

All diesel fuel installations were to have undergone a basic inspection by a certified/licensed Oil Burning Technician (OBT1) by May 2004, with a comprehensive inspection completed by May 1, 2007. Oil Burning Technicians who found deficiencies with the fuel systems were required to notify their clients that fuel would not be delivered to the building until the issues were corrected.

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PROPERTY MANAGEMENT REPORT April 2012 13


Tax Trends

Austerity Delays Equity The Ontario government has halted promised property tax relief for co m m e r c i a l / i n d u s t r i a l r a t e p ay e r s i n Toronto, Hamilton and sever al other municipalities with a higher-than-average business education tax (BET) rate. A freeze in the phased seven-year BET reduction plan is one of several austerity measures in the 2012 Ontario budget, which aims to reduce program spending by $17.7 billion over the next three years. The BET reduction plan was introduced in 2007 as something of a solution to the patchwork of rates across Ontario that resulted in some taxpayers carrying a disproportionate share of the education tax burden up to 50 times greater than that for counterparts located in the municipalities with the lowest rates. Yearly reductions were intended to incrementally reduce the BET rate to a maximum threshold by 2014, which would ultimately deliver a projected 19% education tax cut for over burdened commercial ratepayers in Toronto, a 12% cut in Ottawa and a 10% cut in Hamilton. Even so, the BET reduction plan was not a province-wide harmonization of the tax rate since there was no corollar y upward adjustment of rates sitting below the designated threshold. In contrast, all residential and multi-residential property taxpayers in Ontario are levied at a uniform 0.231% education tax rate. The 2012 Ontario budget now puts a hold on the final installments of the BET rate reductions until at least 2018. “As of 2011, our BET for commercial is 1.443%, while the target for 2014 is 1.33%. Now we will be stuck at a higher rate,” reports Roberto Rossini, General Manager

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of Finance & Corporate Services for the City of Hamilton. “ The BET rates in our neighbouring municipalities [in the Greater Toronto Area] are 1.25% in Peel, 1.2% in York and 1.08% in Halton.” The discrepancy is even more marked in Toronto, where the commercial BET rate was 1.54% in 2011. Meanwhile, newly constructed commercial/indust r ial building s w il l automatically be taxed at the targeted lower rate, as has all new construction since the BET reduction plan was first introduced. “Efforts to reduce property taxes on businesses in Toronto and make them more competitive with other regions are again postponed, with the resulting economic consequences,” asserts Jeff Orlans, Chair of the Toronto Office Coalition, representing owners, managers and tenants of approximately 55

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million square feet of commercial office space. “Further, the discrimination against the existing taxpayers in favour of new construction is reinforced, creating an unequal playing field.” Advocates like the Toronto Office Coalition had more cause for optimism earlier in the winter with the release of the Report of the Commission on the Reform of Ontario Public Services (commonly called the Drummond Commission after its Chair, Don Drummond), which urged the provincial government to move to a harmonized BET rate. “In 2007, the highest BET rate was more than 50 times greater than the lowest BET rate. By 2012, this will be reduced to 15 times greater. Despite the progress, a c o n s i d e r a b l e g a p s t i l l e x i s t s ,” t h e Drummond Commission’s report states. “By not addressing low rates, the province will have difficulties addressing distortions and inequities in the education property tax rate. These could be addressed by moving towards a policy of a single province-wide BET rate, while also limiting the cost of the BET reductions.” Municipalities and ratepayers now stalled at the upper end of the rate spectrum concur. “This is really a matter of tax equity,” Rossini says. i The 2012 Ontario Budget can be found at h t t p : / / w w w. f i n . g o v. o n . c a / e n / b u d g e t / ontariobudgets/2012/papers_all.pdf

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