BCSEA Challenges BCUC move to regulate Strata Thermal Energy Systems

February 19, 2024

By Bill Andrews and Tom Hackney

BCSEA has challenged the BC Utilities Commission’s December 2023 drive to impose ”complaints-based” BCUC regulation on “Strata Thermal Energy Systems” and “Micro Thermal Energy Systems.” In January 2024, BCSEA wrote to BC Energy Minister Josie Osborne, asking her to decline the BCUC’s request for pre-approval of the change under the Utilities Commission Act. And in February 2024, BCSEA filed a reconsideration application with the BCUC itself.

A “thermal energy system” is defined broadly by the BCUC’s TES Guidelines as a facility for delivering heat, hot water and/or cooling from an energy source (or sources) through a distribution piping system to the user’s premises. The energy source can be non-renewable (e.g., a natural gas furnace) or renewable (e.g., waste heat, solar, groundwater-source or air-source heat pumps, geothermal, biomass). A “Strata Thermal Energy System,” in BCUC parlance, is a thermal energy system owned and operated by a strata corporation selling only to its members. A “Micro Thermal Energy System” is a thermal energy system with an initial capital cost of less than $500,000. 

Thermal energy systems, of all types, not just Strata and Micro thermal energy systems, provide important opportunities for decarbonizing space and water heating in BC buildings. While the BCUC does regulate many types of thermal energy systems, it has never actively regulated Strata and Micro thermal energy systems. 

Historically, it hadn’t been thought that thermal energy systems were even “public utilities” under the Utilities Commission Act. This changed with the BCUC’s 2012 Alternative Energy Services Report. However, the BCUC then determined that BCUC regulation of Strata and Micro thermal energy systems was not warranted, and they were exempted from active regulation by the BCUC in 2013. The BCUC said at the time that, “The Micro TES System exemption is intended to capture the case of a homeowner or a small business entering into an agreement with a TES provider [for] … any of a range of thermal services involving a furnace, air conditioner, air source heat pump, ground source heat pump or similar apparatus.” Regarding Strata thermal energy systems, the BCUC reasoned that a “Strata Corporation [that] owns the TES and provides energy exclusively to its Strata Unit Owners is subject to the Strata Property Act, which offers recourse and consumer protection to Strata Unit Owners.” “Accordingly,” said the BCUC in 2013, “customers [of a Strata TES] can find recourse under the Strata Property Act, and not through the Commission under the UCA. 

BCSEA is concerned that the BCUC’s current decision to regulate Strata and Micro thermal energy systems (subject to the Minister’s pre-approval) was based on literally no evidence of any actual safety or reliability problems faced by past or current Micro or Strata TES customers. In fact, the BCUC makes a point of saying that the BCUC “does not need” any such evidence to eliminate existing exemptions. 

In addition, the BCUC review panel had no evidence, or even an estimate, of the number of providers of Strata and Micro thermal energy systems that would now be subject to complaints-based regulation by the BCUC, or their incremental costs under BCUC regulation. While the Land Title and Survey Authority of BC reports some 32,344 filed strata plans as of March 31, 2023, it is unknown how many provide a “Strata Thermal Energy System” in the Commission’s definition. The number could be in the thousands, including for example situations as common as a strata corporation distributing hot water from a central boiler to it strata owners, and getting paid for it through the strata fees. 

To emphasize, BCSEA is not opposed to BCUC regulation of Strata and Micro thermal energy systems if such regulation would add demonstrable value to the existing safety regulation by Technical Safety BC and to customer remedies under the Strata Property Act. However, it would cost a lot of time and money for a Strata Corporation or a provider of a Micro TES to defend itself against a complaint to the BCUC, regardless of whether the complaint is found to be meritorious. Providing satisfactory thermal energy service is no guarantee against complaints being filed with the BCUC. Complaints-based regulation by the BCUC would be particularly inappropriate for Strata thermal energy systems where the costs of unnecessary BCUC regulation would be borne directly by the customers of the Strata thermal energy system (because the customers/unitholders own the Strata corporation that provides the thermal energy service). BCSEA is concerned that removal of the existing exemption could jeopardize the financial strength of existing thermal energy systems to decarbonize and could undermine the competitive position of would-be future Micro or Strata thermal energy systems vis-à-vis more-carbon intensive thermal energy options.

In its reconsideration application, BCSEA noted that no one representing providers of Strata and Micro thermal energy systems gave input on the merits of the BCUC regulating Strata and Micro thermal energy systems. This may have been due in part to the Commission’s draft indication (reversed in the final decision) that existing Strata and Micro thermal energy systems would not be subject to the new regulation (i.e., they would be ”grand-parented”). BCSEA’s sense is that Strata Corporations in BC don’t know if they are what the BCUC calls a “provider of a Strata Thermal Energy System.” They don’t know if the Strata Corporation is the “provider,” and they don’t know if their building’s energy system is a “Thermal Energy System” as defined by the BCUC. This lack of awareness is not surprising, since most of them have never been actively regulated by the BCUC. 

Significantly, where a Strata Corporation is itself the customer of another company that provides thermal energy service to the Strata this is not what the BCUC calls a “Strata Thermal Energy System” and the exemption from BCUC regulation does not apply. A current example is the BCUC’s hearing into a complaint by Strata EPS 7397 against Kelowna OWS Utility Inc. BCSEA encourages any Strata Corporation, or unit-holder of a Strata Corporation, that is dissatisfied with their heating/cooling service to contact the Commission staff to learn more about whether and if so how the thermal energy service is regulated by the BCUC.