Guide 102

Introduction

This guide will assist self-generating users of electricity to understand their rights and responsibilities under the Debt Retirement Charge (DRC) Program. Please note that this guide replaces the initial version published April 2002.

This guide provides information on:

• the definition of a self-generating user
• the definition of self-generated electricity and exempt self-generated electricity
• metering requirements
• self-generating user exemptions
• calculating DRC on self-generated electricity.

Self-generating User Defined

Self-generating users are persons who generate electricity:

• for their own consumption
• or for the consumption of another person at no charge.

Self-generating users who sell or supply electricity to another user are also collectors and have responsibilities as both a collector and self-generating user. See Guide 103 Rights and Responsibilities of Collectors for more information.

Self-generated Electricity Defined

Self-generated electricity is electricity that is:

• consumed by the person who generated it
• or supplied to someone else at no charge.

Exempt Self-generated Electricity Defined

Exempt self-generated electricity is electricity that is:

• generated by a unit that has a maximum load capacity of not more than 15 kilowatts
• generated and consumed within a vehicle or vessel used to transport goods or people
• generated and consumed on a temporary, occasional or emergency basis. (Defined in next section).

Temporary, Occasional and Emergency Use Defined

Temporary basis means the self-generated electricity will be consumed over a limited period of time. Examples include:

• a construction site
• a movie set
• a short term rental of a generator.

Occasional basis means self-generated electricity which is consumed on an infrequent basis and may include uses such as testing generation units.

Emergency basis means self-generated electricity which is consumed when electricity is not available from your normal supplier.

Requirement to Register for DRC

Starting May 1, 2002, all self-generating users must register with the Debt Retirement Charge program before consuming or supplying self-generated electricity.

If you consume only exempt self-generated electricity you are not required to register with the DRC Program. However, you are required to maintain records to substantiate your consumption of exempt self-generated electricity.

Requirement to Meter Electricity Consumption

Meter your consumption of self-generated electricity. The meter must meet the standards required for the purposes of obtaining the basis for a charge for electricity under the Electricity and Gas Inspection Act (Canada) and the regulations made under that Act.

There may be circumstances where installing a meter to measure electricity consumption is not feasible. The Ministry of Revenue may allow you to estimate consumption rather than install a meter.

Calculating DRC on Selfgenerated Consumption

To calculate DRC payable on the consumption of self-generated electricity you should:

• calculate your consumption of self-generated electricity based on whether you primarily consume self-generated electricity or primarily sell it (see sections on Primarily Consume and Primarily Sell below.)
• then multiply your self-generated consumption by the DRC rate(s) applicable to the geographic area(s) where the electricity was consumed. See Guide 101 General Information for rates.

When calculating the amount of DRC payable, round the amount to the nearest whole cent. If the calculation ends in half a cent or more, round up to the next cent.

Primarily Consume Self-Generated Electricity

Calculating Consumption of Self-Generated Electricity

If you primarily consume electricity which you generate (more than 50% in a calendar year), calculate your consumption of self-generated electricity for the period as follows:

• determine the total kilowatt hours of electricity generated in the period
• subtract the kilowatt hours sold in the period to another person, and
• subtract the kilowatt hours of exempt self-generated electricity consumed in the period.

Annual Exemption

If you primarily consume electricity which you generate you may be entitled to an Annual Exemption if you:

• owned or operated generation units or facilities on October 30, 1998, and
• consumed self-generated electricity generated by those units or facilities at any time after December 31, 1988, and before October 31, 1998, and
• consume in a calendar year more than 50% of the electricity you self generate.

This exemption only applies to self-generating users who primarily consume selfgenerated electricity. When your consumption of self-generated electricity in a calendar year exceeds your Annual Exemption threshold, you are required to remit DRC on your consumption of self-generated electricity.

You may only apply this exemption to the consumption of self-generated electricity within each calendar year. The exemption cannot be applied to prior or future years or to electricity purchased or acquired from another person.

Annual Exemption Calculation

Your registration package will contain instructions on how to calculate your annual exemption. The exemption is based on your average annual consumption of self-generated electricity over the 10 year period January 1, 1989 to December 31, 1998.

The exemption is calculated as follows:

• determine your consumption of self-generated electricity from generation units or facilities that you owned or operated on October 30, 1998. Include each calendar year from January 1, 1989 up to and including December 31, 1998.
• do not include exempt self-generated electricity or electricity generated and sold to another person
• if you consumed self-generated electricity for five years or more during this period, total your best five years of consumption and divide by five. This calculation will give you your annual exemption
• if you consumed self-generated electricity for less than five years during this period, divide your total self-generated consumption by the number of calendar years you consumed self-generated electricity during this period. A partial year counts as a full year. For example, if you consumed selfgenerated electricity for 3 years and 1 month, divide your total consumption during the period by 4. This calculation will give you your annual exemption.

When calculating your annual exemption, use accurate metered data. Where metered data is not available, you may use reasonable estimates.

You are not entitled to an Annual Exemption if you are entitled to the Station Service Exemption described later in this guide.

Annual Exemption for 2002

The annual exemption will be prorated in the year the electricity market opens for competition. The calculation will be:

Annual Exemption for 2002 = Annual Exemption × 245/365.

Transfer of Annual Exemption

Self-generating users may transfer all or part of their annual exemption to another person to whom they are transferring ownership of generation units or facilities. The maximum amount of the annual exemption that may be transferred is the portion that is reasonably attributable to the generation units or facilities being transferred.

In the year a transfer takes place, only the unused portion of your annual exemption may be transferred.

Requirements for Transfer of Annual Exemption

A transfer of an annual exemption may only take place if:

• both the transferor and transferee are registered and in good standing with
  the DRC Program, and
• both parties have received written approval from the Ministry of Revenue on the terms and conditions of the transfer agreement, including the amount of the exemption available for use in the year of transfer.

The Ministry of Revenue will specify the effective date of the transfer of the annual exemption when providing written approval. A sample "Annual Exemption Transfer Form" is provided in the pdf version of this guide.

Primarily Sell Self-Generated Electricity

Calculating Consumption of Self-Generated Electricity

If you primarily sell electricity you generate (more than 50% in a calendar year) to another person or through the IMO-administered markets, calculate your consumption of self-generated electricity for the period as follows:

• determine the total kilowatt hours of electricity generated in the period
• subtract the kilowatt hours sold or supplied in the period to another person
• subtract the kilowatt hours of exempt self-generated electricity consumed in the period
• if you are entitled to a Station Service Exemption, subtract the kilowatt hours consumed in the period for station service before calculating DRC payable.

Station Service Exemption

Generators who primarily sell electricity (more than 50% in a calendar year) are exempt from DRC on electricity consumed directly in the generation of electricity at the facility where it is generated provided that the electricity consumed is conveyed through a distribution or transmission system which is owned by the generator (also called "behind the fence"). This exemption is called the "Station Service Exemption"

The Station Service Exemption only applies to electricity generated and consumed "behind the fence" to power the on-site operation of the generation facility or unit.

Any withdrawal of electricity for station service made through a transmission or distribution system which is not owned by the generator is subject to DRC.

Electricity generated and consumed for activities which could be ceased or moved to other locations without affecting the normal and safe operation of the generation facility or unit is excluded from the station service exemption. For example, DRC would apply to electricity consumed in a visitor centre or an accounting department at a generation facility.

You are not entitled to the Station Service Exemption if you are entitled to claim an Annual Exemption.

Responsibilities of Self-Generating Users

Completing DRC Returns

Complete DRC returns for the period covered by the return. Calculate DRC payable on:

• self-generated electricity consumed or supplied to another user at no charge, minus any exemptions
• electricity acquired for own use exempt from DRC
• DRC collectable on the sale or supply of electricity whether or not the customer has paid you for it. See Guide 103 Rights and Responsibilities of Collectors.

Filing DRC Returns

You are required to file completed returns and remit payment by cheque or money order payable to the Ontario Electricity Financial Corporation (OEFC) by the due date shown on the return. The cheque should be drawn in Canadian funds on a Canadian financial institution.

Returns must be filed even where there is no activity or DRC to report. If you do not receive a return, you are still required to provide the return information to the Ministry of Revenue, with payment, by the regular due date.

Changes to Your Business

You should notify the Ministry of Revenue of any changes such as:

• a sale or discontinuance of the business
• changes to the legal or trade name, address, or contact person
• changes to the legal structure such as an amalgamation or the creation of, or changes to, a partnership
• changes to the way the business sells, supplies or consumes electricity.

Directors' Liability

Directors of a corporation may be held jointly and severally liable for DRC owing if the corporation:

• fails to collect DRC
• fails to remit DRC collected to the OEFC
• fails to pay any interest or penalty relating to DRC.

Books and Records

You must keep books and records with enough information to support the amount of DRC charged, collected, payable and remitted.

You can keep records manually or electronically. Electronic records must be in a format that will provide an exact copy of the original.

Examples of Books and Records

Examples of records that you should keep include:

• amount of electricity generated, purchased, acquired, sold or supplied
• amount of DRC paid on purchases
• amount of DRC collected on sales
• amount of DRC payable on own use
• amount of DRC remitted to the OEFC
• amount of electricity consumed
• names and addresses of suppliers
• names and addresses of persons to whom you sold or supplied electricity

If you consume exempt self-generated electricity, you are required to maintain records to substantiate that the electricity is exempt self-generated electricity.

Refunds

If you make an error in calculating DRC you may adjust your next DRC remittance or apply for a refund from the Ministry of Revenue. An adjustment or application for refund must be made within four years from the date the DRC was paid in error. You may refund DRC collected if:

• an error was made in calculating DRC
• the refund is requested within four year from the date the DRC was paid in error.

Download the "Request for Refund" form.

Dispute Resolution

If you disagree with a DRC assessment or disallowance of a DRC refund you may file a Notice of Objection with the Ministry of Revenue's Tax Appeals Branch within 180 days from the mailing date of the Notice of Assessment or Statement of Disallowance. Download the Notice of Objection form or,

• call the Tax Appeals Branch at 1 800 461-2637
• contact any Ontario Ministry of Revenue Tax Office listed in the blue pages of the telephone directory under Taxes - Province of Ontario
• contact the Debt Retirement Charge Program at the numbers listed at the end of this guide.

Right to Appeal

If you are not satisfied with the Ministry's decision on the Notice of Objection, you may file a Notice of Appeal. The Notice of Appeal must be filed with the Superior Court of Justice and a copy of the Notice of Appeal served on the Minister of Finance within 90 days from the date the Ministry's decision on the Notice of Objection was mailed.

Additional Information

DRC is governed by Part V.I of the Electricity Act, 1998 and Regulations 493/01 (Rates and Exemptions), 494/01 (Administration) and 160/99 (Definitions and Exemptions). Consult these documents for detailed information.

The information contained in this publication is only a guideline. For more information, please contact the Ontario Ministry of Revenue at 1 866 ONT-TAXS (1 866 668-8297) or visit our website at ontario.ca/revenue

© Queen's Printer for Ontario, 2002

ISBN 0-7794-3293-2