By Amanda M. Magee and Jennifer M. Lo
Amanda M. Magee
Phone: 604-685-5438
Email: amm@lmlaw.ca
Jennifer M. Lo
Phone: 604-674-9902
Email: jml@lmlaw.ca
Thinking of investing in EV charging stations at your building? Does your strata want to earn carbon credits and trade them in for cash? Looking to hire an aggregator or third-party service provider to manage your EV charger network and data? This article is intended to provide a high-level overview of the relevant provincial legislation, and a word of caution for strata corporations that are contemplating hiring a third party to manage their EV charging network.
BC’s Low Carbon Fuel Standard (LCFS)
The BC LCFS is comprised of the following key pieces of legislation:
- Low Carbon Fuels Act
- Low Carbon Fuels (General) Regulation
- Low Carbon Fuels (Technical) Regulation
The BC LCFS requires regulated fuel suppliers to reduce their carbon footprint annually and imposes reporting requirements and penalties on them. The LCFS also sets out eligibility for carbon credits, how credits are calculated and the reporting requirements for traded credits.
To be eligible for credits, a strata must:
- have EV charging in a building that has five (5) or more attached dwelling units;
- supply and pay for the electricity used by the EV charging; and
- accurately measure the electricity supplied (i.e. dedicated BC Hydro meter, charging station data, or networked system data).
Benefits
Carbon credits are worth real money and represent a potential source of revenue for the strata. Money from traded carbon credits can be used, for example, to pay for common expenses or invest in additional EV charging infrastructure.
Depending on the number of EVs regularly charging at the strata and the amount of electricity supplied, the number of carbon credits can add up to be worth a substantial amount of money.
Process
To turn LCF credits into money, a strata must: (1) submit a compliance report on the LCFS portal and (2) trade the credits on the market. The strata can do this itself or hire an aggregator or third-party service provider to handle it.
Compliance reports must be submitted annually and accurately report the total amount of electricity supplied to charging stations. Failure to report is subject to administrative penalties.
A strata is not required to report if it has supplied 15,000 kWh or less in a reporting period, but it must report if it has supplied over 15,000 kWh, and if it wants to be eligible for credits.
Aggregators
An aggregator is a third party that enters into an allocation agreement with a client EV charging supplier (such as a strata corporation) to pool electricity supplied, submit compliance reports, receive credits, trade credits on the market, record sales, and pay proceeds to their clients.
An allocation agreement is entered into under which the aggregator is made responsible for the strata’s legal obligations under the LCFS. The form and content of the allocation agreement can vary among aggregators.
The provincial regulations set out certain requirements for allocation agreements, which include:
- details about each EV charging station;
- the agreement can only be for a maximum term of three (3) years; and
- the aggregator must inform the strata of the number of credits issued and the fair market value on the date of issuance.
Risks for Strata Corporations
Strata corporations often engage third party service providers to supply and manage their EV charging networks. In some cases, those service agreements will require the strata corporation to sign a separate allocation agreement to appoint the service provider as the strata’s aggregator.
Strata councils are made up of volunteers who may not have the time or resources to dedicate to navigating the LFCS, so hiring an aggregator may be an attractive option. However, some allocation agreements provide for a significant or total assignment of carbon credit revenue to the aggregator, and in some cases the strata corporation may not fully understand what they are giving up. A strata corporation may be leaving a lot of money on the table by failing to read the fine print.
Key Questions to Ask an Aggregator
Strata corporations considering entering into an allocation agreement with an aggregator may want to pose the following questions:
- What support will you provide to help us with the process?
- Is there a minimum number of EV chargers or amount of electricity that must be supplied?
- Is there a set-up fee?
- What is the sales commission rate, and does it vary based on how many credits the strata has?
- Is there a minimum fee if the market price of credits drops?
- Can you sell just a few credits for the strata?
- How long will it take for the strata to receive the money from the credits?
- How long is the agreement for, and does it automatically renew or is there an option to renew at the end of the term?
- Does your service include both the BC and federal programs (BC LCFS and Canada Clean Fuel Regulations)? Does our strata qualify for both?
Legal Review
Many stratas are in the process of upgrading their electrical infrastructure and installing EV chargers in their common property parking facilities. While there is certainly a benefit to engaging a service provider to act as the strata’s aggregator and trade carbon credits on the strata’s behalf, councils should ensure they have a fulsome understanding of what the strata is agreeing to, especially given the amount of carbon credit revenue that may be at stake.
It may be prudent to obtain a legal review of the allocation agreement and any other agreements with the service provider to ensure that the strata’s compensation and other interests are adequately provided for.
Lesperance Mendes regularly reviews these types of agreements for strata corporations. Please contact Amanda M. Magee or Jennifer M. Lo to schedule a consultation. For more information, visit us at www.lmlaw.ca.
THIS ARTICLE IS NOT LEGAL ADVICE: This article provides general information and should not be relied upon without independent legal advice with respect to your specific matter.