Combating Rising Energy Costs Using Local Improvement Charges

Toronto Suburb Skyline

By Geoff Taylor

December 5, 2013

Provincial and municipal governments are developing innovative methods to encourage property owners to better manage their electricity consumption. Inventive and practical financing mechanisms are aimed at helping to alleviate the cost burdens of delivering electricity to ever-increasing consumer demand.

This July, the City of Toronto approved a pilot program that will give 1,000 residential and 1,000 mixed-use unit property owners access to roughly $20 million in financing for energy efficiency upgrades for their properties. These Local Improvement Charges (LICs) will be repayed using property taxes over a fixed term (i.e. 20 years) at a manageable interest rate. This mechanism incentivizes property owners to reduce their carbon footprint by attaching the cost of the upgrades to the property and not their mortgage. Any new owner who acquires the property before the LIC term is over, assumes both the repayment responsibility and the benefits of the reduced utility bills. If successful, the program will be rolled out on a larger scale in Toronto and in other municipalities across the province.

The pilot is the evolution of Ontario’s Green Energy and Green Economy Act, an ambitious plan enacted in 2009 to spur economic development, mitigate climate change stemming from energy generation, replace aging and outdated energy infrastructure, and provide new employment opportunities in the province. The LIC retrofit program comes on the heels of October 2012 amendments to the Municipal Act and the City of Toronto Act that allows energy efficiency upgrades to be financed leveraging municipal funding through local improvement charges (LICs). Other jurisdictions such as Halifax have realized incredible successes in reducing greenhouse gas emissions using similar mechanisms.

Municipalities and residents of British Columbia might be particularly open to new energy efficiency schemes given BC’s Energy Minister Bill Bennett’s recent announcement that residents will face electricity rate increases approximating 26% over three years, adding $8/month to residential electricity bills. Ironically, the City of Vancouver actually had a similar pilot program but disbanded it due to a lack of interest.