CRA finds that a credit generated by a business under the Ontario Net Metering Program is only income when applied, and is offset by a deduction for the electricity consumed

Under the Net Metering Program administered by the Ontario Power Authority, a participant who generates electricity primarily for its own use from a renewable energy source is billed only for the excess of the value of the electricity consumed by it over the value of the electricity supplied to grid. Where the value of the participant’s electricity consumption is less than the value of the electricity supplied, it generates credit, which is available for use against its future electricity consumption in the next billing period – but to the extent that the accumulated credit cannot be used within a given 12-month period, it will then be forfeited.

CRA stated:

[W]here a participant in the Net Metering Program generates electricity that is consumed in the course of carrying on a business or earning income from another property (such as a rental building), the value of such a credit would be included in the participant’s income from such business or property. This income inclusion will be realized in the taxation year in which the credit is applied against the participant’s electricity consumption costs and it will be equal to the value of the credit applied. However at that time, the participant would typically be entitled to an offsetting deduction for the cost of the electricity consumed by the participant, being an expenditure incurred for the purpose of earning income from the business or property.

Neal Armstrong. Summaries of 17 January 2020 External T.I. 2017-0685341E5 under s. 9 – computation of profit, s. 3 – business source, Sched. II – Class 43.1 and Reg. 1100(25).