Ford government to fight energy board decision that developers, not ratepayers, should bear the cost of Enbridge gas expansion

Doug Ford’s government is pledging to reverse an Ontario Energy Board decision that would disincentivize the use of gas in new housing developments.

Less than 24 hours after the decision was published, Energy Minister Todd Smith said he would pause the board’s decision and introduce legislation to reverse it at the “at the earliest opportunity.”

On Thursday, the Ontario Energy Board (OEB) found Enbridge’s plan for a multibillion-dollar gas grid expansion “is not responsive to the energy transition and increases the risk of stranded or underutilized assets.” The decision states Enbridge Gas relied on the unreasonable assumption that despite the energy transition and shift to electrification, virtually all new homes would connect to the gas system and those new customers would remain connected to the gas system for at least 40 years.

To ensure customers aren’t saddled with the cost of an expensive stranded asset, the OEB decision said going forward that gas connections must be paid for immediately (projects under a provincial expansion program are exempt) rather than over 40 years through gas rates collected from residents. The OEB eliminated a gas hookup subsidy so developers will have to pay roughly $4,400 upfront to connect a new home to the gas grid. Or they could install electric heat pumps, which the OEB said would be “a win for homebuyers” and developers because it would keep their builds cost-competitive.

Smith said the decision “would slow or halt the construction of new homes, including affordable housing,” adding: “We will not stand for this.”

The OEB decision was in response to Enbridge’s application to increase gas rates for customers to pay for a planned multibillion-dollar gas network expansion.

“What the regulator is saying here is, ‘What you are proposing to do is very risky and we aren't going to let you shove those costs off onto consumers in the future,’” said Keith Stewart, a senior energy strategist with Greenpeace Canada. “‘You either pay it right now or go another way.’ They're sending a message to Enbridge that you can't just continue with business as usual.”

Similarly, the British Columbia Utilities Commission (BCUC) rejected FortisBC Energy’s application to build 30 kilometres of new gas pipelines in the Okanagan. FortisBC’s application for the project — which would cost an estimated $327 million — did not consider the possibility that demand for natural gas in the Okanagan region could flatten or decrease over the next 20 years as a result of the energy transition and the province’s climate plan, according to BCUC’s announcement on Dec. 22.

Environmental groups celebrated the OEB’s decision and dumped on the Ford government's pledge to overturn it as “a very expensive Christmas present” to Enbridge.

Environmental Defence called Smith’s assertion that the changes would impede construction of new homes false. Developers currently install gas pipes because the subsidy covers the cost. Without that subsidy, it will be cheaper to install electric heat pumps and developers will be more likely to do so, said Environmental Defence programs director Keith Brooks. Greenpeace Canada and Environmental Defence were among the many intervenors speaking against Enbridge’s proposal at the rake hike hearings.

The OEB’s orders aim to protect Enbridge’s customers from the risk of a potential “death spiral” where Enbridge ends up increasing gas rates to cover the cost of stranded assets, people leave the gas system because those rate hikes make it too expensive, remaining customers are then subject to even stepper increases and the cycle continues.

Enbridge will “consider any and all avenues to challenge the order” after conducting a thorough review of the 147-page decision, Leanne McNaughton, an Enbridge spokesperson, told Canada’s National Observer in an emailed statement. Those avenues could include “a motion for review at the OEB or an appeal to the courts,” she said.

McNaughton said the OEB’s decision adds unnecessary costs to residents now that new customers will have to pay for their connection to the gas network immediately rather than over several years. In a majority of cases, developers would be the ones paying for the gas connection, not ratepayers. Subdivisions account for approximately 80 per cent of connections, and the choice to connect to gas is largely made by developers, the decision noted.

Enbridge applauded Smith’s announcement and said the OEB's decision “will significantly impact energy affordability and our capacity to invest in Ontario's expanding energy infrastructure system.”

She said it also undermines the Ontario government's efforts “to bring affordable and sustainable natural gas to all Ontarians,” adding that “northern and remote communities, Indigenous communities, industry and new development communities … will face significant challenges to energy security and affordability without fair access to natural gas infrastructure in Ontario.”

A group of environmental organizations and concerned Ontario residents filed a complaint with the Competition Bureau that accuses Enbridge of falsely claiming gas is the most cost-effective way to heat homes as part of its campaign to expand the gas grid. The complaint takes aim at claims made in a handful of Ontario communities, including that “switching to natural gas could save you up to 52 per cent per year” and that gas is “the most affordable way to run appliances.” Their complaint included analysis showing that customers in the communities Enbridge is expanding into could expect to save $20,000 by switching to heat pumps instead of signing up with Enbridge.

“The Ontario Energy Board is recognizing that the energy transition is real and they're trying to protect consumers from bad decisions by gas companies,” said Stewart, calling the decision an “existential threat” to Enbridge.

“The Ford government is siding with property developers and gas companies to leave you and me on the hook for the cost and to continue pretending that climate change isn't gonna force us to change business as usual.”

Smith’s pledge to reverse the board’s decision “has given Enbridge Gas a very expensive Christmas present, but it is the rest of us who will be footing the bill,” he added.

— With files from John Woodside

Natasha Bulowski / Local Journalism Initiative / Canada’s National Observer