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Fossil fuel giant Enbridge faces the risk of a “death spiral” as the energy transition to renewables unfolds, according to evidence the company filed with the Ontario regulator. A death spiral could occur when customers, fed up with the increasing costs of gas, switch to cleaner and cheaper sources of energy.

The evidence discussing the possibility of a death spiral is part of Enbridge’s 7,000-plus page application now in front of the Ontario Energy Board. Enbridge is asking the regulator for a customer rate hike to pay for a $16-billion expansion and replacement of its gas infrastructure. The risk of a so-called death spiral is referenced repeatedly in a report Enbridge commissioned from consulting firm Concentric Energy Advisors.

“As customers switch to electric heat pumps to save on energy, there's less and less people to pay for pipelines, and so rates need to go up,” said Kent Elson, a lawyer representing the non-profit Environmental Defence that is intervening in Enbridge's application. “And that causes more people to switch to electric heat pumps to save money, which means there's even less people to pay for the pipelines, and the rates need to go up even further.”

That creates a negative feedback loop, where customers ditch the gas network in favour of cheaper alternatives, which undermines the business case for expanding gas infrastructure in the first place, he explained.

“The real risk is to the most vulnerable customers because they would be the ones left holding the bag as rates go up and up and up,” Elson said. It is harder for lower-income people, renters, and others to ditch gas due to the upfront transition costs.

When asked about the risk of a death spiral and what it was doing to mitigate those risks, Enbridge spokesperson Andrea Stass told Canada’s National Observer that because the application is now with the regulator, “we believe it is not appropriate for us to discuss questions on specific elements of the application outside of that process.”

But Stass said “the need for climate change mitigation has become increasingly obvious,” and pointed to a June 2022 study Enbridge commissioned from Chicago-headquartered consulting firm Guidehouse that looked at using Enbridge’s pipeline system to deliver renewable natural gas, hydrogen, and other fuels.

Concentric Energy Advisors does not predict when there will be a death spiral, and says it expects Enbridge would work to avoid one. But it states a death spiral scenario could be sparked if a “meaningful portion” of Enbridge’s customers transitioned off gas.

The Enbridge Westover Exchange oil and gas terminal is seen from the Westover Community Park, which features a baseball diamond, playground, skating rink and picnic shelter, in Hamilton, Ont. Enbridge has applied to the Government of Ontario for future investments in fossil fuel infrastructure in the province. Photo by Ian Willms for Canada's National Observer

Concentric Energy Advisors explains in its report that the risk to natural gas companies like Enbridge posed by the transition to renewable energy has “fundamentally changed” over the past five years. The report references federal policies like Canada’s pledge to cut greenhouse gas emissions 40 to 45 per cent from 2005 levels by 2030 and the Canadian Net-Zero Emissions Accountability Act that puts into law intermediary emission reduction goals. It goes on to say that as the carbon tax escalates to $170 per tonne by 2030, the price advantage of natural gas compared to electricity will continue to erode.

“The real risk is to the most vulnerable customers because they would be the ones left holding the bag as rates go up and up and up." #onpoli #enbridge

The report notes 48 municipalities in Ontario — from Aurora to Woolwich, and including cities like Toronto, Ottawa and Hamilton — have declared climate emergencies. There are also 21 communities in Ontario urging the Ontario government to phase out gas-fired electricity generation.

Other business considerations come into view as the energy transition challenges the wisdom of new fossil fuel infrastructure. The report points to lower average gas use per residential customer, declining rates of new customers, weaker economic growth outlooks, and the Ontario regulator encouraging more competition.

“We conclude that the risk of a ‘death spiral’ is higher today than it was in 2012,” the report says.

The study was filed as evidence by Enbridge as part of its rate hike application to support its gas expansion plans. The increase, expected to range between $28 and $193 more annually per customer, depending on the region of the province, is to help compensate Enbridge for taking on more risk, Elson explained.

“Enbridge is proposing ways to mitigate its own risk while opposing ways to mitigate risks for customers,” Elson said. He called it “hypocritical” because in other parts of Enbridge’s application, it’s arguing the risk isn’t enough for the regulator to protect customers.

The regulator isn’t expected to make a decision on Enbridge’s application until November, but Elson said he plans to argue over the coming year that a separate fund should be set up to pay for pipeline decommissioning costs. It’s “not cheap,” he said, “and we really need to be setting aside money now in that kind of protected fund to make sure we don't come up short when those pipelines, and if those pipelines, are no longer needed.”

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we are getting enbridge out of our lives one appliance at a time. cant wait till we kiss them completely goodbye with a one finger salute!
we were definitely hoodwinked over the last 30 years by their “cleaner than oil” lie, and proud to have an all gas home. now we are bitter and determined to know the facts.

So far, we got rid of gas water heater, dryer, soon gas fireplace as main source in studio. It takes time and money and a lot of effort! stove and hydronic heater will change over when they are kaput seems the sane overall thing to do.

BUT first goal is always USE LESS total energy by massive insulation of basement, attic, windows doors.
good luck to us all

oh, and send money to Enviro Defence every month to fight the bastards in court!!!

Completely agree with the admonition to send money to Enviro Defence. They're doing great work. Enbridge, on the other hand is asking for help because it sees the writing on the wall. They don't deserve our help. When they proposed the northern gateway pipeline (which was never built) they published maps of the Kitimat area that failed to include certain islands. There was speculation at the time that they intended to remove those islands to make room for more tankers. That's just a sample of their subterfuge. They should consider getting into something constructive like renewables. Then they should humbly ask for forgiveness.

The map discrepancies could also be due to the inconvenient fact the tankers, which would have been a lot larger than the Afromax variety TM uses in Vancouver Harbour, need to make very tight turns in excess of 90 degrees when exiting Douglas Channel to reach the open Hecate Strait. Why not fudge the difficulties of the route through PR to make the route seem easy as pie, eh? Especially when the Queen of the North crashed into an island (human error, again) and sank right in that very area not long before?

All the pro-oil tanker rhetoric in the world -- double hulls, duo tethered tugs, etc. -- will never assuage the concern about the other guy about to cross your path in a big cruise ship.

We were able to get rid of fossil gas recently, though Enbridge made it difficult to close the account and has still not done a final reconciliation on the gas bill. They have no tab on the account to close it (had to say we were moving) and it's impossible to reach a human on the phone unless you have a gas leak. They didn't respond to two letters, but did finally come to get the meter. Seems major companies as well as federal, provincial and municipal politicians are in deep denial about the transformation that's started.

You go girl.........I like your energy and commitment.......recently we converted to an induction range.....from electric.........and then started hearing how great natural gas stoves were...AT CAUSING ASTHMA...so took both our son and daughter to induction. It's a great technology.....cheaper, cleaner, faster.

We're also saving for a heat pump and upgrading the windows in our son's 1970 era bungalow. Like you, we are angry and fed up with the BLATANT LIES fossil fools have perpetrated on the public.
Off with their heads.

Again, it's those with lower incomes who can't afford those measures.
Enbridge could stave off its death spiral for a while by stopping investments in new pipelines.
The per-unit cost of gas as authorized by the OEB does not include carbon tax. It has increased four-fold during the past 15-20 years.
Electricity in Ontario is more and more expensive, thanks to Wynne's sell-off of public assets (which were granted as a gift in perpetuity to the people of Ontario) ... its new owners invest in such things as coal operations in the US.

The future need is blindingly obvious: we have to get rid of fossil fuels, so that should be a project. A planned-ahead, scheduled, costed project.

People do not build gas networks (or cities, at all) by putting one house way out there, and having to build a network of water, sewer, gas pipes to get there, then gradually make the network useful as houses fill in. No. They build a whole subdivision at a time, 100 houses, providing them with all services at once, justifying the larger pipes (and roads, and wires) that must be built out to the new subdivision.

Similarly we should be shutting down gas networks one pressure zone at a time - all the houses behind one valve go heat-pump the same summer, and the valve is turned, another segment of network shut down for good. That's the rational, project-based way to convert between two systems.

And, obviously, the first step is to stop digging - literally - you have to stop putting in homes with furnaces, put in only heat-pumps with NO gas network in any new subdivision. You do that first. You pick a year that's the last year of NEW gas furnaces allowed, and it's all heat-pump after that; then you start converting, one network segment at a time.

The "death spiral" then becomes a "ramp" that accountants can plan around, know what's coming and when.

"...we have to get rid of fossil fuels, so that should be a project. A planned-ahead, scheduled, costed project."

Absolutely! Eight years of Trudeau, the last couple with supposedly climate progressive Singh, and what? Baby steps taken in great fear of corporate anger. I suppose baby steps are cumulative, but still ...

Some EU countries are paying 100% of the cost of installing heat pumps, but they were motivated by a supply cutoff made by a tyrant they EU allowed to penetrate deep into their collective economy. The new federal grants for heat pumps suddenly became more generous. I'm thinking about it, even though our high efficiency gas furnace is quite new. But there's also the gas stove and water heater to replace on two pension incomes, along with the renovations required to connect the outdoor heat pump to the furnace ducting some distance away inside the house.

I think I'll wait a little longer and do the math once BC kicks in a better replacement grant program. I already did the math for solar and found it was a perfectly viable project until I discovered that BC Hydro was going to reduce its net metering credit by 60%, therein killing every rooftop solar panel project by Hydro's customers in the province.

The best advice I have is, do your due diligence before jumping in.

FWIW, I ran the numbers for my home and usage against the numbers promoted by what seems to be the main non-profit advocacy group here for heat pumps, and found them to run high on aspiration and low on actual pricing.
Without considering installation costs, running a heat pump here would cost me more in electricity than I save in gas bills. Being a low income senior with only one household income, that wouldn't be smart for me to do. Unless I gave up eating.
And then there's the matter of what happens when the electricity goes out. I survived the storm of what was it, 2013? only because I had access to electricity-free hot water, when the power was out for 13 days.

Reply to f nordvie.

Your situation noted.

So many things come to mind, but given the need to stop burning fossil fuels, what would you suggest, then, as a way forward?

So the concept is, the people of a province should pay extra for a company's product because it faces the prospect of being unable to compete. As usual these "free market" things are only sacred when they're victimizing ordinary people--as soon as someone big might suffer from them, they must be stopped.

Tell me again why I'm supposed to be unhappy if Enbridge suffers a "death spiral"? I think that's kind of necessary for climate change to be stopped, actually.

There is no competition in the natural gas market, when it comes to consumers. They have either Enbridge, or Trans-Union, which was some time ago bought out by Enbridge. They are a monopoly.
As far as electricity goes, the unit price of electricity, while it continues to go up in leaps and bounds, is even so deceptive: most of the electricity bill is not for electricity itself, but for "all the rest," including the 9% profit they are allowed to take: paid out to the company's "preferred shareholders," who are, AFAIK, the only shareholders. There was no vote by anyone on the privatization of Toronto Hydro. I found out it had happened by sheer accident.
It was authorized by the Wynne government, at the same time as it sold off a controlling interest in our publicly owned hydro power generation infrastructure.

There's an easy option for Enbridge: Expand their tiny renewable section into a major department and use their corporate influence and financing sway to build major wind, solar and geothermal generation projects, and HVDC transmission corridors. Deep geothermal is especially promising. Once a clean energy department is in place, let nature take its course on their fossil network. Perhaps a gas pipeline can be converted to carry compressed green hydrogen with the pipe treated with an internal membrane or coating. Who knows? The fossil company that can patent such a thing will be well positioned for the rest of the century.

Enbridge management could suggest a major expansion into renewables to the shareholders, and if they reject it, then at least the honest effort to transition along with the voting results will be on the record even as they witness the creation of stranded oil and gas assets and their associated debt write downs. Government may well force the issue in gas as they are with oil destined to fill gas tanks -- move into 100% EVs in all new car sales by 2035. The gas equivalent would be to cover all (or the majority) of the costs to switch to electric heat pumps with federal grants.

With the latest US federal budget heavily weighted to clean energy, Trudeau was merely following a Canadian tradition with EVs: Mirror the US whose economy is intertwined, and who really needs Canada's critical minerals and metals. Expect Canadian oil exports to decline in accordance with the ascent of American EVs, hopefully adequately translated to our own domestic economy as well. Gas needs the same attention.

As for coal, what the hell are we still mining and shipping it for? Thermal coal is the devil incarnate when it comes to busting the climate. Kick that drunken party animal out of the house already. Metallurgical coal is now largely replaceable with electric arc, electrolytic or green hydrogen-fired blast furnaces. Steel making is a long Canadian tradition; two plants in Ontario are already making the transition to electricity with an expected huge drop in emissions and rise in jobs. Canadian green steel ... imagine that.

Teck Resources and other coal mining outfits should be offered an out (or an "in" -- a piece of the clean energy and / or steel making endeavours), and once the offer is made, then the feds need to cancel the coal export permits through Ports Canada under a non-negotiable deadline. Paying the contract-breaking penalty will be a very small price to meet Canada's climate obligations, which will otherwise be badly blown.

Canadian gas and oil pipelines are not built to the specs that would be required to transport liquid hydrogen.
Enbridge doesn't want heat pumps, because there's no ongoing consumption that would provide them ongoing profits, unless they were placed on a rental basis.
Enbridge should be encouraged to start its death spiral now. They won't quit providing, suddenly and completely, because any profit is better than none.
They could simply lower their executives' compensation expectations, and their shareholders' dividend expectations.
They're in a losing game. My comment to them would be "You had a good run, nothing lasts forever: tough titty."