OEB rejects Ont. natural gas expansion plan

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The Ontario Energy Board has rejected a proposal by the province’s two largest gas utilities to expand the province’s natural gas network through a subsidy charged to existing customers.

However, at the same time, it will allow Union Gas Limited and Enbridge Gas Distribution to charge new customers in communities that don’t currently have natural gas a higher rate to help cover the infrastructure costs, it announced Nov. 17.

The Heating, Refrigeration and Air Conditioning Institute of Canada (HRAI lobbied against the proposed ratepayer subsidy on behalf of the Ontario Geothermal Association (OGA), which operates as a chapter of HRAI.

The OGA argued that if natural gas system expansion was permitted to go ahead at the expense of existing ratepayers, alternative options such as geothermal (or propane or heating oil) would be competitively disadvantaged, reported Martin Luymes, HRAI director of programs and relations. 

The OGA found allies among other interveners in the case, including ratepayer groups and environmental advocates with an interest in mitigating climate change. 

“In essence, the OGA’s case centered on the point that geothermal heating and cooling presents a completely viable competitive alternative to natural gas technology, if all costs are fully accounted for.  The special advantage of geothermal, argued the OGA, is that it is also a non-carbon-emitting technology (assuming the supply of electricity is from “clean” sources), which makes it of special interest in light of the province’s new focus on climate change mitigation,” said Luymes.

The OEB determined that a subsidy was not appropriate, saying that the economic benefits of expansion to many communities are much greater than the costs. A ratepayer subsidy would also distort the market to the detriment of existing energy services that compete with gas, such as propane, and new gas distributors who do not have an existing customer base.

However, the OEB also noted that the current requirement that all natural gas customers in the same rate class are charged the same is a barrier to expansion. The utilities need a higher rate to cover costs, which they are now allowed to charge.

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