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In a rare move, the Ontario government is overruling an independent energy watchdog to ensure Enbridge Gas can continue to pass the costs of natural gas expansions to homeowners.
The so-called Keeping Energy Costs Down Act, announced on Feb. 22, fulfills a promise made by Energy Minister Todd Smith last December. Smith objected strongly when, days before Christmas 2023, the Ontario Energy Board — an independent arms-length regulator mandated to protect the interests of energy customers — released a landmark decision telling Enbridge Gas to stop subsidizing its plans to expand infrastructure for methane-heavy natural gas by charging buyers of new homes for connections.
After reviewing Enbridge Gas’ plans for the next five years, the board argued the company’s proposal would lead to “an overbuilt, underutilized gas system” as the world moves away from fossil fuels toward renewable energy. The board told Enbridge Gas, whose parent company reported an annual revenue of $43.6 billion last year, to charge developers the costs of connecting new customers to the gas system. Homeowners have historically paid connection charges off over 40 years, but starting January 2025, developers would have to pay in full and upfront. The board said the requirement could push developers to consider more eco-friendly, economical alternatives such as heat pumps to cool and heat buildings.
The day after the board’s decision, Smith vowed to overturn it — the second time a government has challenged the Ontario Energy Board — as he said the requirement would increase the prices of new homes by “tens of thousands of dollars.” The Ford government has consistently supported the use and expansion of methane-heavy natural gas, arguing repeatedly it is more affordable than alternative options and ignoring its effects on global heating. While Enbridge Gas promotes natural gas as a “low-carbon” fuel, so-called natural gas is largely made up of methane, a heat-trapping chemical compound and powerful greenhouse gas.
New act gives minister increased authority over and above Ontario Energy Board
Ontario’s Bill 165 gives the energy minister new powers to determine who pays for natural gas hookups and over what time period. If the bill passes, the minister intends to allow Enbridge Gas to charge homeowners for 40 years — or until at least 2065, 15 years past the 2050 target set by Canada to reach net-zero emissions.
The minister is also giving himself greater authority over who pays the costs of new natural gas pipelines; the act exempts a number of natural gas pipelines from the board’s oversight altogether. This move is likely to impact another expected board decision about Enbridge’s plans for a $358-million natural gas expansion in the Windsor area.
These powers would stand for at least five years.
The new bill also strips away some of the Ontario Energy Board’s independence, giving the minister the ability to make the board hold additional public hearings on any issue related to natural gas.
“This reduces transparency and accountability while promoting decision-making via backroom lobbying,” lawyer Kent Elson told The Narwhal in an email. He represented the advocacy organization Environmental Defence when it intervened in the case before the board.
Ontario Energy Board’s Enbridge Gas decision was ‘irrational’: Smith
If Ontario’s Bill 165 passes, the government will ask the board to reassess Enbridge Gas’ plans, as Smith said it is “incumbent” the board factor in the government’s policies. The government will also appoint a new chair for the board this spring (the previous chair passed away in July), and release an official natural gas policy.
Enbridge Gas is also challenging the board’s decision at Ontario Divisional Court; it is unclear how this legislation would impact those legal proceedings. Neither the company nor the Ontario Energy Board responded to requests for comment by publication time.
Smith told reporters this legislation was needed because the board’s decision was “rushed” and “irrational.” The board members went “straight outside of their lane” and the decision was “a huge departure from the realities of our energy system,” he said.
“This was a wrong decision that was made without proper consultation,” Smith said, adding energy stakeholders and developers weren’t heard by the board in open hearings that involved many stakeholders. “What we’re actually doing is ensuring we never have to intervene again.”
“This is not going to just benefit Enbridge,” Smith said. “It’s going to benefit communities that are asking for it. … My goodness, what’s going to power these heat pumps if we don’t have nuclear and natural gas facilities?”
Some energy lawyers are surprised by the minister’s hard stance. Several told The Narwhal this legislation could improve the board’s process if enacted reasonably but the minister’s attacks on the board make that unlikely. “The degree to which the government has openly criticized the [board] is unprecedented,” Ian Mondrow, an energy lawyer with the law firm Gowling WLG in Toronto, said.
Debate comes as Ontario government pushes to build 1.5 million homes by 2031
The Ontario Energy Board’s year-long decision-making process involved tens of thousands of pages of documents analyzed in public hearings, and dozens of interviews with experts across the energy industry. It also heard from stakeholders such as the Federation of Rental-housing Providers of Ontario and the Building Owners and Managers Association. The board considered the perspective of the province’s Independent Electricity System Operator, including its policy on decarbonization and the energy transition. The board also considered the government’s own policies, including its stated goal of building 1.5 million homes by 2031 with a focus on increasing affordable housing.
Smith told reporters rural communities want natural gas because “it’s a low-cost way to heat their homes.” The issue of cost is a point of debate: the board is meant to ensure Ontario energy consumers pay fair prices for reliable energy, and said in its decision the expansion of natural gas will force homeowners to incur high retrofit costs to shift from fossil fuels in the future, along with the costs of pollution. The decision also explicitly and repeatedly mentions “support for electric heat pumps as an alternative to gas heating equipment,” finding the operating cost of a new all-electric house that uses a heat pump is lower than a new house reliant on gas.
“Once again, we have the Ford government intervening in a way that benefits, in this case, a wealthy corporation at the expense of everyday Ontarians,” Mike Schreiner, leader of the Ontario Green Party, told reporters after Smith’s announcement. “Just like they opened the Greenbelt and helped a handful of wealthy, well-connected insiders, this is the exact same story.”
Updated on Feb. 22, 2024, at 8:20 p.m. ET: This story has been updated to clarify that not all natural gas pipelines will be exempted from oversight by the Ontario Energy Board.
