ON: Federal carbon tax on natural gas update

As members are aware, as part of the federal government’s carbon pricing program, a new carbon charge was applied to fossil fuels sold in Ontario, including propane and natural gas, effective April 1, 2019.

On July 4, 2019, the Ontario Energy Board (OEB) issued the following directive regarding federal carbon fees charged to Enbridge customers in communities where natural gas expansion projects have begun:

Customer-Related Charges

Enbridge will charge its customers (other than exempt entities and large Output-Based Pricing System [OBPS] emitters) a carbon tax of  3.91 cents/m³ in 2019. This is a pass through of the federal carbon tax on the volume of fuel consumed by the customer. Enbridge expects this to total about $361 million in 2019 (April to December).  

The amount charged by Enbridge will increase each year as the federal carbon tax increases from $20/ton in 2019 to $50/ton in 2022. By 2022, the pass-through cost charged by Enbridge will be 9.79 cents/m³.

These carbon tax charges will begin being charged on August 1, 2019.

The customer-related carbon tax charge will be shown as a separate line item on customers’ bills, under the heading “Federal Carbon Charge”, and will include the footnote: “The Federal Carbon Charge on this bill relates to the federal carbon pricing program”.

Carbon tax charges accumulated between April 1 and August 1, 2019 will remain in a variance account and will be dealt with the next time Enbridge applies for rates. There won’t be a lump-sum charge in August to make up for the carbon taxes that customers should have been paying since April 1.

Enbridge’s annual $1.8M cost to administer the carbon tax will also be tracked in a variance account and dealt with later.

Facility-Related Charges

In addition to the carbon tax on fuel used by customers, Enbridge is also an OBPS emitter in respect of the fuel Enbridge itself consumes to operate its gas storage compressor stations.

Enbridge expects to pay about $2.3M in 2019 under the OBPS system for its own carbon emissions (the amount Enbridge emits over and above its allowance). Enbridge will forecast this amount and pass this cost through to its customers as well. Because it is less than 1% of the total carbon charges, this charge will not be a separate line item on the bill but will be included within the distribution/transmission charge line item.