Ontario Natural Gas Expansion – Expected News

After a series of hearings in which the Canadian Propane Association (CPA) was an active participant, the Ontario Energy Board (OEB) has approved applications from Union Gas for natural gas expansion into three markets. Applications were approved for service to the following communities: (1) Kettle and Stony Point First Nation and Lambton Shores; (2) Milverton, Rostock and Warburg; and (3) the Delaware Nation at Moraviantown First Nation. The OEB has deferred a decision on expansion into Prince Township, pending the outcome of negotiations between the Batchewana First Nation of Ojibways and Union.

 

While this outcome may appear disappointing, if not unexpected, the CPA’s involvement created important changes to the proposals that mean the terms of the expansion are less favourable to Union than initially proposed. Most importantly, Union cannot use cross-subsidies from existing customers to finance these projects – instead, customers connecting to the new service will have to pay an expansion surcharge for up to 40 years.

 

Project	Expansion Surcharge	Expiry Date
Kettle and Stony Point First Nation and Lambton Shores	$0.23 / m3	December 31, 2029
Milverton, Rostock and Wartburg	$0.23 / m3	December 31, 2032
Delaware Nation at Moraviantown First Nation	$0.23 / m3	December 31, 2057
Prince Township	$0.23 / m3	December 31, 2039

This expansion surcharge, along with the other significant costs involved in converting to natural gas, should act as a disincentive to those considering connection. Furthermore, the OEB will require Union to provide, after the expiry dates, revised calculations. And the OEB’s determination in the Generic Proceeding that cross-subsidies from existing customers are inappropriate will govern that review.

 

Overall, customers thinking about migrating to natural gas can be informed that:

• There are many unexpected costs involved in switching to natural gas, including conversion, connection, delivery and an expansion surcharge.

1. Customers will pay more for natural gas than the rest of the province does as soon as they are connected. A 23? surcharge, established to cover the cost of the infrastructure, will have to be paid for between 12 to 39 years, depending on the project.
2. Customers will also have to pay for the connection cost. Home and business owners typically pay a share of the cost to bring the natural gas pipeline from the roadside. So, the further the distance, the higher the cost. For houses and businesses on long driveways, this can add thousands of dollars to the cost of connecting to the pipeline and it has to be taken into consideration.
3. Over and above paying for the gas used, customers will have to pay a fixed monthly charge to cover the cost of the system. This can be as much as $20 per month.
4. Prices will likely rise every year: only the 23? surcharge is fixed until the expiry dates, or for 12 to 39 years, depending on the project, but the rest of the bill is not.
5. Municipalities will pay a subsidy and this could mean that property taxes will go up.
6. Customers will be locked into one fuel supplier forever, whose rates are determined by the OEB, including a determined profit for natural gas providers. Customers will have no options to shop around or negotiate with various local suppliers.
7. Customers will have to support the costs of conversion, which, depending on the design and age of their current propane system, can cost from $500 to $5,000 to move to natural gas ready equipment.

All in, savings made when moving to natural gas are often less than anticipated and it can be many years until upfront costs are recovered. When customers consider the costs of fuel, appliance conversion, connection, delivery and expansion surcharges, there is more to think about than is first apparent. View key messages and Q&A here.

 

The full OEB decision, dated August 10, can be viewed here.

 

NEXT STEPS: The CPA will continue to take an active role at the OEB and with the Government of Ontario on the issue of natural gas expansion, advocating for a level playing-field and recognition of the role propane plays in Ontario’s energy market. The CPA will keep members up-to-date on information relating to this submission and any future expansion proposals as well as continue its work to obtain, for members, an energy retrofit program for propane.