Proposed Amendments to the Ontario Energy Board Act, 1998 to provide the government with the authority to ensure fair and informed decision-making at the OEB to foster affordable communities.

Purpose

• Ensure fair and informed hearings at the Ontario Energy Board.
• Ensure Government sets energy policy, not the regulator.
• Protect future homebuyers and promote affordable housing.
• Maintain customer choice with respect to energy options for homes and businesses.
• Support the Government’s mandate to rebuild Ontario’s economy as we keep costs down for people and businesses and build the homes our growing province needs.

Details

This posting seeks to receive feedback on a proposed approach to provide the government with authority to ensure fair and informed decision-making at the OEB to foster affordable communities. The proposed approach contains several elements.

First, the ministry is seeking feedback on proposed legislative amendments to ensure mechanisms are in place to facilitate broad stakeholder participation in OEB proceedings and other stakeholder input to the OEB related to natural gas and electricity.

If legislative amendments are passed, the government may subsequently propose regulations to require the OEB to provide notification to and invite participation or testimony from specific stakeholders or economic sectors (e.g., housing, transit, low-income service providers, construction, government agencies) that could be significantly impacted by an upcoming decision or hearing.

Secondly, the ministry is seeking feedback on proposed legislative amendments that would provide the Minister of Energy with the authority to issue directives, approved by Cabinet, requiring the OEB to hold a generic hearing on any matter respecting natural gas or electricity. Generic hearings are used to address one or more issues common to multiple regulated entities, which may require input from a broader set of participants. In an instance where the Minister of Energy believes an issue affects several regulated utilities, generators or stakeholders, the proposed changes could allow the Minister to request a broad hearing, highlighting the importance of the issue to the sector and encouraging broad participation.

If approved, a directive could include direction on how and when the generic hearing should be conducted. It could also transfer an issue from an ongoing proceeding to a generic hearing, or require a generic hearing on issues already decided by the OEB, provided that at least two years have passed since that decision.

Third, the ministry is seeking feedback on proposed legislative amendments to provide the government with time-limited authority to prescribe the “revenue horizon” over which natural gas utilities calculate the upfront cost required for new natural gas connections for residential, small commercial and other customers.

If legislative amendments are passed, the government may subsequently propose regulations to initially restore the revenue horizon at 40-years and require an OEB panel to re-rule on the revenue horizon by a specified date and take into account evidence from significantly impacted stakeholders (e.g., those who were absent from the OEB’s Phase 1 proceedings). Proposed regulations could also require the OEB take into account key considerations at that time including government policy documents and reports that have been published related to the future role of natural gas in Ontario. The proposed approach seeks to support the government’s policy to build affordable housing, maintain customer choice for homes and businesses and keep costs down.

Lastly, the ministry is seeking feedback on proposed legislative amendments that would provide the Minister of Energy with authority to issue directives, approved by Cabinet, requiring the OEB to accept certain cost allocation conditions in reviewing a leave to construct application for a natural gas transmission project. Similar to existing authority for the Minister of Energy to prescribe the ‘need’ for leave to construct for priority electricity transmission projects, this provision would allow the Minister to prescribe the cost allocation conditions in the ‘economic test’ for leave to construct for key natural gas transmission projects. If approved, the proposed approach would allow the government to preserve historical practice for specified gas transmission projects where new customers are not required to make contributions in aid of construction (CIACs) toward the project. On a time-limited basis, the Minister’s directive may also apply to a gas transmission project for which the OEB has already issued a leave to construct decision. The proposed approach seeks to ensure Ontario continues to attract new investments in sectors like greenhouses and electric vehicle and battery manufacturing.

The proposed legislative amendments and potential subsequent regulations in this posting would have no impacts on the environment. All relevant permits and approvals to ensure environmental, technical and safety requirements from Ontario ministries, authorities and municipalities would still need to be met before proceeding with construction of new customer connections or gas transmission projects.

Background

Currently, gas utilities use 40-years from the in-service date of the initial gas mains as a revenue horizon for residential and small commercial customers, which was determined by the OEB in 1998.

On December 21, 2023, the OEB issued its Phase 1 decision on Enbridge Gas Inc.’s 2024-2028 rate application. Enbridge Gas serves the majority of Ontario’s roughly 3.8 million natural gas customers. Phase 1 of the OEB’s regulatory hearings on the application dealt with the details necessary to set Enbridge Gas’ delivery rates effective January 1, 2024.

In its Phase 1 decision, the OEB determined that the revenue horizon (the period of time in which utility revenues from new customers are offset against the cost of the new connections to determine if a project is economic) would be reduced from 40-years to zero years. This would effectively require new residential and small commercial customers to bear the full upfront cost of gas connections effective January 1, 2025 and would apply throughout the four year rate-period up to December 31, 2028. Projects under the current phase of the Natural Gas Expansion Program are excluded from this requirement.

The OEB’s Phase 1 decision and order noted that “no developers intervened or filed evidence in the proceeding” despite the rationale being predicated on “understanding the consideration and circumstances facing developers.” The decision also noted that it was reached without an understanding of the impacts to the province’s electricity grid, as the province’s Independent Electricity System Operator was not invited to provide evidence on this issue.

On December 22, 2023, the Minister of Energy issued a statement that noted that OEB’s decision reducing the revenue horizon to zero means costs that are normally paid over 40-years would be owed in full upfront and could increase the cost of building new homes. The statement noted that legislative options would be considered, which if passed, are intended to protect future homebuyers and keep shovels in the ground.

On a related matter, the Electrification and Energy Transition Panel’s report was publicly released on January 19, 2024. The report included recommendations on how the government can implement reforms to support electrification and the energy transition while appropriately managing overall costs to consumers. The government is currently reviewing the report and considering the recommendations and advice on fundamental principles and approaches that should guide Ontario, as well as other key changes and additions to existing energy planning and governance frameworks.