New customers, not current users, will pay for natural gas expansion, OEB decides


By Barb McKay

The Ontario Energy Board (OEB) has made its decision on how the expansion of natural gas service to rural and northern communities can best be achieved.

The OEB held public generic hearings back in the spring to determine a new regulatory structure for natural gas expansion projects. The concern was that the current structure may create barriers for communities who are not serviced because of the associated costs.

In announcing its decision, the OEB stated it had considered cost recovery solutions for rural and northern natural gas projects. Costs will not be subsidized by existing natural gas customers, the board reported. Rather, new customers will pay for expansions through a rate structure that reflects the cost. Natural gas utilities who wish to undertake expansion projects will need to apply to the OEB, as they have in the past, and must provide a long-term commitment to maintain stable rates (reflective of long-term costs) in order to receive approval.

The OEB’s decision creates a challenge for Union Gas, whose application to expand natural gas service to 29 communities, including the Municipality of Kincardine, was put on hold pending the findings of the generic hearing. Union Gas had planned to recoup some of its costs through a surcharge to existing customers.

“Upon initial review, we feel that the new framework will enable expansion of gas to a number of communities,” Union Gas spokesperson Andrea Stass said in an email to The Independent.“However, the costs to customers in those communities will be higher than under Union Gas’ proposal and the number of communities we can expand to may be limited.”

The municipalities of Kincardine,Arran-Elderslie and Township of Huron-Kinloss have partnered to bring natural gas to the region and selected Edmonton-based utility company EPCOR as their distributor. EPCOR plans to recover construction costs over time through user rates. As well, the municipalities plan to apply for a portion of the $230 million that the province has allocated to extend natural gas service to rural and northern communities. That money would go to users to assist with conversion costs.

“The Municipality of Kincardine and our partners in the natural gas project, Huron-Kinloss and ArranElderslie, are pleased that the OEB has made its decision on the generic hearing that the three mayors participated in last spring,” Kincardine Mayor Anne Eadie told The Independent on Friday. “We were very encouraged with some of the rulings and the new process laid out in the decision.At this point the three municipalities need to examine the decision of the OEB in more detail and Southern Bruce will have more to share with the public in the next week or two.”

In related news, EPCOR announced last week that it has acquired Natural Resource Gas Ltd. (NRG), a natural gas distributor that services residential, commercial and industrial customers in Oxford, Middlesex, Elgin and Norfolk counties. The transaction is subject to OEB approval.

“EPCOR’s acquisition of NRG is positive news for our Southern Bruce project,” Eadie said.“It demonstrates EPCOR’s commitment to be in the natural gas business in Ontario.”