SUMMARY

OHBA has been closely following the Ontario Minister of Energy’s commitment to reverse an Ontario Energy Board (OEB) decision in late December 2023 that denied Enbridge’s amortization of natural gas connection costs.

The OEB’s decision would have had the effect of front-ending the entire cost of the natural gas servicing connection on the construction of any new homes connected to natural gas utility. This is estimated to add several thousands of dollars in additional costs to the construction costs of a new home.

Minister of Energy Todd Smith committed to introducing legislation to reverse the decision, citing that the decision would lead to increased costs and reduced choice for consumers.

BACKGROUND

On December 21st, the OEB released a decision that Enbridge could no longer amortize natural gas connection costs for new customers over a 40-year period and would have to charge the complete costs upfront (estimated by the OEB at roughly $4,400 per new home).

The OEB’s position is that Enbridge’s long-term plan is unreasonable because it assumes that every new housing development will include gas servicing and that homebuyers will remain on gas for 40 years, with OEB citing an energy transition toward electrification in new home construction.

"The OEB is not satisfied that Enbridge Gas's proposal will not lead to an overbuilt, underutilized gas system in the face of the energy transition," much of the board wrote.

The OEB stated the connection cost should be paid upfront by home developers to address that risk and incentivize developers "to choose the most cost-effective, energy-efficient choice." Per the OEB: “Consumers would benefit if developers chose to forego that up-front cost and opted against gas lines.”

The decision also noted that “connection costs have escalated sharply for Enbridge Gas in recent years due to rising construction costs and additional costs related to municipal permit and restoration requirements.”

The final decision was two to one, with the dissenting commissioner arguing that a 20-year horizon would be appropriate for amortizing gas connection costs for Enbridge’s customers.

MINISTER’S RESPONSE

Minister Todd Smith Released the following statement on December 22nd, 2023.

“Our government was elected with a mandate to rebuild Ontario’s economy as we keep costs down for people and businesses and build the homes our growing province needs.

“I am extremely disappointed in yesterday’s split decision by the Ontario Energy Board to reduce the amortization period for the cost of installing new natural gas connections for homes. This decision, which would mean costs that are normally paid over 40 years would be owed in full upfront, could lead to tens of thousands of dollars added to the cost of building new homes.

“At a time when Ontario, like the rest of Canada, is already dealing with the difficult headwinds of high-interest rates and inflationary pressures, the Ontario Energy Board’s decisions would slow or halt the construction of new homes, including affordable housing. We will not stand for this.

“In response, I will use all of my authorities as Minister to pause the Ontario Energy Board’s decision. At the earliest opportunity, our government will introduce legislation that, if passed, would reverse it, so that we protect future homebuyers and keep shovels in the ground.” [Emphasis added].

The Legislature is in recess till February 20th – so the earliest any legislation can be introduced would be on or after this date.

Some notable points that Minister Smith highlighted during his press conference:

“We’re still doing the math on how many thousands of dollars it could be. More than half of the delegations I’ve had as minister of energy over the last two years are from municipalities that want new natural gas in their communities; they want that expansion program expanded again.”

“We’ve been trying to take a pragmatic approach to the energy transition and not heaping tons of new costs on new homes, making sure that life is affordable for people, particularly for those looking to buy a home for the first time.”

There have been no further statements from the Ministry on the announcement to overturn the decision. Due to the sensitive precedent of overruling an independent regulator’s decision, the Minister has not speculated on precisely what the government will bring forward regarding legislation.

NEXT STEPS FOR OHBA

• OHBA will be sending official correspondence to the Minister of Energy and the Premier communicating OHBA’s support for the government’s move to ensure housing affordability by reversing this decision AND encourage local HBA’s to send letters as well, reinforcing the OHBA position. We will provide a sample form letter to ease of reference.
• OHBA will continue to engage directly with the Ministry of Energy and the Ontario Government to reinforce the sector’s position and seek clarity regarding the legislative vehicle that the government introduces to reverse the decision, as well as the anticipated timeline.
• OHBA will coordinate efforts with our industry partner, Enbridge Gas, on any efforts we may mutually agree are in the best interest of OHBA members to ensure this decision is rescinded.

RESOURCES

OEB Decision Backgrounder December 21, 2023

https://www.oeb.ca/sites/default/files/backgrounder-EGI-EB-2022-0200-20231221-en.pdf

OEB Decision and Order

https://www.rds.oeb.ca/CMWebDrawer/Record/827754/File/document

Minister’s Statement

Ontario Government Standing Up for Families and Businesses | Ontario Newsroom