In the final days of 2023, the Ontario Energy Board released a decision that is good for the climate and reduces energy costs for existing gas users and new home buyers. Some 15 hours later, the Government of Ontario threatened to pass legislation that would reverse that decision. This would be a gross misuse of power and would interfere with the independence of one of our more important regulatory bodies. It would also drive up the costs of home heating, worsening affordability.
The OEB is Ontario’s independent regulator of the electricity and natural gas sectors. It is charged with monitoring how energy companies operate to make sure that the best interests of the public are served. One of the ways it does this is to set the rates that utilities, such as Enbridge, can charge.
Enbridge had applied for a subsidy to cover the cost of the installation of gas lines in new residential developments. To pay for this expense, Enbridge applied to the OEB for permission to increase its energy rates, which would, in turn, increase gas bills. The OEB declined the request citing the reduced probability that existing customers and new homeowners would continue to use gas in the long term given that heat pumps have become cheaper and increasingly popular. The OEB referred to the fact that heat pumps are now cheaper for home heating than gas furnaces.
In the past, gas was the cheapest way to heat a home. However, in the last ten years, heat pumps have dropped dramatically in price and are now cheaper than gas furnaces over the life of the product. In fact, heat pumps are now up to 300 per cent more efficient than gas furnaces, meaning they use three times less energy to produce the same amount of heat. They also work well in temperatures down to -30 °C.
Citing this evidence, the OEB ruled that developers could pay for the cost of new gas lines themselves, rather than having those costs paid for by the Enbridge subsidy, and hence all gas users. Another alternative being the developers could install heat pumps, which would save homeowners money on energy, given the lower operating costs of heat pumps compared to gas furnaces.
As we wrote in a letter to Ontario Energy Minister Smith, ending the subsidy would not increase the costs of new homes, but in fact it would be a win for new homeowners, a win for the environment, and a win for affordability for existing gas users.
Overruling the OEB’s decision would set a bad precedent for Ontario. The government’s own Electrification and Energy Transition Panel recommends that the OEB take steps to ensure that decisions regarding electrification and energy transition are made in the customer’s best interest. The Ontario government should support, not fight, the OEB in implementing actions in line with growing the clean energy economy, especially those that increase affordability.