In a letter issued in January 2016, the Ontario
Energy Board initiated a generic proceeding to consider possible
alternative ratemaking frameworks to all gas distributors
(including new entrants) who wish to provide gas distribution
service to unserved communities. As seen in a Procedural Order issued on February 10, 2016,
the generic proceeding will allow the OEB to establish a common
framework for all distributors, and will provide guidance to new
entrants that wish to provide gas distribution services in
communities across Ontario.
In earlier posts (here and here), we discussed inducements and
invitations from the Ontario Government and the OEB that were
expected to spur interest in the expansion of natural gas
distribution service to unserved communities in Ontario. We also
discussed the reaction of interested parties, including the July
2015 Application by Union Gas to the OEB for
approval of a proposed "Community Expansion Program" and
the announcement that Kincardine, Arran-Elderslie
and Huron-Kinloss have reached agreement with a new entrant (Epcor
Utilities) to provide natural gas distribution service to their
The Union Gas "Community Expansion Program"
application attracted broad interest from a wide variety of
stakeholders. It quickly became apparent that other parties wished
to present evidence and potentially receive OEB direction about the
appropriate funding mechanisms for their own community expansion
projects. For example, Epcor Utilities filed letters indicating plans to file evidence that
would focus on why it is appropriate to create equal opportunities
for new and existing utilities to provide natural gas service to
Following a "Pre-Hearing Day" in the Union Gas
application, where parties presented information about the evidence
they planned to file, the OEB determined that the issues at play
were common to all gas distributors and new entrants. This prompted
the OEB to suspend the hearing of the Union Gas application and
convene a generic proceeding. As set out in the Board's January
2016 letter, the key issues that the OEB plans to
address in the generic hearing are:
Should the OEB implement new ratemaking mechanisms, including
changes to current economic tests, to encourage utilities to expand
natural gas distribution service to new communities? If so, what
should these new mechanisms be?
Should the OEB consider imposing conditions or making other
changes to Municipal Franchise Agreements and Certificates of
Public Convenience and Necessity to reduce barriers to natural gas
Does the OEB have the authority to require the ratepayers of
one utility to subsidize the costs of another utility to expand
into new communities? If so, under what circumstances (if any)
would this be appropriate?
A more detailed Issues List for the generic proceeding has
also been published, addressing the specific questions that the OEB
plans to address.
As set out in the Procedural Order issued on February 10, 2016,
the generic proceeding will move ahead quickly. Evidence must be
filed by early March, with a short written discovery process to
follow. The OEB plans an oral hearing starting on April 18,
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