On July 28, 2016, the Ontario Energy Board (OEB) released a decision providing some details about how
Ontario's gas utilities are to implement billing and provide
customer information when the Cap and Trade program comes into
effect on January 1, 2017. The key determination in the OEB's
decision is that the cap and trade costs will be passed on to gas
utility customers as part of their overall delivery charges, not as
a separate line item.
Residential, commercial and industrial customers (excluding
Large Final Emitters (LFEs), defined as emitting > 25,000 tonnes
CO2e per year) and natural gas generators
Facilities owned or operated by natural gas distributors
The gas utility "Compliance Plans" intended to achieve
their Cap and Trade obligations will include costs of:
Facility-related obligations for measures related to GHG
emissions from facilities owned or operated by the utilities
Customer-related obligations for measures related to GHG
emissions from natural gas-fired generators and residential,
commercial and industrial customers who are not LFEs or voluntary
Administration to meet compliance obligations
In a letter dated May 25, 2016, the
OEB provided parties with a Staff Discussion Paper
addressing proposals for the Cap and Trade Regulatory Framework for
the Natural Gas Utilities (see our previous
post). The OEB invited comments in response, and indicated that
there are two issues that require early determinations –
billing questions and customer outreach. The need for an early
decision on the billing requirements is because the gas utilities
require time to develop and implement billing system changes in
advance of the January 1, 2017 effective date for Cap and
The OEB's July 28, 2016 decision provides direction on
First, the OEB has determined that the facility and customer
related cap and trade costs will be recovered from all customers
except LFEs and voluntary participants, who are responsible for
managing their own compliance obligation. This recovery will be on
a volumetric basis (based on consumption). The gas utilities will
create rates for facility-related costs and customer-related costs,
which rates will be separately identified on the utility tariff
sheet. According to the OEB, this approach will allow customers to
"easily identify these costs" and it will
"facilitate tracking and updating as needed."
Second, the OEB has determined that the administrative costs
relating to the implementation and ongoing operation of the Cap and
Trade program will be allocated and recovered from all customers in
the same manner as existing administrative costs. It is not clear
how this will be done in the context of existing incentive
regulation plans for Enbridge Gas Distribution and Union Gas which
have already set and approved the level of recovery of the
utilities' operating and capital costs for 2017 and 2018.
Third, notwithstanding that the facility and customer related
cap and trade costs will have separate rates, the OEB had directed
that the charges related to the recovery of Cap and Trade program
costs will be included in the delivery charge on the bill. In other
words, there will be no separate identification of these costs (or
the underlying rates) on a customer's bill. As pointed out in a
news article about the OEB's
decision, this means that the cap and trade costs will be
subject to HST.
Finally, the OEB has indicated that it will provide utilities
with "key messages" to be included in customer
communications about the Cap and Trade program and related costs.
While the OEB will not require pre-approval of the utilities'
communications to customers, the OEB's decision indicates that
"[t]he OEB will expect the Utilities to provide their customer
communication materials to the OEB prior to any Cap and
Trade-related information being delivered to customers."
According to the OEB's decision, the balance of the
Regulatory Framework for Natural Gas Distributors' Cap and
Trade Compliance Plans will be finalized and issued in the fall of
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).