Ontario Energy Board Fossil Fuel Removal for New Developments

A critical development concerning the Ontario Energy Board's (OEB) decision to eliminate fossil fuel subsidies for fossil fuel infrastructure in new developments was discussed. Kent Elson, representing Elson Advocacy, and supports Environmental Defense with OEB discussions shed light on the OEB's ruling, Minister Smith's response, and the significance of this issue for Ontario municipalities.

The OEB made a landmark decision on December 21st, 2023, with far-reaching implications for both decarbonization efforts and energy cost reductions in Ontario. This decision addresses a little-known fossil fuel subsidy, funded by all Enbridge customers, aimed at expanding fossil fuel infrastructure into new developments. It's essential to note that the OEB is primarily a consumer protection organization rather than an environmental body. The OEB decision to remove the fossil fuel subsidy came after extensive consultations through a robust multi-stakeholder process.

The crux of the OEB's decision is to terminate the subsidy for constructing methane gas pipelines in new building construction, effective in 2025. Previously, this subsidy amounted to an average of approximately $4,500 per home for developers. The OEB's rationale for ending the subsidy is twofold: it is detrimental to both existing gas customers, who bear the cost through higher energy bills (an annual burden exceeding $250 million), and new homebuyers, as it incentivizes the installation of expensive fossil fuel equipment. Consequently, this subsidy results in higher energy bills for both groups and encourages continued fossil fuel use. Its elimination promises to benefit existing gas customers, new homebuyers, and the environment by reducing carbon emissions.

Presently, developers lack the proper financial incentives to prioritize electrification for building heating. They don't bear the costs associated with expanding fossil fuel infrastructure; these costs are borne by the rate base. This approach risks creating stranded assets, as it can take up to 60 years to recoup the expenses of fossil fuel infrastructure. Additionally, there has been misinformation regarding the affordability of heat pumps, leading the Competition Bureau to investigate Enbridge's claims about fossil fuels being the cheaper heating option.

The Ontario government's response to the OEB decision was unprecedented. The morning after the ruling, they announced their intention to overturn it through legislation. This has sparked significant backlash, both in terms of rate base costs and concerns about the independence of the OEB's decision-making process.

Enbridge may have reached out to your municipalities seeking support to lobby against the OEB decision. However, it's crucial to emphasize that the OEB's decision is beneficial on multiple fronts: it reduces costs for existing gas customers by over $1 billion in four years, and it encourages the consideration of heat pump installations for new homebuyers, resulting in energy savings and a transition away from fossil fuels. The OEB ruling applies to both greenfield and infill developments.

A draft resolution/motion and background report has been created for Ontario Climate Caucus (OCC) members to use in advancing this important conversation within their municipal councils.

Is there any updates regarding incentives for incentivize new developments to advance electric heating options, similar to the Greener Homes program but tailored for new developments. This decision does help to level the playing field between how fossil fuel and electricity infrastructure is costed out and in that way help increase consideration of cost effective building heating via air source, or ground source heat pumps or other lower carbon options. But yes there would be benefit to advancing the electrification of building heating at the cheapest time to do so - the time of construction. Thereby reducing future costly retrofits.

Gaby Kalapos from Clean Air Partnership (gkalapos@cleanairpartnership.org) or Adrian Currie from Environmental Defense (acurrie@environmentaldefence.ca) are available to do deputation on this topic as they are advanced across Ontario municipal councils.