Kincardine mayor concerned Union Gas proposal will cause public confusion

Union Gas has announced it plans to bring affordable, safe and reliable natural gas to the communities of Kincardine, Tiverton, Inverhuron, Chesley, Paisley, Ripley, Lucknow and Point Clark.

The company has set up public meetings and put forward an application to the Ontario Energy Board (OEB), but its hearing has been suspended, pending a generic hearing in April.

This announcement by Union Gas is cause for concern, says Kincardine mayor Anne Eadie, since Kincardine, Huron-Kinloss and Arran-Elderslie just announced last fall that they have selected EPCOR Utilities Inc. of Edmonton, Alberta, to bring natural gas to the area.

"The three municipalities are sticking with our South Bruce natural gas initiative," said Eadie. "My concern is that people will get confused by this Union Gas proposal."

She said Union Gas, which was involved in the South Bruce project back in 2011-12, sent an application to the OEB to expand its service into this area, with costs covered partially by a surcharge on all existing and future natural gas customers. Since then, the OEB has suspended the Union Gas hearing and is holding a generic hearing in April to discuss regulatory charges pertaining to natural gas applications.

As for the generic hearing called by the OEB, Eadie said that is also cause for concern as it delays the South Bruce project timelines by several months. "We're hoping the OEB will make a decision by the fall and we can move forward."

She added that the three municipalities will be meeting to issue a press release that will help clarify things.

Meanwhile, Union Gas' promotional material states that its proposal is the ideal solution for the community because it offers a signfiicant reduction in energy costs over the long-term; supplies the eight Southern Bruce communities with affordable natural gas; does not rely on the Province of Ontario's $230-million funding commitment; and connects communities with an experienced natural gas provider, offering the lowest natural gas rates of any utility in Ontario.

When asked about this application to expand service to South Bruce, when Union Gas had no interest five years ago, the answer was that serving this area has always been a priority for the company.
 

"However, any utility looking to provide distribution service to a community must comply with OEB regulations," said Andrea Stass, manager, external communications and media relations, for Union Gas. "Under OEB regulations, the flexibility did not exist then, and does not exist today, for alternative ways for utilities to address large shortfalls between the cost of providing gas service to a community and the revenue such a project would generate. Large upfront financial contributions from new customers would be required and because of that, the project was not considered feasible."

She said that over the past three years of working with the provincial government and the OEB to advocate for alternative regulatory models, the OEB is now entertaining alternate proposals. 

"We simply did not have that option five years ago," said Stass. "While our specific proposal is on hold (and we were the only utility to submit one), this is so the OEB can conduct a generic hearing with participation from all interested parties, in order to determine the best approach to serve new communities.

"The OEB will be considering the elements of our proposal through this hearing process. We plan to actively participate and advocate for our proposal, which we believe to be the optimal one for communities. Ultimately, through this process, the OEB will decide on how new communities in Ontario will be served."

Stass said the Union Gas proposal includes three NEW elements that, when combined, will address the shortfall between the cost of the project and the revenue it will generate:

 

1. A temporary volume-based community expansion surcharge (23 cents per cubic metre of natural gas consumed or about $500 per year for a typical home) for up to 10 years to be paid by new and future gas customers in the new communities to be served. It’s important to note that taking into account this charge, residents could save $1,000 to $2,000 per year when compared to electricity, heating oil or propane.
2. Temporary municipal financial contributions, which will be equivalent to the property taxes that Union Gas will pay the municipality on the new pipelines for up to 10 years.
3. A reduction in the current OEB-approved minimum economic feasibility threshold required to proceed with a community expansion project. This translates to an additional cost for all Union Gas customers, of up to $2 per month for a typical existing residential customer.

As to OEB regulations, Stass said they have not changed. Any utility seeking to serve a community today, would need to obtain funding to close the gap between the cost of the project and the revenue it generates. That could be through customer contributions, government grants, etc.

"The upcoming hearing will consider proposals to amend the regulations, allowing for more flexible models to serve communities where the costs significantly exceed the revenue," she said. "Our proposal balances three elements (contributions from new customers, municipalities and existing customers) which will close the gap. It’s important to note that this proposal does not rely on government funding."

Regarding the OEB's generic hearing, Stass said Union Gas was the only utility to submit a proposal, and while it is on hold, the OEB has indicated it will consider the elements of that proposal through the hearing process.

"We plan to actively participate in the hearing and to advocate for the best solution for Ontario communities," said Stass. "We are presenting this to the public as we feel it’s in the people's best interest to learn about other alternatives available that would be more cost-effective and would not rely on government funding.

 

"Furthermore, customers served by Union Gas would benefit from the company’s long-standing record of safe and reliable natural gas service. Union Gas has more than 100 years of experience in building, maintaining and operating natural gas infrastructure in Ontario; a proven track record of superior customer service; and the lowest natural gas rates in Ontario."