CAN: The Keeping Energy Costs Down Act explained

The Government of Ontario aims to make life more affordable for Ontario families and deliver policies that intend to help power the province's growing economy. As Ontario's population continues to grow the proposed Keeping Energy Costs Down Act, of 2024 would ensure that the province can build new homes and that all Ontario families and businesses can continue to access reliable and affordable energy when it is needed. OVGV explains what's going on.

Keeping down housing costs
In December 2023, the Ontario Energy Board (OEB) issued a split decision that would increase the upfront cost to consumers of installing natural gas connections for new homes and small businesses. During the review process, the OEB made the decision that for small-volume customer connections, such as homes and small farms and businesses, the revenue horizon over which gas utilities use to calculate the upfront cost of new connections for customers would be reduced from forty years to zero, effective January 1, 2025. As a result, new customers would have to pay 100 percent of the cost to connect up front, costs that would have otherwise been paid over forty years. This change could increase the cost of new homes in the province by tens of thousands of dollars, particularly in rural areas, and would limit customer heating choices in Ontario.

The proposed legislation would give the government time-limited authority to set the revenue horizon for residential, small commercial, and small farm customers – effectively reversing the OEB's December 2023 decision. If passed, the government intends to immediately introduce regulations to reset the revenue horizon for natural gas connection costs to 40 years. Once the government introduces a Natural Gas Policy Statement, a recommendation of the Electrification and Energy Transition Panel's final report, it intends through regulation to require the OEB to consider this issue again.

After the time-limited authority expires, the exclusive jurisdiction to determine a revenue horizon will be returned to the OEB.

Improving Public Participation in Regulatory Processes
Through the Keeping Energy Costs Down Act, the government is seeking to support fair and inclusive decision making at the OEB to foster affordable communities. The OEB's December 2023 decision demonstrated opportunities for improvement. For example, a dissenting opinion in the decision noted that reducing the revenue horizon to zero was reached without an understanding of the impacts to the province's electricity grid, as the province's Independent Electricity System Operator was not invited to provide evidence. The dissenting opinion also noted that certain impacted sectors were not invited to participate or provide evidence.

To ensure that future decisions made by the OEB consider a wider range of affected parties and government policy priorities, the proposed act would require the OEB to conduct broader engagement and provide the Minister of Energy with the authority to ask for a separate hearing on any matter of public interest that could arise during an OEB proceeding. This would include both transferring an issue from an ongoing OEB proceeding to its own generic hearing and directing a hearing for a matter not currently before the OEB under certain circumstances.

If passed, the government may subsequently propose regulations to require the OEB to notify and invite participation or testimony from specific stakeholders or economic sectors (for example transit, low-income service providers, construction, housing, or government agencies) that could be significantly impacted by an upcoming decision or hearing.

With the proposed legislation, the government would also ensure new customers do not have to incur upfront contributions toward the construction of certain gas transmission projects that are critical to the province's economic growth. This would preserve the historical treatment of these transmission projects that provide broad energy system benefits and serve many customers in different areas. Preserving this treatment will help ensure that the province can continue to attract critical investments in sectors like greenhouses and automotive in southwestern Ontario.

Leave to Construct Changes
The OEB reviews Leave to Construct (LTC) applications for electricity line and pipeline projects and will grant approval to carry out the work if it determines that it is in the public interest to do so. LTC approval is not required for all pipeline projects, only those that exceed certain thresholds such as cost and length of the pipeline. Proponents in Ontario that want to construct a pipeline must currently get an LTC order from the OEB if the estimated cost of the project will be $2 million or above.

Municipalities and municipal and agricultural organizations have raised concerns that the $2 million threshold for small pipeline projects, first set in regulation in 2003, has not been updated to reflect inflation and increased construction costs.

Under the proposed legislation, the process would be streamlined by allowing the government to prescribe conditions through regulation to exempt certain energy projects from requiring LTC. These changes would allow for regulations to exempt small pipelines projects that cost between $2 million and $10 million from LTC, provided, where triggered, the Crown has adequately discharged its duty to consult obligations with Indigenous communities.

For all projects, whether there is an LTC proceeding or not, proponents will require authorizations from Ontario ministries, authorities and municipalities including permits and other approvals relating to technical, safety and environmental requirements needed to support the construction of the pipeline.

These changes are expected to improve the timelines for pipeline construction and expansion that would help build housing and transit faster.