Yahoo Finance Enbridge CEO has 'no fear' amid Ontario clash over who pays for home gas lines
The CEO of North America's largest natural gas utility doesn’t see the Ontario independent energy watchdog’s plan to force housing developers to pay for new home gas connections inspiring more climate-based challenges in other parts of its vast pipeline network.
Enbridge (ENB.TO)(ENB) held its annual investor day in New York on Wednesday. The Calgary-based company raised its short-term profit forecast, touting strong demand for its “integrated infrastructure super systems” for “delivery of energy in a planet-friendly way.”
Enbridge has placed a massive bet on a long-term role for natural gas in the energy transition of Canada and the United States. Last September, it announced a blockbuster deal to acquire three utilities in the U.S. from Dominion Energy (D) for $14 billion including debt. In Ontario, Enbridge Gas says it distributes natural gas to 3.9 million homes and businesses.
Last December, the Ontario Energy Board (OEB), the province’s independent energy regulator, told Enbridge that housing developers should pay upfront in full for new gas connections starting in 2025. Currently, homeowners foot the cost over about 40 years, through their monthly utility bills.
The OEB says the shift incentivizes builders “to choose the most cost-effective, energy-efficient choice.” The decision is also designed to address “stranded asset risk,” should Enbridge’s vast network of natural gas infrastructure in the province lose value amid a transition to cleaner fuels.
“In Ontario, I have no fear about stranded assets,” Enbridge CEO Greg Ebel told reporters on Wednesday. “We’re in 43 states, eight provinces, and five countries. I don’t think there’s a jurisdiction where policymakers aren’t thinking 20, 30, 40 years [ahead]. They know darn well that conventional fuels are going to be needed for all of that amount of time.”
Enbridge has filed a notice of appeal in Ontario’s Divisional Court asking the court to set aside key parts of OEB ruling.
Earlier this month, Ontario Energy Minister Todd Smith tabled legislation that would effectively reverse the OEB’s December decision. He has warned an upfront charge for natural gas connections could increase the cost of new homes by “tens of thousands of dollars,” particularly in rural areas, while limiting customer heating choices for consumers.
Enbridge has pegged the cost of connecting new homes at about $4,400.
Chris Neme, principal and co-founder of consulting firm Energy Futures Group, was among the experts who testified on the matter before the OEB. He says builders are currently incentivized to connect new homes to the natural gas grid, when other heating and cooling options require electricity only.
“If you are a builder building a new house or a new subdivision of houses, you are going to connect every single one of those houses to the electric grid. That is pretty much a given. You have a choice then of whether you are going to put a gas furnace with a central air conditioner into that home for heating and cooling purposes, or whether you will have a cold-climate air-source heat pump into that home for heating and cooling purposes,” Neme said in testimony to the OEB included in its 147-page decision.
“If you offer a subsidy from existing gas ratepayers for some period of time to facilitate that gas connection, or to reduce the cost to the builder of making the gas connection, you have distorted the decision from an overall societal economics perspective,” he added.
Enbridge is confident Canada’s most populous province will rely on natural gas for decades.
Last month, its president of gas distribution and storage said: “Ontario is not going to meet its economic growth aspirations without the flexibility and affordability of natural gas.” She says that includes its goal of building at least 1.5 million homes by 2031.
Ebel expects the clash in Ontario over who pays to connect gas lines to new homes won’t inspire similar challenges in other parts of the company’s growing North American service map.
“The government of Ontario, and ultimately, I think the regulatory, and more importantly the macroeconomic structure sets up natural gas there for a really long time,” he said at Wednesday's investor day.
“The pace of energy transition has been really consistent for many, many years,” Ebel added. “It seems the consensus is increasingly coming towards, and being aligned with, our view that we’ve held for a long time.”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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