Accolades for OEB’s regular regulation

The Ontario Energy Board (OEB) has issued a decision today on guidelines for funding the expansion of natural gas delivery. The ruling is extraordinary in adherence to sound regulatory principles – at least in light of the willful plundering that’s been allowed to fall on electricity consumers for years, and which I noted was continuing just two days ago.

Contrast the government’s spend/contract first, do the math never, electricity experience with:

This proceeding is a generic hearing convened by the Ontario Energy Board (OEB) to establish a framework within which natural gas service could be expanded to communities in the province of Ontario that are not currently served.

Despite the benefits of natural gas, there are still areas of the province that are not being served. In most cases, these are rural and/or remote communities where there are challenges to building out natural gas infrastructure (primarily pipelines) in an economic way. Although the costs of building the infrastructure can be high, so too can the benefits of having access to natural gas. Despite some of the high up-front costs, it appears that for many communities the economic benefits of having natural gas would greatly outweigh these costs. In spite of this, many of these communities are not being served under the existing framework. Clearly, there are barriers. The purpose of this proceeding is to assess what these barriers are, and to determine what steps, if any, can be taken to overcome them.

Under the existing framework, utilities are generally only permitted to expand to communities where the incremental revenues that will be generated from the expansion will, over time, cover the costs of the expansion. If the revenues do not recover the costs over time, an up-front payment in the form of a capital contribution will be required from new customers. This ensures that existing customers do not have to pay higher rates to subsidize the extension of natural gas service to new communities. This is known as the “benefits follow costs” principle, and has been used for many years in Ontario and other jurisdictions.

The OEB has determined that [a requirement to charge customers that are in the same rate class the same rate] is one of the primary barriers to expansion, and it will therefore allow utilities to charge “stand alone” rates to new expansion communities.

The other chief measure proposed to enable more expansions was a subsidy from existing customers. … The communities that receive the benefit will be the ones paying the costs.

Bravo.

I would hope the OEB would reflect on all the electricity sector spending they’ve allowed costs recouped on – along with profits – and ask what communities that spending benefited.

And which it did not.

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