Ontario’s energy regulator is blocking emission reductions
Coming off a federal election, which had a strong emissions reduction focus, and with just months to go before a global climate change summit in Glasgow, many Canadians are thinking hard about how to reduce their carbon footprints.
Some have taken to travelling on or in electric vehicles, e-bikes or e-scooters. Others have signed up for federal home energy deep retrofit subsidies. And a growing cohort of investors, from individuals tending an RSP to giant pension plans, are looking to shift their holdings away from fossil fuel companies and into renewable energy stocks.
Yet in Ontario, homeowners and building managers who want to reduce their reliance on natural gas for space and water heating are bumping up against an intransigent regulatory obstacle that receives virtually no political or media attention — and yet is placing an enormous drag on the province’s greenhouse gas reduction plans.
Last week, the Ontario Energy Board (OEB), which regulates Enbridge’s gas distribution monopoly, failed once again to approve a far-reaching conservation incentive plan that would provide millions of dollars for home energy retrofits, cut gas consumption and spur the take-up of green alternatives, ranging from geothermal systems to electric heat pumps. The OEB and Enbridge have been locked in a standoff over a new so-called “Demand Side Management” (DSM) plan for almost two years, not only in defiance of the Ontario government’s greenhouse gas reduction targets, but seemingly unaware of the accelerating climate crisis.
In the absence of a more ambitious conservation mandate for Enbridge, the company can continue to add potentially unnecessary capacity to its pipeline/distribution network — infrastructure that will deliver carbon to the atmosphere for years to come. “The regulator has been very unwilling to go the whole distance,” says Julia Langer, CEO of the Atmospheric Fund, which finances clean energy initiatives. “We’re sort of stuck in this very mediocre, unambitious conservation plan.”
For decades, the OEB has used a quid pro quo approach to natural gas regulation. It sets a gas rate that allows Enbridge’s shareholders to earn a reasonable return, while also funding conservation programs — such as incentives to upgrade to the sort of highefficiency furnaces that use less gas and produce fewer emissions.
This tradeoff produced a win-win result: it saved Ontario gas consumers, both individuals and companies, approximately $6.6 billion between 1997 and 2019, according to Pollution Probe, which has been participating in the protracted hearings about a new DSM.
The problem is that OEB-approved conservation incentives like rebates perpetuate the use of gas, which accounts for 28 per cent of provincial emissions and 40 per cent in the GTA. In the city of Toronto, natural gas for space and water heating represents the largest source of carbon.
Renewable energy experts want to see a new approach, known as “integrated resource planning,” that allows natural gas conservation incentives to finance nongas heating sources — geothermal systems, for example, or air-source heat pumps, which run on electricity.
Municipalities, meanwhile, want a new set of natural gas conservation policies that will enable them to meet their carbon targets. After all, many Ontario cities, including Toronto, have declared climate emergencies and stepped up their reduction plans. Yet, in this incredibly important area, they don’t have the policy tools to cut emissions generated by gas heating.
In a growing number of U.S. cities, municipal authorities have banned natural gas hookups in new buildings. In Quebec earlier this summer, HydroQuébec and Énergir, the provincial gas utility, teamed up to allow gas customers to tap into incentives that help them switch their gas furnaces to “dual-energy systems,” meaning that buildings can be heated with electricity most of the time, with natural gas being used only in very cold weather.
In Western Canada, the provincial agency Clean B.C. now provides a range of rebates for homeowners who want to switch away from natural gas — up to $4,000 to replace a gas furnace/water heater with electric heat pumps. Those options aren’t available in Ontario, and won’t be unless the OEB gets serious about bringing in a conservation program that doesn’t just serve the interests of the gas companies.
The regulatory holdup in Ontario is mystifying in its short-sightedness, and serves to undermine Canada’s net-zero targets. As Langer says, investments in new low/no gas heating equipment will “keep delivering emission reductions for five, 10, 20 years. If you don’t do it now, then you missed all of that opportunity. It’s like saving for retirement.”