OEB's own motion to consider the price paid by distributors and their customers for natural gas produced in Ontario

EB-2022-0094

The Ontario Energy Board (OEB) is initiating this proceeding on its own motion to consider the price paid by rate-regulated natural gas distributors (Distributors) for natural gas produced in Ontario. The price that Distributors currently pay Ontario producers for natural gas is ultimately passed on to their system gas customers through the OEB’s Quarterly Rate Adjustment Mechanism (QRAM) rate process.

Distributors procure natural gas on behalf of their system gas customers, largely on the open market from a variety of producers located outside of Ontario but also from producers that are located within Ontario. Most Ontario natural gas producers sell their gas directly to Distributors through gas purchase agreements. Under these agreements, Ontario’s largest distributor (Enbridge Gas Inc.) currently pays Ontario natural gas producers a forward Dawn Index price for natural gas. In the OEB’s recent consultation on Enbridge Gas’s gas supply plan (EB-2019-0137), the Ontario Petroleum Institute (OPI) argued that Enbridge Gas should instead be paying the Total Gas Supply Commodity Charge (TGSCC) in the Union South rate zone for gas produced in Ontario. The TGSCC is usually (though not always) a higher price than the forward Dawn Index price.

The OEB does not allow Distributors to earn a profit on the sale of natural gas to their system gas customers. Rather, Distributors must “pass through” the price they pay to buy natural gas to their system gas customers with no markup. The OEB does not currently directly fix or approve the price that Distributors pay for natural gas; however, through the QRAM the OEB does assess the reasonableness of Distributors’ gas supply costs when they seek to pass these costs on to their system gas customers. Any changes in the price paid by Distributors for natural gas, whether sourced within or outside of Ontario, can therefore affect the bills paid by their system gas customers.

This proceeding will focus solely on a consideration of the price for natural gas produced in Ontario, and will not consider the price for other sources of natural gas.

The OEB has prepared a draft issues list that identifies options as potential alternatives to the status quo, on which parties will be invited to comment in the early stages of the proceeding:

  1. Is it appropriate for the OEB to fix or approve price(s) (or pricing formula(s)) that a Distributor will be required to charge their system gas customers specifically for natural gas produced in Ontario and, if so, what should the price(s) (or pricing formula(s)) be?
  2. Alternately, is it appropriate for the OEB to provide direction on the principles it will consider when assessing whether the costs of natural gas produced in Ontario that a Distributor proposes to pass on to system gas customers through the QRAM are reasonable? If so, what should those principles and related filing requirements be?
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Rates
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Submit a letter of comment

You can submit a letter of comment that will be considered by the panel deciding the application. Unless the notice states otherwise, your letter of comment must be received by the OEB no later than 60 days after the publication or service date of the notice for the application. Your letter will be provided directly to the panel of Commissioners who will be deciding whether the application is approved. The panel will consider your comments in reaching their decision. The panel will only be able to consider comments which relate to issues which are within the authority of the OEB and relevant to the issues being considered by the panel.

More about commenting and privacy

More about commenting and privacy
All letters of comment sent to the OEB are placed on the public record. This means the letters can be seen at our offices and will be placed on our website. Before the letter of comment is placed on the public record, all personal (i.e. not business) contact information is removed, such as the individual's address, fax and phone numbers, and email address. The individual's name and the content of the letter will become part of the public record..

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Or mail the below address with the reference number EB-2022-0094

Ontario Energy Board
P.O. Box 2319
2300 Yonge Street, 27th Floor
Toronto ON M4P 1E4
Attn: Registrar