Review of Ford Gov’t’s Gas Delivery System Expansion Legislation, Bill 32

With this legislation, the Ford gov’t is taking over one of the key functions of the OEB — overseeing gas system expansion.

The legislation can be found here:

Regulating gas system expansion necessarily involves tradeoffs between the interests of existing customers versus the interest of prospective customers beyond the fringe of existing gas delivery networks. The OEB has performed reasonably well in this role over many decades. Cross-subsidies between existing and new customers was permitted but kept to a dull roar. Expansion was orderly and carefully planned.

Politicizing gas system expansion will directly result in higher overall costs, but I believe the indirect costs could be greater than the direct costs.

This legislation is the equivalent of a notwithstanding clause hanging over the head of the OEB undermining its authority. While the legislation says that utilities will be insulated from the costs of uneconomic expansion, politics cuts both ways. A future government might grow concerned about rising gas delivery costs and simply order utilities to suck up the extra charges.

All this creates risk for utilities and customers.

The Wynne government had a program whereby taxpayers subsidized uneconomic gas expansion on a one-off $100 million basis. Wynne’s approach was bad policy. Why should taxpayers subsidize energy services? Compared to all of her government’s other energy policies, her gas expansion policy was the least harmful — contained costs and some benefits. Ford would have been far better off to simply continue her program.

Wynne’s approach to gas expansion looks temperate and well-considered compared to Ford’s approach.