Ford government’s vow to override energy ruling could make housing even more expensive

The cost of housing could rise even further out of reach because of the Ontario government’s threat to overrule an Ontario Energy Board (OEB) decision that would stop Enbridge from passing on the cost of new gas infrastructure to existing customers, experts say.

The OEB ruling published on Dec. 21 found Enbridge “has not provided an adequate assessment” of the risk its infrastructure could lose value through the energy transition and ordered that new infrastructure to put gas in homes be paid for upfront by developers, rather than paid off over 40 years by existing customers through higher rates.

Enbridge applied for higher natural gas rates to cover its expansion plans, but the regulator has yet to decide what those rates should be. The company told Canada’s National Observer it is reviewing the OEB’s decision and is considering its next steps to challenge the order. That could include a “motion to review” at the regulator or an appeal to the courts.

The morning after the OEB’s decision, Ontario Energy Minister Todd Smith said he was “disappointed” because it would slow new home builds. Smith said his government “will not stand for this.”

“I will use all of my authorities as minister to pause the Ontario Energy Board’s decision,” he said in a statement. “At the earliest opportunity, our government will introduce legislation that, if passed, would reverse it, so that we protect future homebuyers and keep shovels in the ground.”

Smith did not provide any evidence to back his claims and did not return requests for comment.

Ontario opposition parties are challenging Smith’s assertion that the ruling will mean higher housing costs. If the energy board ruling is overturned and Enbridge gets its way, expensive fossil fuel infrastructure will be locked in, putting the public on the hook for risks those assets will lose value during the energy transition.

In an interview, Ontario Green Party Leader Mike Schreiner called the Ford government’s position “outrageous.”

“The OEB made a decision that's a win for consumers, a win for the economy, [and] a win for climate action,” he said. “We know there is a more affordable alternative in heat pumps that would enable affordable home construction, that will provide lower cost heating over the life cycle cost.”

The Ford government is attempting to “impose an expensive sprawl agenda,” which increases the cost of new homes by requiring new infrastructure be built, instead of developing existing areas with infrastructure already in place, Schreiner added. Making sure new homes are hooked on gas only compounds the problem, he said.

“I actually think the Ford government's sprawl agenda and subsidy of fossil gas is going to make the housing affordability crisis worse,” he said.

Schreiner said the Ontario government under Ford is not working in the public’s best interest.

“You saw it with the sole-sourced contract for Shoppers Drug Mart to distribute vaccines; you're seeing it with the sole-sourced contract for an Austrian-based mega spa to develop Ontario Place; you're now seeing it with the sole-sourced contract for Staples and Walmart to host Service Ontario locations; and you most pronouncedly saw it in a handful of land speculators being able to cash in $8.3 billion through the Greenbelt giveaway,” he said.

“What connects all these examples? Ford putting wealthy insiders ahead of everyday ordinary Ontarians.”

Municipalities should have more freedom to decide how to heat homes and buildings so that gas is not the “automatic” choice, said Ontario Liberal energy critic Ted Hsu in a statement to Canada’s National Observer.

“With climate change looming, it makes sense to think twice before committing to burning more natural gas,” he said. “Passing legislation to override an OEB decision, when the OEB has the mandate to protect consumers, only puts consumers at risk.”

There is a real risk of a utility death spiral, as previously reported by Canada’s National Observer. If Enbridge is allowed to stretch the cost of new gas infrastructure out over 40 years and customers ditch gas for cleaner and cheaper alternatives, even more money must be extracted from the shrinking customer base to cover the infrastructure costs. That creates a vicious cycle encouraging even more customers to leave.

“This government’s decision is short-sighted, an overreach on the independence of the OEB and has little to do with housing and more so with this government’s ignoring the long-term costs of increased reliance on burning natural gas,” Hsu said.

In a statement, the Ontario NDP said Ford’s government is “ignoring the best interests of consumers” and ignoring “evidence and expert analysis.”

“By overruling the OEB, the Ford Conservatives will unfairly shift costs and risks off of Enbridge and onto consumers,” the party said.

Kent Elson, a lawyer representing the non-profit Environmental Defence that is intervening in Enbridge's rate application, told Canada’s National Observer the OEB decision would improve housing affordability.

“It's such a good decision because they did something that is a win-win-win, which is very rare,” he said. “It's a win for affordability for new homebuyers, it's a win for existing energy customers, and it's a win for the environment.”

The OEB decision ended a subsidy that benefited developers, not homeowners, Elson said. By putting existing customers on the hook for new gas hook-ups, developers have ducked the costs altogether. That has helped the gas industry grow, even as the cost of clean alternatives like high-efficiency heat pumps has fallen.

That subsidy “drives a wedge” between homeowners and developers, he said. If developers don’t have to pay for the cost of new gas hook-ups, they put in gas lines, which pushes the cost of housing up for homeowners because gas-heated homes are more expensive than electrified homes.

Clear cost savings arise from not having to connect both gas and electricity, said Brendan Haley, a Carleton University research professor and policy director with Efficiency Canada. Avoiding fitting a house with gas infrastructure and connecting it to the gas grid by switching to electric heating and cooling means only one system, which is easier to install and more cost-effective.

“One of the biggest cost savings from not having a building use any gas is that the customer does not have to pay the fixed charges, which don’t change regardless of how much gas they consume,” he said.

In fact, in Policy Options last fall, Haley and Efficiency Canada research manager Kevin Lockhart outlined how cleaner homes could increase the supply of affordable housing.

“Early studies exploring the cost of building electrification show all-electric buildings constructed to net-zero energy-ready standards can be delivered for less than the average cost of similar code-minimum buildings,” they wrote. “These marginal costs can be expected to fall further as high-performance construction becomes the norm.”