Utilities lambaste reported gas phase out plan in Ontario

Natural gas utilities have been quick to criticize a proposal by Queen’s Park to move the province away from using natural gas to heat homes.

By Gene Laverty for SNL Financial

The government of Ontario denied a newspaper report that it intends to phase out the use of natural gas for home heating, but that did not stop the two largest distributors of the fuel in Canada’s most-populous province from decrying the plan.

Ontario’s Minister of the Environment and Climate Change Glen Murray claimed that a report by The Globe and Mail that the government plans to phase out or severely curtail use of natural gas is not accurate. The newspaper said a leaked copy of the province’s C$7 billion Climate Change Action plan, set for release in June, recommends changes to the provincial building code that would mandate all new houses and small buildings would have to be heated by something other than fossil fuels by 2030.

“Natural gas will continue to play a critical role in the energy mix in Ontario in the future and beyond that. To be clear, we are not banning natural gas or forcing anyone off of it,” the ministry said in an email. “We will soon be making an announcement on all the initiatives and investments in our Climate Change Action Plan. We will be presenting a viable plan that will invest in our future and ensure we met our near and long term emissions reduction targets.”

Ontario has committed to aggressively lowering greenhouse gas emissions. In the past two years it has shut down the last of its coal-fired electricity generators and extended contracts with the operators of the nuclear plants that provide the bulk of its base load electricity. It has also invested heavily in renewable energy.

Natural gas utilities were quick to condemn the reported move away from the burning the fuel for home heating despite the government’s denial. Enbridge Inc.-owned Enbridge Gas Distribution Inc. said converting a home from natural gas heat to electricity would cost about C$4,500 and fuel costs would triple to about C$2,000 annually. About 76% of Ontario’s households use natural gas for heat, Enbridge said.

“While Enbridge supports a lower-carbon future, we believe that phasing out of natural gas for home heating is not a responsible solution,” the company said in a May 17 statement. “We believe that greening the natural gas grid is a more cost effective, resilient and responsible pathway to meet home energy needs. This is the approach of leading jurisdictions such as British Columbia, California and Germany.”

Spectra Energy Corp’s Union Gas Ltd. utility said forcing the use of electricity for heating will boost the cost of power generation and infrastructure.

“Natural gas is, by far, the most affordable energy,” Spectra said in a separate May 17 statement. “A low-carbon future can be achieved without affecting the economic health of consumers and businesses within the province. … Natural gas continues to be an essential partner for renewable energy, providing backup when the sun doesn’t shine, and the wind doesn’t blow.”

At the same time the government is considering phasing out the use of the fuel, it is also encouraging the Ontario Energy Board, or OEB, to extend gas service to parts of the province where it is unavailable, said Brady Yauch, an economist and executive director of the Consumer Policy Institute. Yauch is taking part in the OEB hearing to provide gas to more communities in the province.

“Part of me thinks the province is talking out of both sides of its mouth and it’s not clear if it’s thought through these policies very much,” Yauch said.

Natural gas has come under fire by environmental groups not only for emissions created when the fuel is burned, but for leaks of raw methane into the atmosphere. Ontario wants to stem all types of emissions, but natural gas will remain an important part of its energy future, Yauch said.

“Over the next decade or two, regardless of what the province wants, natural gas is going to play a huge role in our energy mix, whether it’s home heating or energy for electricity production,” Yauch said. “So we’re going to have to build out these assets for that and that could go on for 40 or 50 years. So if the province then allows this to be built out and then says, oh wait, no more natural gas, there’s going to be a huge base of stranded assets that someone’s going to have to deal with. Utilities don’t want to take that cost and put it to their shareholders.”

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