OFA stands its ground on need for natural gas for rural Ontario

Tuesday, April 1, 2014

by JIM ALGIE

It's no joke: The price of natural gas for most Ontario consumers jumps, effective today, by as much as 40 per cent.

Both major distributors, Union Gas Limited and Enbridge Gas Distribution Inc. notified customers earlier this month of rate hikes approved by the Ontario Energy Board of 26 and 40 per cent, respectively. It follows heavy demand during what one gas distribution executive has called “the coldest winter in 25 years.”

Nothing about this winter or about rising energy costs convinces Ontario Federation of Agriculture President Mark Wales, however, to alter his pre-budget advice to Ontario Premier Kathleen Wynne. In a pre-budget submission, the federation maintains Wynne's government should make a big push to extend natural gas service in rural areas of the province.

This winter's tight fuel market only reinforces natural gas advantages when compared with oil, electricity and propane,” Wales said in an interview Monday. As many as 500,000 rural residents – farmers and non-farmers – have no natural gas option because their communities lack pipeline access.

“Natural gas is always cheaper than the other three” fuels, Wales said. He compared home heating costs with propane at double, oil at a premium of 50 percent and electricity at three times the cost of natural gas.

Livestock and greenhouse operators with heavy heating requirements are feeling the hit, said Wales, who has been hearing from them “big time.” Distributors blame rocketing prices on severe winter conditions and increased energy use.

A statement published on the Union Gas website says the approved rate increase reflects only “changes in the market price of natural gas and transportation services.” As a result, the company estimates residential customers in southern Ontario will see an annual increase in cost on average of about $200. In northern and eastern parts of the province, the effect of the increase will be slightly less, about $190 for Union Gas customers, the company said.

“The unusual weather pattern which is causing prices to rise is not expected to continue,” the Union Gas statement says. Gas remains plentiful and prices are forecast to remain low relative to other fuels “well into the next decade,” the company says.

Enbridge customers face similar increases. A statement quoting Enbridge Vice-President Malin Giridhar says full impact of the rate approved for April 1 will not likely be felt by most customers until next winter.

Meanwhile, the energy board will consider “steps to smooth costs for customers,” the Enbridge statement says.

Greenhouse growers with gas service and large fuel requirements have some ability to “pre-book gas into storage,” at fixed prices, Wales said. But demand beyond the contracted volume comes at a huge premium.

On the other hand, propane supplies have been costly and sketchy at times, Wales said.

“This winter the propane price rose 100 per cent or more and there were supply issues as well,” the Ontario Federation of Agriculture president said. “In some parts of Ontario there wasn't enough propane to go around,” he said of a commodity which sells at prices which, unlike natural gas, are not subject to Ontario Energy Board approval.

In some instances, propane suppliers were forced to ration fuel to customers, he said.

Wales spoke of instances where suppliers have borrowed propane from farm customers with large storage facilities in order to meet the needs of residential customers.

Ontario Environmental Commissioner Gord Miller has warned this winter's fuel pricing issues will “spill over to electricity prices,” as gas generators work their costs into future electrical supply bids. Wholesale electricity prices in January and February this year were higher than at any time in the past eight years, Miller said.

The environmental commissioner warned that relatively low natural gas prices which have prevailed in the past five years “may not last forever.”

Wales argues this winter only reinforces his organization's recommendation that Ontario taxpayers should support expanded natural gas distribution in rural areas. A pre-budget briefing to government describes rural extension of natural gas service as “the largest economic stimulation the provincial government can provide.” because of the savings it would generate. BF