Union Gas files Amalgamation Application and new ten year Rates Mechanism
On Nov. 2, 2017, Union Gas and Enbridge Gas Distribution applied to the Ontario Energy Board (OEB) for approval to amalgamate the two utilities beginning in 2019 and to defer rebasing of rates for ten years (EB-2017-0306). The proposed amalgamation will provide greater operating efficiencies, which in turn will provide a significant and sustainable benefit to ratepayers in Ontario. The amalgamation will also allow for greater strategic focus and capacity to face the challenges and opportunities in the Ontario energy sector.
The utilities are using an established long-term regulatory framework for Mergers, Acquisitions, Amalgamations and Divestitures (also known as MAADs), which gives utilities up to ten years to integrate and manage costs while providing benefits to customers including rates that are less than they otherwise would be in the absence of integration and continued outstanding safety, reliability and quality of service. A detailed analysis of potential efficiencies will be completed following, and subject to, an acceptable decision on our application from the OEB.
On Nov. 23, 2017, Union Gas and Enbridge Gas Distribution filed a proposed ten year rate setting mechanism which, if approved, will be used to determine the yearly rate charges for natural gas delivery services beginning Jan. 1, 2019, during the deferred rebasing period (EB-2017-0307).
Under the rate setting framework, customer delivery rates will be set at the beginning of each year (2019-2028) using a proposed price cap mechanism to allow for inflationary increases plus the pass-through of certain costs, plus the opportunity to earn the allowed Return on Equity to ensure continued investment in natural gas infrastructure in Ontario. This rate setting mechanism is similar to current Union Gas practice.
This harmonized regulatory framework will offer rate predictability for ten years, continued high standards of service and operational excellence, continued investments to meet customer needs, time to fully examine and implement potential efficiency opportunities and to recoup the significant investments that are needed to achieve them, and positions the integrated utility for future success. Integration of Union Gas and Enbridge Gas Distribution will deliver additional value to our customers and provide a platform to further grow our business.
The OEB will conduct public hearings on the applications and we anticipate decisions in mid-2018 for implementation beginning in 2019. The applications are available on our website.
If you have any questions about this issue of Enerline, please contact your account manager.