Union Gas Files 2019 Federal Carbon Pricing Program Application

factsline logoOn Oct. 9, 2018, Union Gas filed its 2019 Federal Carbon Pricing Program application with the Ontario Energy Board (OEB) for rate changes effective Jan. 1, 2019 (EB-2018-0187). This application is for approval of rates to recover the costs associated with the federal Greenhouse Gas Pollution Pricing Act as a pass-through to customers, as well as for the approval of two new deferral accounts: the Federal Carbon–Customer Deferral Account and the Federal Carbon–Facility Deferral Account.

In accordance with the Greenhouse Gas Pollution Pricing Act, the federal government is expected to implement a carbon pricing system in Ontario effective Jan. 1, 2019. It is anticipated that, as a natural gas distribution company, Union Gas will have an obligation to bill and collect these federal charges from its customers. To meet this effective date, Union Gas has requested approval of interim rates for Jan. 1, 2019 implementation (found in the chart below). Differences between the interim and approved rates will be captured in deferral accounts to be cleared at a future date.

Proposed 2019 Federal Carbon Pricing Customer-Related Charge
(if applicable)
Proposed 2019 Federal Carbon Pricing Facility-Related Charge
3.9100 cents/m3 0.0025 cents/m3

The customer-related "federal carbon charge" (as applicable) will be a separate line item on the bill. Customers who have registered and received exemption certificates will not be charged the customer-related charge. The facility-related "facility carbon charge", which applies to all customers in each rate class, will be included in in-franchise delivery rates and ex-franchise transportation rates.

Federal Carbon Pricing System

The federal carbon pricing system, also known as the federal carbon pricing backstop, is a carbon emission pricing system comprised of two key elements:

  • A levy applied to fossil fuels, including natural gas; and
  • An output-based pricing system (OBPS) for facilities that generate carbon emissions above a certain threshold.

The carbon charge is expected to start at $20/tCO2e (3.91 cents/m3) in 2019, reaching $50/tCO2e (9.79 cents/m3) in 2022. All natural gas consumption will be subject to the carbon charge except natural gas consumption that qualifies for the OBPS.

The OBPS will apply to prescribed facilities that emit 50 ktCO2e or more per year (about 26 million cubic metres of natural gas, assuming natural gas is the only source of emissions) and for which an output-based standard is specified (mandatory participant). Union Gas expects that in the future the government may allow for prescribed facilities that emit between 10 and 50 ktCO2e per year (five million to 26 million cubic metres of natural gas emissions) and whose application for voluntary participation is approved (voluntary participant), to access the OBPS.

Facilities that are registered under the OBPS will be subject to a carbon price on the portion of their emissions that exceed an annual output-based emissions limit. Registration details are not yet available; however the federal government is expected to provide this information in October 2018 and the registration process is expected to open Nov. 1, 2018. Union Gas will require businesses to provide confirmation of the facilities that have been registered and received an exemption certificate in order to have federal carbon customer-related charges excluded from their bill no later than two weeks in advance of the first day of the month in which they wish to have their consumption volumes exempted. More details on this process will be communicated in late October/early November.

Confirmation that Ontario will be required to participate in the federal carbon pricing system is expected to be provided by the federal government in the coming weeks. For more information on the federal government carbon pricing program we recommend you visit this government site.

Full details of the Federal Carbon Pricing Program application (EB-2018-0187) can be found on the Union Gas website.

If you have any questions about this edition of Factsline, please contact Patrick Boyer.

Patrick Boyer (519) 436-5470   Cell (519) 436-4915   Email: pboyer@uniongas.com