December 9, 1997

Pollution Probe Appeals to Cabinet to head off gas companies' $35 million rip-off attempt

(Toronto, ON) Hundreds of thousands of Ontario natural gas customers stand to be charged 40% more to rent the safe water heaters that are already in their basements, if an Ontario Energy Board (OEB) decision is allowed to stand, Pollution Probe warned today.

Pollution Probe today filed a formal Cabinet Appeal of an OEB decision that would grease the skids for approval of a water heater money-grab which would increase air pollution.

A study for the gas companies conducted by CIBC Wood Gundy Securities Ltd. found consumers would be paying an average of $39.59 a year more than they are currently paying. This amounts to $34.6 million a year in extra cost - for no extra value - for 875 000 gas consumers in Southwestern Ontario, Northern Ontario as far south as Orillia, and along the St. Lawrence River from Cobourg to Cornwall except Kingston and Brockville.

"If Centra and Union get their way on this value-less price hike, you can bet that Toronto is next," said Ken Ogilvie, executive director of Pollution Probe.

"To add insult to injury, Centra and Union are asking the OEB to allow them to charge all of their customers - whether or not they rent gas water heaters - the total cost of de-regulating water heaters," Mr. Ogilvie said. This amounts to $11.8 million for the gas companies' customers, or about $10 each for the companies' 1 000 000 residential customers.

"This deregulation proposal looks like a real stinker for air quality. Cabinet should instruct the Energy Board to consider the additional air toxics and global warming pollution this change would cause," said Mr. Ogilvie. The negative environmental aspects of the gas companies' proposal are two-fold:

Raising the price of gas water heaters will prompt some consumers to switch to electric water heaters, or not to switch from electric to gas water heating. Per unit of hot water, electric water heating causes three times as much carbon dioxide (global warming) pollution. Because additional electricity demand is provided by coal-fired generators, air toxics such as mercury, lead, cadmium, chromium and arsenic are emitted which otherwise would not be
• OEB requirements that the gas companies promote energy efficiency will be hampered. More efficient gas water heaters have been a major area of energy efficiency in the past, but if they are deregulated, the gas companies will have a new disincentive to promoting their use. This will reduce gains in carbon dioxide emissions that would otherwise be won.

The OEB ruled Nov. 28 that the de-regulation request by Union Gas and Centra Gas would be subject only to a narrow test. Under this narrow test, if the proposal constitutes "fair market value" or would not hurt consumers, it would be approved. In other words, if the proposal hurts consumers, but is at fair market price, it would have to be approved under the narrow test the OEB intends to apply. No other factors would be considered.

Pollution Probe is asking Cabinet to invoke its powers under the OEB Act to instruct the Energy Board to analyze the gas companies' proposal under a broader "public interest" test. This test would include the environmental aspects affecting global warming gas emissions, and toxic air pollution.

Centra and Union estimate that more than 90% of their gas customers who use gas water heaters rent them from the gas companies.

If Centra and Union get their way, they'll be enjoying an unregulated near-monopoly. Centra and Union are asking the Harris government to enrich them at the expense of consumers with the stroke of a pen.

"When people rented these hot water heaters from the gas companies, I don't think this is the sort of bath they had in mind," Mr. Ogilvie said.

For more information, please contact:

Ken Ogilvie
Pollution Probe
(416) 926-1907

Jack Gibbons
CIELAP
(416) 923-3529