In the Air - HRAI Industry News

HRAI members concerned about the advent and growth of Enbridge Sustain can breathe just a little easier thanks to the work of HRAI at the Ontario Energy Board (OEB) over the past several months. 

Even members not directly affected by Sustain have been paying attention to the emergence of this new player, because it has stirred memories of previous utility incursions into the HVAC marketplace – most notably in the form of water heater rentals, appliance sales, financing and service programs, which proliferated in the 1970s, 1980s and 1990s. These programs were underwritten by significant ratepayer subsidies and were able to grow into massive enterprises thanks to various forms of support that the utility was able to provide.  Thanks to the diligent work of the HVAC Coalition, supported by HRAI and various other industry groups and allies, these businesses were eventually driven out of the utility by order of the OEB, but not without having taken a major toll on the industry. 

Guided by a strong group of volunteer members – the “Utility Action Committee” -- HRAI first made the OEB aware of its concerns about the new utility business earlier this year and, while progress has been slow, there have been some major gains. 

Action at the OEB 

As previously reported, HRAI applied to the OEB for intervenor status in the Enbridge Rate Proceeding (Phase 2), EB-2024-0111, with the goal of probing the utility on how (and why) it is operating Sustain inside the regulated utility. 

On May 30, the OEB gave HRAI intervenor status (including eligibility for cost recovery), and ruled that the matter of subsidies to Enbridge Sustain would be included in the issues list during this proceeding.  The only disappointment in this decision was that the OEB chose to define the issue very narrowly to the singular question of whether there is evidence of a financial ratepayer subsidy occurring between the utility and this new unregulated business.   

Over the summer, Enbridge filed evidence (much of it redacted) about the new business and HRAI, along with other intervenors, filed “interrogatories” to dig deeper into this evidence. A quick review of Enbridge’s evidence, however, made it clear that: 

1. the utility has very ambitious plans for growing this business (including an expectation of significant market share within 10 years); and 

2. one of the key underlying drivers for Sustain is to promote hybrid solutions in the residential retrofit market (80% of their planned business growth) with the intent to retain those customers as natural gas customers.  

It has been much more difficult, however, to gauge from the evidence whether a financial subsidy is or has been occurring.  The information was simply not granular enough to lead to that conclusion.   

Settlement Agreement 

In late September, while still in the “pre-hearing” phase, HRAI and Enbridge (and other intervenors) entered intensive discussions about a “settlement agreement” that would take the issue of Sustain out of the hearing (along with other issues). 

On October 12th HRAI and Enbridge agreed in principle to settlement terms.  Over the following two weeks, this settlement agreement was hammered out and was released last week (November 4th) for OEB approval.  

Considering the options, the Utility Action Committee concluded the benefits extracted in the settlement agreement outweighed what might have been accomplished in the hearing.  Due to the narrow scoping of the issue noted above, there was a real possibility that the OEB might decide there was insufficient evidence of a financial subsidy, and the whole issue might have been dismissed.  

Under the agreement [click HERE to access], HRAI and Enbridge agreed to the following terms: 

• Enbridge Gas agreed to make available certain, previously confidential, information to HRAI representatives on the Utility Action Committee, with some conditions. 

• Commencing January 1, 2024, base utility rates will be reduced by $1 million annually as an initial estimate of the amounts to be received by Enbridge Gas from Enbridge Sustain for services provided. 

• A new “asymmetrical Enbridge Sustain Affiliate Recoveries Variance Account” will be created, into which Enbridge Gas will credit any additional amounts above $1 million paid or payable by Enbridge Sustain to Enbridge Gas for goods or services provided in each year.  For each annual Deferral Account Clearance Application, Enbridge Gas will file: (i) financial information relating to the business of Enbridge Sustain to provide context for the OEB to assess the affiliate transactions information provided; and (ii) a detailed list of all of the resources of Enbridge Gas that are used by Enbridge Sustain, all of the resources of Enbridge Sustain that are used by the utility, and all of the resources of any person that are shared between the utility and Enbridge Sustain, including an explanation of the cost allocation methodology for each.  

• Enbridge Gas confirmed that its customer service representatives do not and will not refer any inquiries relating to home heating and cooling, geothermal, electric vehicle charging (EV) and solar received by the utility (including in the call centre) to Enbridge Sustain.  

• Enbridge Gas will ensure that, from and after January 1, 2025, its utility website will have no direct or indirect links to Enbridge Sustain.  

• Enbridge Gas confirmed that Enbridge Sustain charges will not be billed on the same bill as gas commodity and/or delivery charges. This includes both billing on the utility bill and any Enbridge Sustain bill – no shared arrangement. 

• Enbridge Gas agreed that any utility customer information sharing authorized by a residential customer under the Enbridge Sustain contract will be done through the Provincial “Green Button” program only (or any successor or replacement program) in a manner that would also be available to any other HVAC contractor that provides appropriate customer authorization. 

• Enbridge Gas agreed that it will take reasonable steps in the next two years to study whether customers are confused between the utility and the competitive Enbridge Sustain affiliate, and what steps, if any, are appropriate to minimize or eliminate that confusion. The results will be reported to the OEB and the Parties.  

• Enbridge Sustain, once transferred to an affiliate, may apply for membership in HRAI. HRAI will follow its normal rules for determining whether to accept that application. Enbridge Sustain has acknowledged that the HRAI bylaws may prohibit membership by certain companies with exclusive ties to utilities. 

• Enbridge Gas and Enbridge Sustain have also agreed that, if Enbridge Sustain becomes a member of HRAI, at no time will HRAI be limited by that membership status in any intervention before the OEB, including any interventions related to Enbridge Sustain. 

HRAI’s Utility Action Committee accepted this settlement knowing that it will require continued due diligence going forward. Utility filings will have to be reviewed regularly, and any apparent violations of the terms will have to be documented and reported as appropriate. 

It is also worth noting that HRAI remains active on this file in two other veins: 

1. The committee is engaged with the OEB’s regulatory compliance team on the complaint that was filed early last year, and a meeting with OEB staff is scheduled for November 26th to hear ongoing industry concerns. This investigation probes the question of whether Enbridge has violated any other OEB guidelines in the way it set up Sustain inside the regulated utility.  

2. The federal Competition Bureau continues to collect evidence as it assesses whether there have been any breaches of competition regulations.  No action has been filed as of this writing.  

In summary, the industry has made some important progress towards the goal of ensuring that new utility-based entrants to the HVAC industry compete on a level playing field with the rest of the industry. 

For more information, contact Martin Luymes at 1-800-267-2231 ext. 235 or email mluymes@hrai.ca.