John Spears
Toronto Star
January 9, 2003

Enbridge Gas Distribution Inc. has asked the Ontario Energy Board to reconsider a decision last month in which the board questioned whether Enbridge still has the in-house expertise to run gas pipelines.

Enbridge Gas Distribution has 1.5 million customers in Ontario, and serves most of Greater Toronto east of Oakville.

The company has been aggressively outsourcing operations, including gas purchasing, pipeline operating control and customer service – in many cases to its parent, Enbridge Inc., or to other Enbridge affiliates.

Several customer groups told the energy board that the outsourcing is so extensive that Enbridge Gas Distribution may soon become a "virtual utility." The board observed it is "unclear" whether the company still has "all the assets, including expertise" to run gas pipelines.

The customers questioned whether the deals Enbridge Gas Distribution struck with its affiliates were at competitive market prices. They suggested the contracts might benefit Enbridge Inc. shareholders, at the expense of Enbridge Gas Distribution ratepayers.

The board listened with a sympathetic ear.

While Enbridge argued there is "no evidence that outsourcing will harm ratepayers," the board said that’s not good enough.

"Enbridge must demonstrate not only that the arrangements will not harm ratepayers, but also that there will be a significant and tangible benefit to ratepayers," it ruled, ordering the company to show such evidence the next time its rates are reviewed.

Enbridge takes issue with that.

"The board erred in its determination that Enbridge Gas Distribution Inc.’s outsourcing must provide a benefit to ratepayers," the company argues.

The board "violated the fairness principle in utility ratemaking, which requires the balancing of the interests of the utility, the shareholder and the consumer."

The decision, it contends, will make it harder for Enbridge to raise capital, and will make it more difficult to present future cases to the energy board.

The energy board itself is in flux. No permanent replacement has been named for ex-chair Floyd Laughren, who resigned last fall, and the provincial government is conducting a review of the board’s mandate.

Tom Adams, executive director of Energy Probe, said the case will test the board’s mettle.

"What’s at stake here is the ability of the regulator to ensure that utility outsourcing doesn’t undermine the ability of the regulator to protect the public interest," he said in an interview.