Ontario Superior Court upholds Energy Board’s authority over natural gas franchise dispute

The OEB has broad discretionary powers to regulate the natural gas industry: court

Ontario Superior Court upholds Energy Board’s authority over natural gas franchise dispute

In a recent ruling, the Ontario Superior Court of Justice dismissed an appeal concerning a renewal of a natural gas franchise agreement and upheld the Ontario Energy Board’s (OEC) regulatory authority.

The dispute in Leamington (Municipality of) v. Enbridge Gas Inc., 2024 ONSC 867, centred around the Ontario Energy Board’s (OEB) decision to approve Enbridge Gas Inc.’s application to renew its natural gas franchise with the Municipality of Leamington.

A significant point of contention was the agreement's provision on gas system relocation costs, particularly costs associated with municipal drainage works. Under the Model Franchise Agreement endorsed by the OEB, Leamington would be responsible for covering some of these costs, a departure from the Drainage Act, which would otherwise assign full responsibility to Enbridge.

Leamington argued that the OEB overstepped its authority by deviating from the Drainage Act without the municipality's consent. However, the Ontario Superior Court of Justice found that the OEB possesses broad discretionary powers to regulate the natural gas industry, including the terms of franchise agreements, based on public convenience and necessity. Despite Leamington's objections, the court determined that the OEB acted within its jurisdiction in maintaining the cost-sharing provision as stipulated in the Model Franchise Agreement.

The court underscored the OEB's role as an independent regulatory body with the mandate to ensure a financially viable and efficient energy sector that provides reliable services at reasonable costs. The court reiterated the OEB’s authority to prescribe terms and conditions for the renewal of natural gas franchises, emphasizing the need to balance public interest with the fair treatment of all stakeholders.

Leamington's appeal aimed to amend the relocation costs sharing provision to exempt the municipality from sharing the costs for drainage work relocations, which would otherwise be fully covered by Enbridge under the Drainage Act. The court, however, upheld the OEB's decision, stating that appeals could only be made on questions of law or jurisdiction, and the determination of specific renewal agreement terms falls outside this scope.

Ultimately, the court affirmed the OEB's regulatory authority and its capacity to make discretionary decisions in the best interest of the public and the energy sector. The court dismissed the appeal with costs, requiring Leamington to pay Enbridge $12,500, with no costs awarded for or against the OEB.

 

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