FAQ: The OEB

What is the Ontario Energy Board?
What is the role of the Ontario Energy Board?
Where does the OEB derive its powers?
What does the Board regulate in the Natural Gas area?
What does the Board regulate in the Electricity area?
What does the Board not regulate?
How are Board members chosen and for how long?
How do I contact the Board?

What is the Ontario Energy Board?

The Ontario Energy Board (OEB or "Board") is the regulator of Ontario's natural gas and electricity industries. The Board also provides advice on energy matters referred to it by the Minister of Energy and the Minister of Natural Resources. The Board is a self-financing Crown corporation without share capital.

What is the role of the Ontario Energy Board?

The Board has regulatory oversight of both natural gas and electricity matters in the province and provides advice on energy matters referred to it by the Minister of Energy and the Minister of Natural Resources.

On December 9, 2004, the Government of Ontario passed the Electricity Restructuring Act, 2004, (Bill 100) which reorganized the province’s electricity sector and changed the Board's objectives. The legislation amended the OEB Act, 1998, and the Electricity Act, 1998.

In the electricity sector, the Electricity Restructuring Act, 2004, defines the Board's objectives as follows:

To protect the interests of consumers with respect to prices and the adequacy, reliability and quality of electricity service.
To promote economic efficiency and cost effectiveness in the generation, transmission, distribution, sale and demand management of electricity and to facilitate the maintenance of a financially viable electricity industry.

In the natural gas sector, the Board’s objectives include:

facilitate competition in the sale of gas to users;
protect the interests of consumers with respect to prices and the reliability and quality of gas service;
facilitate rational expansion of transmission and distribution systems;
facilitate rational development and safe operation of gas storage;
facilitate opportunities for energy efficiency consistent with the policies of the Ontario government; and
promote communication within the gas industry and the education of consumers.

Where does the OEB derive its powers?

Most of the OEB's powers and duties are established in the Electricity Act, 1998 and the Ontario Energy Board Act, 1998. Other statutes which give jurisdiction to the Board are: the Municipal Franchises Act, the Oil, Gas and Salt Resources Act, the Public Utilities Act, the Assessment Act and the Toronto District Heating Corporation Act. The Board’s processes are generally governed by the Statutory Powers Procedure Act.

What does the Board regulate in the Natural Gas area?

The Board approves rates charged by the natural gas utilities to transmit, distribute and store natural gas and approves pipeline construction, terms and conditions of franchise agreements, certificates of public convenience and necessity, storage facilities and utility ownership changes.

The Board also licenses natural gas marketers wishing to retail natural gas to residential and small commercial consumers. The Board establishes rules with respect to how natural gas utilities conduct their relationships with natural gas marketers and affiliates.

DELIVERY RATES

The Board regulates the rates Ontario’s natural gas utilities can charge. The Board establishes rates for each natural gas utility typically following a public hearing. The rates cover transportation costs to Ontario, delivery costs within Ontario and storage. The Board does not regulate the cost of natural gas (the "commodity"); the commodity price is determined by the market forces of supply and demand.

Where users purchase natural gas directly from marketers, the OEB controls the rates utilities can charge to transport natural gas to Ontario and store and distribute natural gas in Ontario. The price paid for the natural gas commodity is determined by the contract signed with the marketer.

For those who have not elected to purchase natural gas from a marketer, the rates also cover the commodity cost of natural gas, passed through to the customer without markup.

LICENCES

Companies wishing to sell natural gas to low-volume consumers(residential and small commercial customers consuming less than 50,000m³ of gas per year) or to act as an agent in the sale of natural gas in Ontario must first obtain a licence from the Ontario Energy Board and abide by a Code of Conduct and Part V.I of the Ontario Energy Board Act, 1998 (the Energy Consumers' Bill of Rights).

TRANSMISSION PIPELINE CONSTRUCTION

OEB approval is required to construct a natural gas transmission line in Ontario. The Board assesses whether the proposed construction is in the public interest by considering need, safety, economic feasibility, community benefits, security of supply and environmental impact. The Board’s Environmental Guidelines set out the Board’s expectations for locating, constructing and operating pipelines in Ontario.

FRANCHISE AGREEMENTS

Each municipality may grant a natural gas utility the right to deliver natural gas service and use road allowances or utility easements within its borders. The specific terms and conditions of the agreement between the municipality and the utility, (the Municipal Franchise Agreement), requires OEB approval. The Board approved a model franchise agreement in 1987 and issued an updated agreement in December 2000.

CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY

Board approval, in the form of a Certificate of Public Convenience and Necessity is necessary to construct any works to supply natural gas in Ontario. Approval is granted only when it is proven to the Board that the construction is necessary to provide service and that the service is for the public good.

STORAGE FACILITIES

Natural gas may be injected into a geological formation in Ontario only where the area designated by the Lieutenant Governor in Council (LGIC). The Board recommends areas that are suitable for designation. Once the LGIC has approved designation, the Board may authorize a storage area’s use. Most of these geological formations are located in Southwestern Ontario, including under Lake Erie.

The Board also determines the compensation payable to land owners where storage pools are situated, if the parties cannot agree among themselves.

In addition, applications for drilling permits for wells within a designated storage area are referred to the Board for a report to the Minister of Natural Resources.

OWNERSHIP CHANGES

A natural gas utility must obtain approval from the Board to sell its system or amalgamate with another company. Approval is also necessary when any person wishes to acquire or hold more than 20 per cent of the voting securities of a natural gas utility.

What does the Board regulate in the Electricity area?

DELIVERY RATES

The Board approves the rates to be charged for the distribution and transmission of electricity in the province. Distribution rates reflect utilitiy's cost of service and includes transmission and local delivery costs.

REGULATED PRICE PLAN

The Ontario Energy Board has developed an electricity price plan that better reflects the price paid to generators. The Regulated Price Plan, which took effect April 1, 2005, is based on an OEB forecast of the cost of electricity over 12 months.

Learn more about the Regulated Price Plan

LICENCES

The Board licences all market participants including the Independent Electricity System Operator (IESO), Ontario Power Authority (OPA), generators, transmitters, distributors, wholesalers and retailers. Retailers wishing to sell electricity directly to consumers must also abide by a Code of Conduct.

FACILITIES CONSTRUCTION

Distribution and transmission companies that wish to construct distribution and transmission lines, sell any or all of their assets, or purchase the assets of another distributor or transmitter, must first obtain approval from the Board.

COMPLIANCE

The Ontario Energy Board is also responsible for ensuring regulated natural gas and electricity monopoly utilities comply with Board decisions, orders and other regulatory instruments. Compliance activities can involve audits, investigations and filing monitoring information as prescribed by the Board, from time to time.

The Board may impose penalties of up to $20,000 per day for a breach of the OEB Act, 1998 and certain provisions of the Electricity Act, 1998, or the Board's licences, rules or orders.

MARKET SURVEILLANCE

The OEB monitors markets in the electricity sector and may report to the Minister on the efficiency, fairness and transparency and competitiveness of the markets and reports on any abuse or potential abuse of market power.

The Board is responsible for reviewing the IESO budget and fee schedule. The Board may also be asked to review the IESO market rules and consider appeals of IESO orders.

What does the Board not regulate?

The Board does not regulate the prices charged for competitive services. In the natural gas sector, these include the sale of the natural gas commodity (which is established by market forces and passed on to consumers without markup), and water heater rentals and repair and maintenance services. These products and services are competitive and can be obtained from various companies. All business activities are competitive except distributing, transmitting natural gas and providing Standard Supply Service.

How are Board members chosen and for how long?

Board members are appointed by the Government of Ontario for a term of two years initially, and renewable up to five years. Board members come from a variety of backgrounds and include economists, lawyers, engineers, accountants and business people with experience in the energy field.