Big changes are happening in the way Ontario consumers purchase natural gas. Due to increased competition and lower pipeline tolls, natural gas producers from Alberta and the US are competing to provide bargain prices to the Ontario market.
Natural gas production in Alberta has traditionally been transported by way of the TransCanada PipeLines Limited (TCPL). But with shipping options increasing, all Ontario and Quebec utilities are moving towards sourcing natural gas at points in Ontario.
An example of a new competing pipeline is the Rover Pipeline, which is slated to deliver one billion cubic feet per day from Pennsylvania’s Marcellus and Utica shale production areas into the union gas dawn storage hub in Ontario. The Dawn Hub is Canada’s largest integrated underground natural gas storage facility.
Meanwhile, according to TCPL, the Vaughan Mainline Expansion (VME) is under construction and due to come online in November. This project is to serve as an additional connection between the two Ontario utilities, Union Gas in the southwest, and Enbridge in the Toronto area. It will allow Enbridge consumers the ability to source gas at the Dawn Hub.
Many things had to happen to meet the November 1st start date. In order for Enbridge to implement Phase 2 of the Dawn Transportation Services (DTS) for eligible customers in its distribution area, both the VME project as well as TCPL’s King’s North Connection Pipeline Project had to be completed. Enbridge first announced implementation of a contingency plan to cover possible delays, but then quickly retracted to say it was off. The end result is that Dawn Transportation Services will begin on November 1st for all approved Phase 2 and Phase 1 customer renewals.
As a consequence of these developments, local gas distribution companies will be more reliant upon the Dawn Hub during periods of high demand such as winter, instead of from the Western Canadian Sedimentary Basin and Alberta’s benchmark hub, AECO.
In addition, the new competition has already prompted TCPL to reduce tolls for large shippers. However, the drop in natural gas commodity prices could be offset as distribution companies include various riders and charges onto consumer bills.
Nevertheless, Ontario gas consumers will benefit from increased access to a stable supply. Indeed, they appear to be the clear winners in the battle for Ontario market share amongst producers.