Proposed Union Gas utility merger with Enbridge would create 'virtual monopoly,' says analyst

Energy analyst Dan McTeague is concerned a proposed merger of the Union Gas and Enbridge natural gas systems in Ontario would create a "virtual monopoly."

While Enbridge and Union Gas parent company Spectra completed their corporate merger in February, their Ontario distribution utilities, which deliver natural gas to homes and businesses, remain separate.

• Enbridge buying Spectra Energy for $37B in stock to create pipeline giant

• Enbridge-Spectra deal part of a bigger North American trend, says analyst

• Enbridge sheds 1,000 jobs after takeover of Spectra Energy

In December, Union Gas customers received notification that an application has been filed with the Ontario Energy Board, which regulates natural gas utilities, to allow the two systems to operate as one.

The companies claim that the move will be good for consumers, saying the amalgamation will give clients "a total benefit of $410 million over a ten-year period."

In an interview with Afternoon Drive host Chris dela Torre, McTeague said that due to their corporate merger, the desire to combine Enbridge and Union Gas' natural gas systems in Ontario is not surprising, but will fundamentally change the province's natural gas supply.

"The structure of the market [will be] highly concentrated and in the hands of one particular player — I don't think such a thing would normally happen under other anti-trust jurisdictions, particularly the United States," McTeague said.

New entrants would also find it much harder to purchase or build natural gas utilities in Ontario he said, adding that it may affect the access of wholesale suppliers as well.

Rates still controlled by OEB

​McTeague said that while natural gas rates would still be set by the Ontario Energy Board, having one company dominate the natural gas network could still affect prices down the road.

"How do you question the distribution rates if you have only one player that is serving as a gatekeeper for what comes into Ontario?" he said.

"There are plenty of ways which one can pass on the costs of doing business ... those prices can be in fact be rubber-stamped and passed on," McTeague said.