Customers of Enbridge Gas will soon be hit with an average increase of nearly $400 a year on their gas bills, at least on an interim basis.

The Ontario Energy Board approved the company's application to boost its rates by 40 per cent.

Enbridge said the higher costs are the result of colder than normal weather over the past winter and higher natural gas prices forecast for the next year.

But in its decision, the energy board said that these rates, which come into effect April 1, are approved on an interim basis, meaning they could be adjusted in the future.

Every three months, the three companies that supply natural gas to Ontarians apply to the Ontario Energy board for price adjustments, based on the market price for natural gas.

Union Gas and NRG, Ontario's two other natural gas distributors, have also applied to increase their rates.

The increase is based on the rising cost of natural gas, which has risen 11.5 per cent in the past year, and 20 per cent in the past six months.

However, Enbridge says prices on the open market have at times been even higher, especially during the colder-than-usual winter.

Not allowed to profit from increases

In its decision, the board says, "Enbridge, as a natural gas distributor, is not allowed to profit from the sale of the natural gas commodity. The actual cost of the gas purchased by Enbridge for its customers is passed on to Enbridge’s customers without any markup or added costs."

"The board is of the view that rate mitigation may be warranted in this case to smooth the bill impact to customers that buy their gas from Enbridge," the board said in its decision.

The full effect of the rate increase is not expected to be felt by residential customers until next winter, Enbridge noted.

"We respect the decision and the interim order of the Ontario Energy Board and its desire to further review the bill impact on customers following our coldest winter in 25 years," said Malini Giridhar, vice-president, Enbridge Gas Distribution, in a statement.

Enbridge said that typical residential customers would see an increase of around $33 a month. The company said $20 per month relates to the costs of this past cold winter and $13 related to the projected forecast natural gas price. 

In its decision, the energy board noted that over the past eight years, consumers have benefited from decreases in natural gas commodity prices.