News

PNG rates dropping

THERE’S GOOD news for residential customers of Pacific Northern Gas (PNG) – rates are going down.

That’s because a drop in the price of the gas itself has more than compensated for an increase in the cost of delivery. As of April 1, the price of gas dropped from $5.37 a gigajoule to $4.42 a gigajoule.

That reduction is more than enough to absorb an increase in the cost of delivery, which is rising 17 cents a gigajoule from $11.14 a gigajoule to $11.31 a gigajoule.

In total, the price plus delivery will be $15.73 a gigajoule beginning July 1 and that’s less than the $16.28 being charged at the end of last year.

Residents will start seeing the reduction on bills being sent out after July 1.

The increase in delivery rates came late last month, the result of several months of negotiations between PNG and its regulator, the BC Utilities Commission.

While the price of gas is adjusted every three months depending upon what PNG pays for it (PNG passes the cost straight through to customers and cannot add on any other charges), delivery and other expense items are set annually and must be approved by the utilities commission.

PNG had first asked for a substantial delivery rate increase, citing a shortfall of approximately $4.5 million in revenues. The commission granted an interim increase as of Jan. 1 to $13.01 a gigajoule, subject to a final rate determination.

But the increase was then whittled down primarily due to three main reasons, said PNG official Craig Donohue.

The first was a postponement in the accounting standards used by PNG to handle its accounts and any resulting income tax considerations.

The second came in using $1.5 million in option payments made by LNG Partners to reserve space in PNG’s pipeline for a possible liquefied natural gas export project.

And the third was a $500,000 credit provided by PNG to reduce delivery charges – that represented the value of work done by PNG officials to buy into run-of-river projects on the Sunshine Coast.

The utilities commission had argued that PNG’s customers would otherwise be paying for company officials to work on projects not connected to its gas distribution business.

“Once all that was taken into account, the revenue deficiency went down to ... $487,000, and that is then the [delivery] increase,” said Donohue.

And because the final increase is less than the interim one granted Jan. 1, customers will see a refund being applied, also on billing after July 1.

“It’s not an insignificant amount,” said Donohue of the delivery cost refund which is in the $1.70 a gigajoule range. It will apply to gas delivered from Jan. 1 until the new rate is applied July 1.

The decrease follows years of increases, some of which were in the double digit range.

Residential customers began absorbing more and more of the cost of maintaining PNG’s distribution network as more and more large industrial customers were lost.

A drop in the price of gas has helped overall rates, but has not been able to fully absorb the impact of delivery cost increases.

The highest cost and delivery rate being charged last year was $16.63 a gigajoule and in 2009, the rate was $15.12.

Donohue did point out that the commodity and delivery rate does not include a fixed monthly charge of $10.75 and any applicable taxes.

And it does not include a scheduled July 1 increase in the provincial government’s carbon tax, which is to rise by 25 cents a gigajoule.

 

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