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Hydro, natural gas costs on the rise

Northwest residents should hope a warm spring and summer extends into a warm fall to delay for as long as possible the impact of price hikes for both electricity and natural gas.

BC Hydro increased its rates by nine per cent as of April 1 and, because of a large jump in the price of natural gas, Pacific Northern Gas (PNG) upped its residential rate by more than 10 per cent on April 1 as well.

The rate at the beginning of the year was $3.50 a gigajoule for natural gas but it is now $5.593 a gigajoule.

BC Hydro’s nine per cent bump is the first of a series designed to raise prices by a cumulative 28 per cent by 2019.

The increase schedule follows years of low rate increases which, according to BC Hydro, affected its ability to maintain its current facilities as well as to build new ones.

The crown corporation also pays an annual dividend to the provincial government.

This first hike is the highest of the five planned to 2019 with the 2015 price increase pegged at six per cent.

Meanwhile, several years of low prices for natural gas appear to be over and that’s affected the rate being charged by Pacific Northern Gas.

“North America markets have experienced some of the coldest weather in over a decade this past winter, resulting in significant drawdown of natural gas storage inventory levels, combined with reduced production levels – there has been upward pressure and significant volatility in gas commodity prices in recent months,” said Janet Kennedy, a PNG official.

“Based on these conditions, natural gas rates have increases all across North America – the increases are not unique to PNG’s service territory or British Columbia.”

Natural gas utilities are not allowed to add on to the cost of natural gas that passes through their lines to customers.

The delivery rate for natural gas went up marginally as of April 1 for a residential commodity and delivery rate that is now $17.753 a gigajoule, not including government taxes and fees, compared to $15.705 as of Jan. 1 which itself was an increase over the $14.464 a gigajoule that was charged last November.

Rates in the past could have been higher had not it been for payments made by a company to hold space in PNG’s existing line for a small liquefied natural gas plant planned for Kitimat.

That option money for what’s generally called the BCLNG project was paid into what’s called a deferral account and as of Dec. 31, 2014 the remaining balance was $1.6 million from a one-time total of $7.5 million.

Kennedy said approximately $6 million paid into the account was used over the past four years to reduce delivery costs by approximately 5 per cent.

Kennedy said PNG has asked its regulator, the B.C. Utilities Commission, for permission to use the remaining money this year to lower delivery rates by just under five per cent.

“PNG has recommended that this balance be fully amortized in 2014 which would result in all the option fee payments received to date being fully credited to PNG [North] West’s customers by the end of 2014,” she said.

As it is, the delivery rates paid by PNG’s northwest customers are higher than elsewhere ever since heavy industry, particularly pulp mills, left the region.

Because those industries used a lot of natural gas, their revenues contributed greatly to the ongoing maintenance and upkeep of PNG’s line.

But without those users, residential and small business customers now have to pay more to maintain PNG’s operations.

This means the only hope for lower delivery prices is for the excess capacity of PNG’s line to be taken up once again.

And although the BCLNG project planned for Kitimat does have space reserved in the PNG line, it’s suffering from financial troubles and is in creditor protection.

The original option agreement does, however, require PNG to credit back to the BCLNG project a large portion of the option fees that were paid should that project ever proceed.

While BCLNG forfeited $1 million of the $7.5 million it paid in option fees because it did not meet a deadline to start taking gas from the PNG line, it will receive credit for the remaining $6.5 million should it straighten out its financial troubles and the project get underway. Late last week a deal was announced which could see BCLNG being sold.

 

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