PNG trims gas hike request

  • Jan. 21, 2011 5:00 a.m.

PACIFIC NORTHERN Gas (PNG) has lowered its planned rate increase for this year.

A first request for a rate hike amounting to 11.7 per cent made late last fall to the BC Utilities Commission has been trimmed to 7.3 per cent indicates an amended application filed Jan. 17.

What was to be a gigajoule price of $18.92 would now be $17.478 if accepted by the commission.

PNG official Craig Donohue said the reduction in the increase came after meetings with the utilities commission.

The increase adjustment is not a reflection in the price of the commodity itself but in PNG’s cost of doing business, he said.

“It concerned the move to International Financial Reporting Standards which is to take place in 2012,” Donohue said.

Essentially, the shift to this new method of financial reporting will change the way deferral accounts and any income tax payable from those accounts is treated.

“It’s about how they are recognized for accounting purposes,” said Donohue.

Monies in those accounts are meant to buffer customers from any sudden price increase shocks.

“Instead of making those changes now, the commission wants us to come back to them about this in 2012,” said Donohue.

The result, he said, is that the utility doesn’t need as much money as it first thought it did.

The revised application shows a revenue deficiency of $2.747 million instead of $4.529 million.

Unlike natural gas customers elsewhere, PNG’s clients haven’t been in a position to benefit from declines in natural gas prices.

That’s because PNG has been losing major industrial customers who paid for a lot of the utility’s pipeline expenses. The result is those costs are being passed on to primarily residential users.

But there’s an added cost factor this year in increased pension and benefit costs, said Donohue.

The combined dollar impact is $1.379 million, more than half of the utility’s shortfall, and is needed to cover medical plan increases and to top up the company’s pension fund.

Donohue said the company had not been fully keeping up with its pension obligations for the past several years.

Extended health and dental benefits are rising 10 per cent and seven per cent respectively while there’s a six per cent jump in the provincial Medical Services Plan premium.

A final decision from the commission isn’t expected until the spring. Interim rate hikes were put in place as of Jan. 1.