Residential gas rates rise

Pacific Northern Gas (PNG) wants to raise its rates next year, saying it needs more money to meet rising costs.

  • Dec. 26, 2012 3:00 p.m.

PACIFIC NORTHERN Gas (PNG) wants to raise its rates next year, saying it needs more money to meet rising costs.

In an application for an interim price hike as of Jan. 1, PNG forecasts an overall increase per gigajoule burned of 4.4 per cent.

That works out to a hike, says PNG, of from $17.911 a gigajoule now to $18.699 a gigajoule in 2013.

Overall, PNG says it needs to charge customers another $600,000 in 2013.

It cites general inflation, wage increases of three per cent, hiring two new executives (at a cost of $180,000), a $146,000 executive compensation program, initiated by new owners AltaGas of Calgary which is meant to keep valued employees from moving on and $346,000 in fees to be paid to AltaGas as some of the reasons a rate increase is needed.

PNG does say that while the above may be regarded as new costs, in some places they replace costs that had been in place earlier.

One such example cited is the $346,000 fee to AltaGas with PNG saying it’s lower than what PNG might be paying out had it still been an independent company and not a wholly-owned subsidiary of the Alberta energy company.

One cost item that won’t change as of Jan. 1 is the cost of natural gas itself – it’s to remain at the current rate of $3.375 a gigajoule.

That’s being regarded as about as low as it can get after several years of price drops because of a sudden increase in supply across North America.

PNG isn’t allowed to put a mark up on what it pays for gas and simply passes that cost to its customers.

But when taxes, fees and assorted cost-plus factors are added, the true rate per GJ nudges $20.

The provincial Liberal carbon tax alone amounts to $1.490 a GJ or about 41 per cent of the actual cost of the natural gas itself.

PNG’s requested increase comes just after a slight decrease it says will amount to $8 a month for both November and December.

Although the BC Utilities Commission did allow PNG a rate hike of $0.098 a gigajoule as of Nov. 1, a special account maintained by PNG resulted in a credit of $0.595 a gigajoule, enough to offset that increase and result in a temporary decrease.

Whenever PNG collects more money than it told the utilities commission it originally needed (chiefly arising when more gas is burned than anticipated), the excess is paid into this account.

PNG can then use the account to cushion future price hikes essentially by refunding money to customers it has already collected.

But if less money is collected, customers can be billed more to make up for a revenue shortfall.

As of Jan. 1, PNG says it can still provide a cushion from this account, but one that’s only $.111 a gigajoule.

The utilities commission usual practice is to grant requests for interim rates which are then made permanent or are adjusted during hearings held later on in the year.

In contrast to PNG’s rates, those just approved for interior BC customers of Fortis BC, the province’s largest natural gas supplier, are approximately half of what people here pay despite an increase on the delivery end.

That increase now means Fortis customers in the interior will be paying approximately $5 a GJ to deliver gas and $2.997 a GJ to buy the gas itself.

That works out to a combined delivery and commodity price of just under $8 a GJ, roughly   half that paid in northwestern BC.

Northwest gas users can look to the collapse of heavy industry here as the cause of regional delivery cost rate increases over the years.

The closure of two pulp mills, several sawmills and an ammonia and methanol plant in Kitimat, Prince Rupert and Terrace, severely reduced the amount of gas flowing through PNG’s pipeline and with it, the amount they were paying to use the pipeline.

That left residential and remaining businesses to shoulder more and more of the cost of maintaining the line and other PNG facilities.

The only chance of reducing the natural gas price for northwestern residents is the construction of the smallest of the planned LNG plants in the region.

Variously called BCLNG or the Douglas Channel Energy – the Haisla First Nation has an equity stake – this project involves a floating plant just offshore to liquefy natural gas for export to Asian markets.

Feeding the floating plant would take up the large surplus capacity of PNG’s existing pipeline and generate the kind of revenue needed by the gas utility to ease the rates for its existing customers.

BCLNG has passed all of the various environmental approvals and even has a gas export licence from the federal government.

But there’s no word yet on when the project will proceed.

BCLNG did take out a 90-day vessel charter option the end of November with a company called Golar for two new LNG carriers.

The BCLNG floating project would cost an estimated $400 million to $600 million.

“PNG is increasingly optimistic that this project will proceed as planned causing the pipeline to be fully utilized and generating approximately $15 million per year in revenues,” said PNG official Janet Kennedy.

“After taking into account some incremental operating and capital costs, this project should result in great benefits to PNG customer,” she said.



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