One rate structure “on the radar” for PNG

Trent Ernst, Editor


For the third time in as many years, representatives from Pacific Natural Gas (PNG) appeared before council to discuss Natural Gas Rates in Tumbler Ridge.

In the past, the company has appeared before council to discuss rate increases around the proposed “virtual pipeline”, which would see truckloads of natural gas brought in from Dawson Creek. While the virtual pipeline was designed to meet the additional demands for natural gas to commercial customers, PNG planned on passing on a portion of that expense to residents of Tumbler Ridge. The town took issue with that, and  the BC Utilities Commission (BCUC) agreed.

Still, the price of natural gas has gone up this year, and council is wondering why. So Janet Kennedy, VP Regulatory & Gas Supply and Graeme Doak, VP Human Resources & Government Affairs, came to town to provide an explanation for the 2014 residential rate increases in Tumbler Ridge.

Kennedy says PNG strives to provide reliable supply at lowest possible cost. The sales are regulated by the BC Utilities Commission (IBCUC), so natural gas costs are passed through to customers without markup. “The only thing we make money on is the flat charge,” she says.

There are three parts to your gas bill. The first is the monthly charge, which goes to the company. In Tumbler Ridge, that basic charge is $8.50, compared to $7.00 for Dawson Creek and Fort St. John.

The second part of the cost is the delivery charge. This is the cost of getting the gas from the processing plant to Tumbler Ridge. Any cost for infrastructure upgrades is passed on to the users, but PNG does not actually make money on this part of the bill.

The final cost for delivering natural gas is the commodity price. This includes what it costs for the natural gas, plus any cost involved in getting the gas from the well to the processing plant. As a general rule, the farther it is from the well to the plant, the higher the cost on your bill.

Currently, PNG prices based on service area. There are three service areas in Northeastern BC: Dawson Creek, Fort St. John and Dawson Creek. If PNG needs to put $1500 work into the Tumbler Ridge plant, every customer in Tumbler Ridge will pay $1 more over the year. But if they put the same amount of work into their plant in Fort St. John, the cost would work out to pennies per customer. (These figures are completely made up and are highly inaccurate; they are for illustrative purposes only.)

Every year PNG goes through a process to look at rates, which have gone up due to additional facilities charge and a decrease in industrial demand, as well as an additional cost from supplier, says Kennedy. PNG had asked for a 20 percent increase for rates in Tumbler Ridge, but a 6.5 percent increase with a revenue deficiency of $70,000 was approved by the BCUC.

Kennedy says that, while there was an initial spike in prices early in the year, the price of natural gas has been going down, and the rates have fallen over the last few months. “You should see a further decrease as of October 1,” she says. “Every quarter we look at commodity prices, but the long-term forecast is for prices to stay pretty constant.”

The forecast needs to be accurate, and she says, the BCUC keeps a close eye on the industry. If the forecast is too high, the next year people will see a rebate. If it is too low, they are able to make up the cost in additional charges. “Rate increases do not go to the bottom line of the company,” she says.

She says that CNRL was in place to bring in increased volume if needed, but in order to build in the infrastructure to do that, they needed to have the customers in place. “You need this much volume to do this, and right now that’s not in place,” she says. As a result, not only are there no expansion plans in the work, the virtual pipeline, which was proposed as an interim measure to meet the needs of Quintette, is on hold.

Recently, the BCUC approved BC’s largest Natural Gas Supplier, Fortis, to move to a one rate system. Currently, Fortis has a number of different delivery areas, but over the next three years, they will be adjusting the rates so that everyone across the province (save for Fort Nelson) will be paying one rate. This will mean an approximate five percent increase for people in the Lower Mainland and Interior, but a 25 percent decrease for people who live in Whistler, on Vancouver Island, or on the Sunshine Coast.

Kennedy says that this model is “on their radar” now, but has no time frame for when, or if, this might be implemented. “Tumbler Ridge would be happy about it, but Dawson Creek and Fort St. John…”

While it would mean that folks in Dawson Creek would be paying for infrastructure improvements in Tumbler Ridge, it would mean the opposite as well, and the larger customer base would mean that any infrastructure improvement throughout the region would mean that more people were paying less money than a small amount paying more.

Kennedy says PNG has just started investigating what form something like this could take. “We are in the very preliminary stages of exploring the potential amalgamation of either all of the PNG companies (Northwest BC and  Northeast BC) or just the Northeast BC divisions (Fort St. John, Dawson Creek and Tumbler Ridge) and resultant effect on customer rates.  As such, we do not yet know if this proposal would result in fair and reasonable rates to all our customers.”

She says that the company has not broached the idea with the BCUC yet, either, which would have to happen before a rate scheme like this would go into place.

While both Dawson Creek and Fort St. John have a lower price for natural gas, PNG Northwest residential customers are paying more. Residents in Tumbler Ridge are paying $8.50/month, plus $11.98/GJ, while residents living between Vanderhoof and Prince Rupert are paying $10.75/month, plus $17.19/GJ. It’s possible, if PNG were to move to a single price for all its customers, it would mean that Tumbler Ridge residents wound up paying more, not less.

Still, any such discussion are still a long way off. “With regards to timeframe,” says Kennedy, “I would guess that this would take a few years if circumstances and our analysis indicate that an amalgamation would be fair and beneficial to all our customers.”