Natural gas rates to drop

Rate relief follows years of high prices

Pacific Northern Gas (PNG) customers paid less for gas last year and will be paying less again this year compared to previous years now that its regulator, the BC Utilities Commission, has set rates for 2018 and 2019.

A 1.3 per cent drop in 2018 from 2017 and a further 1.4 per cent decline in 2019, mostly from reductions in the cost of delivering the fuel, mark a modest reversal of a pattern of increasing rates which began when the utility began losing large industrial customers.

Without the income from large customers such as the Skeena Cellulose pulp mill in Prince Rupert and the Methanex methanol plant in Kitimat, both gone for more than 15 years now, remaining customers were left shouldering the cost of PNG’s pipeline and operations running west of Vanderhoof to the coast.

Setting rates is an intricate and lengthy process and while PNG has to pass along the price of gas without a markup, the utilities commission examines everything else from pipeline maintenance costs to bonuses for managers to accounting practices to taxes a utility owes in setting delivery rates.

In setting rates for 2018 and 2019, the utilities commission allowed for a temporary increase as of Jan. 1, 2018, but following a series of submissions and hearings, did not set permanent rates until late November 2018.

READ MORE: Natural gas rates will go up in B.C. on Jan. 1

And because the 2018 permanent rates were lower than the temporary ones, ratepayers received a refund in November and December of 2018 of what they paid from January to October of last year.

Information from PNG pegs this refund for an average residential customer using 71 gigajoules of gas a year at $51.

In requesting approval for its 2018 and 2019 rates, PNG determined it had more income than needed in 2018, but is then forecasting less income than it will need this year.

That would have resulted in a rate drop of 5.6 per cent in 2018 followed by a 7.9 per cent increase this year — but the utilities commission approved what amounts to a blend of rates for the two years to avoid that kind of fluctuation.

One factor influencing PNG’s two-year financial picture is that 2018 was the last year PNG recorded what amounted to an income tax credit which took the form of a refund to customers which then helped buffer past rate impacts.

That loss of the income tax credit is contributing to PNG’s forecast 2019 revenue deficiency.

The company will, however, be writing off capital projects from taxable income this year.

PNG’s revenue 2019 deficiency will also be buffered by the utilities commission allowing it to transfer $221,000 from a separate account to its main revenues account.

That represents $200,000, plus interest, paid by a company called Triton LNG Limited Partnership, when the two companies were working on a project that would have pumped more gas through PNG’s pipeline.

The company is now speaking to other companies, says PNG vice president Janet Kennedy.

“PNG continues to work diligently to get new customers to fill the unutilized pipeline capacity and continues to work on a potential expansion pipeline,” she says.

This year will also see the start of operations of the Alta Gas/Vopak propane export terminal at Prince Rupert and full operations of the new Pinnacle pellet plant in Smithers, providing a new source of revenue for PNG. Their gas requirements will more than offset a reduction in what Rio Tinto says it will this year, noted PNG in its filings to the utilities commission.

Existing ratepayers are also being spared paying for the majority of the $6 million spent in 2018 to repair and move a section of the PNG pipeline exposed along the Copper River just east of Terrace during heavy rain and flooding in the fall of 2017.

READ MORE: Pacific Northern Gas spends $6 million to move and protect gas line near Terrace

This is thanks to an anticipated insurance payment and treating the project as a capital expense to be repaid over a number of years, says PNG vice president Joe Mazza.

“Isolating this project’s costs and subject to the finalization of the insurance claims, PNG estimates that the average residential customer would see an annual bill increase of approximately $3, or 0.2 per cent,” he says.

That cost, however, has easily been absorbed by the overall 2018 rate reduction, Mazza added.

Still, the lack of large industrial customers continues to mean PNG’s customers from Vanderhoof to the coast are paying the highest delivery rates in the province — as much as two and a half times what Fortis B.C.’s customers pay on the lower mainland.

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