New PNG app lowers hike

Pacific Northern Gas (PNG) has lowered its planned rate increase for this year.

Pacific Northern Gas (PNG) has lowered its planned rate increase for this year.

A first request for an interim all-in rate hike amounting to 10.2 per cent made late last fall to the BC Utilities Commission has been trimmed to 6.2 per cent via an amended application filed Jan. 17.

That means what was to be a gigajoule price of $18.92 would become $17.48 if accepted by the commission.

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

However, the higher interim rate effective January 1 will apply until the regulatory review of the amendment is complete and the commission delivers its verdict.

“Based on the fact the amended application has lower rates than the interim rates, it is anticipated that a credit would appear on future customer bills equal to their gas consumption from January 1, 2011 to the effective date of the new lower rates times the difference between the interim and the approved lower rates,” explained Donohue.

The increase adjustment is not a reflection in the price of the commodity itself – that remains the same as in the original application – 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.”

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.

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