B R I T I S H C O L U M B I A U T I L IT I E S C O M M IS S I ON O R D E R N U M B E R G-63-00 SIXTH FLOOR, 900 HOWE STREET, BOX 250 TELEPHONE: (604) 660-4700 VANCOUVER, B.C. V6Z 2N3 CANADA BC TOLL FREE: 1-800-663-1385 web site: http://www.bcuc.com FACSIMILE: (604) 660-1102 IN THE MATTER OF the Utilities Commission Act, R.S.B.C. 1996, Chapter 473 and The Special Direction to the British Columbia Utilities Commission By the Lieutenant Governor in Council through Order in Council 1510, dated December 13, 1995 and An Application by Centra Gas British Columbia Inc. for Approval of Changes to New Customer Rates effective July 1, 2000 BEFORE: P. Ostergaard, Chair ) B.L. Clemenhagen, Commissioner ) June 21, 2000 K.L. Hall, Commissioner ) N.F. Nicholls, Commissioner ) O R D E R WHEREAS: A. On June 16, 2000, Centra Gas British Columbia Inc. (“Centra Gas”) applied to increase rates for New Customers to recover the increased cost of gas, effective July 1, 2000, pursuant to Sections 23 and 61 of the Utilities Commission Act and the Special Direction issued by the Lieutenant Governor in Council through Order No. 1510 dated December 13, 1995; and B. The Special Direction directs the Commission on the fixing of rates up to the year 2002 for New Customers, who generally are customers who contracted for natural gas after February 13, 1996. The Special Direction provides that the Commission may, in accordance with Section 61(4) of the Act, allow the passthrough to New Customers of a change in Centra Gas’ cost of service due to a change in Federal, Provincial or Municipal taxes; a material and uncontrollable change in costs due to a program established by a governmental or regulatory authority; and a difference in the cost of gas relative to the Designated Royalty Adjusted Cost of Gas as set out in the Special Direction (collectively referred to as “Passthrough Costs”); and C. The Special Direction provides that Passthrough Costs shall be recorded in a New Customer Rate Balancing Account (“NCRBA”), which is a notional account for the purpose of determining adjustments to New Customer rates; and . . . /2
B R I T IS H C O LU M B I A U T IL I T I E S C O M M IS S I ON O R D E R N U M B E R G-63-00 2 D. The Application revises the December 31, 2000 forecast balance in the NCRBA to $4.0 million, as it relates to the increasing cost of gas, based on Centra Gas’ current forecast of 2000 energy sales and royalty adjusted 2000 wellhead cost of gas. The passthrough of the 2000 forecast balance in the NCRBA to New Customer Rate Classes over the 10-month period July 1, 2000 to April 30, 2001 will require an increase to Rate Rider C of $0.979/GJ to $1.694/GJ; and E. The average increase in New Customer rates for SGS-11 will be 8.7 percent, for SGS-12 will be 9.6 percent, and for LGS-11, LGS-12 and LGS-13 classes will be from 11.8 percent to 16.1 percent; and F. The proposed amount of Rate Rider C is calculated to recover the forecast December 31, 2000 balance in the NCRBA from sales to New Customers from July 1, 2000 to April 30, 2001; and G. The Commission has reviewed the Application to passthrough an increase in the cost of gas and is satisfied that approval of the rate increases to New Customers is necessary. NOW THEREFORE pursuant to Section 61(4) of the Utilities Commission Act, the Commission orders as follows: 1. The Commission approves for Centra Gas the proposed New Customer rates as set out in its June 16, 2000 Application for a cost of gas passthrough increase to Rate Rider C of $0.979/GJ on sales to all New Customers, effective July 1, 2000. 2. Centra Gas, by way of a Customer Notice, is to provide all affected customers with an explanation of the rate changes. Centra Gas is directed to review its communication plan, advertisement plan, advertisements and bill inserts related to the rate increase with Commission staff prior to release. 3. The Commission will accept, subject to timely filing, amended Gas Tariff Rate Schedules in accordance with the terms of this Order. DATED at the City of Vancouver, in the Province of British Columbia, this 22 nd day of June 2000. BY ORDER Original signed by: Peter Ostergaard Chair Order/CG-Rate Incr July 1’00
SIXTH FLOOR, 900 HOWE STREET, BOX 250 TELEPHONE: (604) 660-4700 VANCOUVER, B.C. V6Z 2N3 CANADA BC TOLL FREE: 1-800-663-1385 web site: http://www.bcuc.com FACSIMILE: (604) 660-1102 N E W S R E L E A S E For release June 22, 2000 BCUC Approves a Rate Increase of 9 Percent for Centra Gas Residential New Customers Vancouver – The B.C. Utilities Commission has approved a large rate increase for Centra Gas customers on Vancouver Island and the Sunshine Coast starting July 1, 2000. The $0.979/GJ increase affects New Customers, who are customers that signed up for natural gas after February 13, 1996. The new rates will increase bills for residential customers by 9 percent, with increases of 10 to 16 percent for commercial and general service customers who purchase their gas commodity from the utility. Residential customers will typically pay about $70 per year more for gas. The entire increase is attributable to the rapid rise in market prices for natural gas. Natural gas is a commodity whose price at the gas well and at wholesale trading points is not controlled by governments or regulation. Elimination of government control of natural gas commodity prices in 1985 and free trade have created a North American market for natural gas, with prices in different areas varying largely as a result of transportation costs from gas wells to major trading points. The monopoly transmission and distribution pipelines remain regulated. The company’s forecast of gas prices from July to December has been validated against other forecasts, as part of the Commission’s responsibility to ensure that utilities buy natural gas at the lowest overall cost. For the past few years, gas customers in British Columbia have been shielded from the full impact of gas price increases. There was a surplus of gas production capability in British Columbia and Alberta and insufficient pipeline capacity to move this surplus gas to markets in Eastern Canada and the United States. The recent construction of major new pipeline facilities is exposing British Columbia consumers to the full impact of open market price increases. Natural gas commodity prices increased significantly in 1999, and have subsequently risen dramatically in 2000. Centra Gas buys natural gas from producers and marketers and generally passes on the cost, . . ./2
2 without markup, to its customers. Any increase or decrease in costs is carried in a separate account to either be credited to customers if gas prices fall, or recovered at a future date from customers if gas prices turn out to be higher than forecast. For July 2000, Centra Gas applied to the Commission for a rate increase to pay for the higher cost of gas commodity purchases that it forecasts for 2000. The Utilities Commission Act and a Special Direction from the provincial government to the Commission permit Centra Gas to file new rates for New Customers that recover increases in non-controllable costs such as gas supplies. The Commission has now approved a higher Rate Rider for New Customers effective July 1, 2000 that is based on current forecasts of gas prices and currency exchange rates. Centra may apply to the Commission to have rates for January 2001 adjusted for natural gas commodity price forecasts at that time, and for the recovery of past underpayments. Particularly in these times of high prices due to growing demand and tight supplies for natural gas, the Commission encourages customers to take advantage of opportunities to minimize gas consumption. To avoid very high bills in winter months, consumers may also wish to consider Centra Gas’ equal payment plan, which levelizes utility payments over the full year. -30-Also see Attached Backgrounder “Approved Natural Gas Rate Increases, Effective July 2000” For further information: Bill Grant, Executive Director, (604) 660-4700
SIXTH FLOOR, 900 HOWE STREET, BOX 250 TELEPHONE: (604) 660-4700 VANCOUVER, B.C. V6Z 2N3 CANADA BC TOLL FREE: 1-800-663-1385 web site: http://www.bcuc.com FACSIMILE: (604) 660-1102 APPROVED NATURAL GAS RATE INCREASES Effective July 2000 Natural gas is a commodity whose price at the wellhead and at wholesale trading points is not controlled by governments or regulation. In 1985 the federal government and the producing provinces agreed to eliminate government control of natural gas commodity prices. Free trade between Canada and the United states has created a North American market for natural gas, with prices in different areas varying largely as a result of transportation costs from gas wells to major trading points. The monopoly transmission and distribution pipelines remain regulated, but natural gas commodity prices are established in the open market. North American gas prices increased significantly in 1999, due to a number of factors that included: • very warm weather in eastern North America in the summer of 1999 and high air conditioning loads across much of the continent, so that more natural gas was consumed to generate electricity rather than being stored for the winter; • concerns that natural gas demands for the 1999/2000 winter would strain gas production, pipeline and storage systems, particularly if winter weather was colder than normal; and • lower than normal drilling activity in 1998 to obtain new sources of supply, especially in the U.S., due to low oil prices which reduced reinvestment levels. In 1999, British Columbia consumers also became exposed to the full impact of open market price increases. For the previous few years, gas customers in Western Canada had been shielded from the full impact of gas price increases. There was a surplus of gas production capability in British Columbia and Alberta and insufficient pipeline capacity to move this surplus gas to markets in Eastern Canada and the United States. This changed with the recent construction of major new pipeline facilities. Natural gas prices have continued to increase dramatically in 2000, for reasons that include: • underground gas storage facilities across the continent were drawn down in early 2000 to levels that are lower than in 1999. The need to refill storage increases total gas demand; • long range weather forecasts indicated a warmer than normal summer in 2000; • supply additions in the United States have not been sufficient to meet the growth in demand; and • the high price of crude oil is also contributing to higher gas prices, due to oil customers with fuel switching capability (gas/oil thermal electric generation stations, for example) switching to gas. …/2
2 January 2000 rate increases were mostly to cover increases in the cost of gas purchases, but also included small adjustments to the charges for transporting and delivering the gas commodity to customers. The utilities receive a regulated return on their investment in the pipeline distribution system. The increases approved for July 2000 are entirely to cover increases in the wholesale cost of the natural gas commodity purchased by BC Gas, Pacific Northern Gas and Centra Gas for their customers. Utilities purchase natural gas from producers and marketers and pass on the cost, without markup, to customers. BC Gas, Pacific Northern Gas and Centra Gas record actual costs and revenues related to the natural gas commodity in their gas cost reconciliation accounts. If natural gas rates do not fully cover actual costs, the deficiency is recorded in these accounts, for future recovery from customers. If natural gas rates recover more than actual costs, the difference is returned to customers when the new rates are set. Rate increases in 1999 did not keep up with increases in gas costs, and debit balances (amounts that must be paid to the utility) have built up in these accounts. Rates for 2000 include rate riders that start to repay the account balances. The increases in the gas rates effective July 1, 2000, as a percent of a typical average annual bill and in dollar amounts, are shown below. The new rate amounts are approximate, as they include monthly fixed charges and will vary with consumption. Increase Increase New Rate % $/GJ 1 $/GJ BC Gas Residential 33% $2.35 $9.55 Commercial 36-41% General Service 47-48% PNG-West Residential 22% $1.80 $10.15 Commercial 27% PNG(N.E.) Residential 37% $2.02 $7.56 (Fort St. John) Commercial 42% Centra Gas Residential 9% $0.97 $12.37 (New Customers) General Service 12-16% A typical residential annual bill will increase by about $240 to $290 for BC Gas, $240 for PNG customers, $360 for PNG(N.E.) customers, and $70 for Centra Gas New Customers. Centra Gas’ rates are set according to a Special Direction from the Provincial Government to the Commission that permits Centra Gas to flow through increases in the cost of gas supplies to New Customer classes. Centra Gas’ residential customers pay the highest natural gas rates in the Province. The Commission reviews natural gas purchase contracts to ensure that the prices and terms are prudent and that BC Gas, Pacific Northern Gas and Centra Gas are buying gas at the lowest overall cost. The Commission also confirms that increases in the utilities’ gas costs flow through to consumers without markup. British Columbia Utilities Commission Staff June 22, 2000 1 A gigajoule (“GJ”) is a unit of energy. One GJ is about the amount of energy contained in 915 cubic feet of natural gas, or 29 litres of gasoline, or 278 kilowatt hours of electricity, or 0.16 barrels of oil. The amount of natural gas used by individual residential customers varies widely; a typical customer consumes about 120 GJ annually for space heating and domestic hot water.
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