LETTER NO. L-43-05 SIXTH FLOOR, 900 HOWE STREET, BOX 250 ROBERT J. PELLATT VANCOUVER, B.C. CANADA V6Z 2N3 COMMISSION SECRETARY TELEPHONE: (604) 660-4700 Commission.Secretary@bcuc.com BC TOLL FREE: 1-800-663-1385 web site: http://www.bcuc.com FACSIMILE: (604) 660-1102 Log No. 10311 VIA E-MAIL cdonohue@duke-energy.com June 22, 2005 Mr. C.P. Donohue Director, Regulatory Affairs & Gas Supply Pacific Northern Gas Ltd. 950 - 1185 West Georgia Street Vancouver, B.C. V6E 4E6 Dear Mr. Donohue: Re: Pacific Northern Gas Ltd. (“PNG”) Annual Gas Contracting and Price Management Plan for 2005/06 PNG-West, Fort St. John/Dawson Creek and Tumbler Ridge The Commission accepts PNG’s Annual Gas Contracting Plan (“ACP”) and Price Management Plan (“PMP”) as amended in the June 8, 2005 letter for the 2005/06 gas contracting year subject to directions as outlined in the confidential attachment, Appendix A. The Commission remains concerned that PNG-West and Tumbler Ridge residential customers are paying natural gas rates in excess of electricity even though PNG continues to suggest that the marginal difference between gas and electric rates will not cause residential gas customers to convert their natural gas systems or appliances to electricity. In order to protect customers from further increases at a time when natural gas price movements have been extreme, PNG proposes a more measured winter hedging program in its June 8, 2005 revision to its PMP. PNG’s objective is to shield customers from further exposure to even higher gas prices that may occur as the year unfolds. There must be a balance in the portfolio between the risk of embedding high gas prices through hedging if the market price of gas should decline and the prospect of taking advantage of lower prices if this event should occur. PNG states that avoiding exposure to short term price volatility is a higher priority than maintaining competitiveness with electricity but it does not provide support for this position. The Gas Cost Variance Account will dampen the impact on rates from extreme changes in gas prices in the short term. PNG provided limited information about the rates that would result from current gas prices or the demand response that would be the product of these rate levels. The Commission believes that when PNG is executing its PMP it should be cautious about the impact this plan may have on customer’s bills and consumption. As in past years, all individual gas supply contracts and amendments should continue to be filed prior to November 1, 2005 pursuant to Section 71 of the Utilities Commission Act. The ACP and GCP for 2005/06 will be held confidential, except for the Executive Summary. Yours truly, Original signed by: Robert J. Pellatt RB/yl PNG/Cor/APC and PRMP 2005-06
ends to secure to G's gas sales cust strategies. Cost/Price Management: tain the competitive o Ensure price diversi ggregate dernan al Gas Contracting an es the physical gas average and peak day ember 2005 to October as price management
G's overall gas price age the volatility of 's exposure to gas same time, strive to keep gas prices within a range that maintains the competitiveness of P G's bundled gas sales rates to alternative energy sources. sales customer A higher percentage of forecast sales is to be hedged over the November 2005 to March 2006 winter period (i.e. 76 percent of forecast sales) compared to the ctober 2006 summer period (i.e. 42 ercent of forecast sales).
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