Northwest residents and businesses will be paying more for natural gas as of Jan. 1, 2016 because of an interim rate increase approved by the BC Utilities Commission for Pacific Northern Gas (PNG).
This is an interim increase for delivering natural gas and a final decision won’t be made until the spring when formal hearings are planned.
While the interim delivery hike for residents is 1.8 per cent, from $11.755 a gigajoule to $11.987 a gigajoule, add-ons push the increase higher.
Those add-ons allow PNG to charge more to recover overall delivery costs should not as much gas be consumed as forecast and more for the cost of the commodity itself should the gas price rise higher than forecast.
In both cases, however, those costs can be refunded should delivery revenues be higher than forecast and should the price of the commodity itself not be as much as forecast.
PNG does not add to the cost of gas it purchases for its consumers and that cost is adjusted to meet market prices throughout the year.
In asking for increased rates, (PNG) says wage increases, increased inspections, general business costs and inflation are part of the reason its expenses are scheduled to rise by 14.5 per cent or $2.3 million.
And it’s also not adding in any option payments made to it to hold space in its northwestern pipeline, as has been the practice in past years, to feed a planned small liquefied natural gas plant near Kitimat.
But the utility also has some good news for its balance sheet – an additional estimated $2.4 million from natural gas sales to Rio Tinto Alcan now that it has completed its Kitimat smelter modernization project and is shifting to full production.
When increased income is weighed against additional expenses and loss of other income, the utility is projecting a revenue deficit of nearly $600,000 should it not be given a rate increase.
Northwestern B.C. natural gas consumers pay more to have gas delivered here than elsewhere in the province because they shoulder more expenses to maintain the delivery system. That dates back to the loss to PNG of large industrial customers beginning in the last decade.
Without those large customers and their revenue, the cost of maintaining the PNG pipeline has fallen to residents and remaining business and industrial customers.
In past years delivery costs to PNG customers had been buffered by income from the sale of its interest in the planned Pacific Trails Pipeline which would provide natural gas to the proposed Kitimat LNG project at Kitimat. Those payments have now concluded.
PNG customers had also benefitted from option payments paid to the utility to hold space in its pipeline for the planned Douglas Channel LNG project, also at Kitimat, in which PNG’s owner, AltaGas of Calgary, is a partner. But for 2016 PNG is holding off on applying option payments until, as it states in its rate increase application to the utilities commission, “there is greater clarity and certainty that the project will proceed.”
That’s because Douglas Channel LNG’s partners had been expected to make a final decision by the end of 2015. When that is to be now made is not known, something made more complicated by a decision by federal customs officials to charge a duty of $100 million for the Asian-built floating platform on which the plant to liquefy natural gas would be placed. That decision is being appealed.
The Douglas Channel LNG project is also the one great hope for reduced delivery charges for PNG’s other northwest customers.
The plant would take up the remaining capacity in PNG’s pipeline, adding substantial operating revenues to the utility’s bottom line.