An application by FortisBC to introduce common rates for all of its customers has been turned down by the B.C. Utilities Commission.
FortisBC had applied to the commission to amalgamate its three provincial utility companies into one in an effort to introduce a uniform rate across the province.
Currently, Vancouver Island, Powell River, Sunshine Coast and Whistler natural gas customers pay more for natural gas service because the infrastructure that supplies it is newer, though all customers all pay the same rate for the gas itself.
If approved, those customers would have ended up paying substantially less for their gas service.
BCUC made the decision Feb. 25, citing common rates – also called postage stamp rates – would be unfair to those already paying less.
“The panel determined that the FEU proposal to implement postage stamp rates, involving, as it does, substantial rate decreases for customers of FortisBC Energy (Vancouver Island) and FortisBC Energy (Whistler) Inc. at the expense of FortisBC Energy Inc. customers in the mainland and Fort Nelson areas is not fair, when viewed against accepted principles of rate design,” said the report, which provided reasons for the denial. “The panel therefore concluded that the postage stamp rate proposal would result in rates which would be unjust, unreasonable, unduly discriminatory or unduly preferential, contrary to section 59 of the Utilities Commission Act and should therefore be denied.”
The commission’s panel also noted that rates are different among the different utilities but considered that the regional differences support the use of different rate designs which are better suited to the circumstance of the individual utilities.
Currently, Lower Mainland gas customers pay about $3 per gigajoule for gas while Vancouver Island residents pay as much as $14.
Tracy Tang, spokeswoman for FortisBC, said the rate structure is complicated, but the utility charges all of its customers the same rate the company pays for natural gas across the province. Vancouver Island, however, only received natural gas service 20 years ago, so the infrastructure is newer than the mainland’s and customers pay more to service higher debt levels for that infrastructure.
“Because Vancouver Island is a younger utility, obviously the servicing infrastructure costs naturally with a younger utility are going to be higher. It’s the same thing with our company in Whistler,” said Tang. “The nut of the conversation is by combining our utilities and operating as one we thought there was a case … that made good business sense and it made good sense to simplify the rate structure for our customers. We are disappointed that that decision came back as a negative.”
She added that if the application had been approved, Vancouver Island gas residential customers would have seen an estimated 25-per cent decrease in their bill amounts over the course of a few years.
Instead, Vancouver Island residential customers could now see gas utility bills increase over time with the expiration of the Royalty Revenue agreement with the provincial government that ended in 2011. The agreement was put in place to help offset the cost to Vancouver Island customers of bringing gas to the Island in the early 1990s.
“Without common rates, Vancouver Island, Sunshine Coast and Powell River customers will see large rate increases over the next three to four years,” said the FortisBC website.
FortisBC serves about 850,000 customers provincewide in more than 100 communities with 40,000 kilometres of distribution mains. On Vancouver Island, it serves about 102,000 customers located in about 40 communities through 6,360 kilometres of pipeline.