B.C. Natural gas prices could jump by 20%

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Last Updated: Thursday 19 October 2000 TOP STORIES

Natural gas prices could jump by 20%, experts warn

Consumer advocates predict users may be hit with the fourth price hike in two years. Glenn Bohn Vancouver Sun A cold winter could send natural gas prices "through the roof," consumer advocates are predicting.

Natural-gas users have already been dealt four significant price hikes since 1999 -- including a 33-per-cent increase in July -- but BC Gas is hinting there may be another increase on the way.

Residents should brace themselves for a 20-per-cent hike, warns Richard Gathercole, executive director for the B.C. Public Interest Advocacy Centre.

Gathercole -- a lawyer who has represented pensioners, consumers and other groups at B.C. Utility Commission hearings over the past 15 years -- expects the increase to hit the Lower Mainland by January.

"Right now, everyone in the natural gas industry is crossing their fingers, hoping that global warming works and we have a warm winter," Gathercole quipped. "If we have a cold winter, the prices are really going to go through the roof."

Vancouver consultant Lloyd Guenther predicts a 13- or 14-per-cent rate increase this winter.

On the bright side, he said, natural gas prices should eventually drop because more money is being invested in exploration, which should increase supply.

But some argue users are paying too little when environmental costs are taken into consideration.

Mark Jaccard, an associate professor at the school of resource management at Simon Fraser University, chaired the B.C. Utilities Commission between 1993 and 1997.

Jaccard said consumers are still getting a good deal because they enjoyed about a dozen years of low prices after Canadian governments stopped regulating natural gas prices in 1986.

"The price of energy is still too low," said Jaccard, who once tried to stop the promotion of natural gas-fired outdoor space heaters for patios.

"People are still not paying the true environmental costs of using natural gas. Relative to other fossil fuels, natural gas is cleaner, but does that mean you should have a natural gas fireplace? I don't think so."

BC Gas hasn't yet applied to the B.C. Utilities Commission for another price increase, but its spokesman conceded that more price hikes are coming.

"As long as the price of the commodity continues to increase -- and it is -- it's inevitable that, sooner or later, this will be reflected in an increase in the price at the consumer level," said Verne Prior, the company's media relations manager.

Prior refused to comment on Gathercole's prediction of a 20-per-cent hike.

"I'm not going to engage in speculation," he said. "If that's the figure he wants to live with, that's his choice."

B.C. Utilities Commission executive director Bill Grant expects an application in late November for a price increase that would take effect in January, 2001. Grant doesn't yet know the size of the rate hike that BC Gas will seek, but he knows it will be added on to the three- or four-per-cent hike the company needs to start paying for a new pipeline across southern B.C.

"I don't have the information yet to judge whether it will be as high as 20 per cent," Grant said. "I sure hope not."

Although the provincial commission gives its blessing to new gas prices for residential consumers, Grant said the commission can only scrutinize the buying practices of BC Gas to ensure it is getting the lowest market prices possible and that it doesn't mark up the price when it distributes gas to consumers.

Poverty advocates say future increases should not be passed on to the poor, who are already struggling with the last increase.

But Grant said the commission can't insist utilities offer lower prices to the poor. The commission's previous attempts to have social and environmental considerations taken into account have been overturned during appeals to the courts.

Jenny Shaw of the West End Seniors Network said most seniors in the Vancouver neighbourhood are renters, but landlords will pass on higher natural gas rates through rent increases after giving three months' notice.

"Most of the members we have are seniors who live below the poverty line, so they're paying what they can afford now," she said.

Surrey resident Dorscle Paterson already spends a significant portion of her pension heating her home. The 87-year-old estimates that she will have to pay $350 a month to heat her home this winter -- a bill that would consume most of her $420-a-month pension.

Paterson has more than 2,000 names on a petition asking the B.C. government to return some natural gas profits to the poor.

In northern B.C., where colder winters mean even higher home heating costs than Greater Vancouver, there are already some early warning signs of a natural gas price hike this fall and winter. Pacific Northern Gas, which provides natural gas service in northwestern B.C., has asked the commission to approve a 10-per-cent increase this month and another 16.5-per-cent increase on Jan. 1, 2001.

Audrey Schwartz, of a Prince George-based group called Active Support Against Poverty, said people on low incomes can't afford to pay more for home heating this winter.

"At this point, the money they're paying for shelter is coming out of their food budget," she said.

When Lower Mainland residents in July were hit with an average price hike of 33 per cent, it marked the fourth increase over a relatively short period of time. There was a seven-per-cent increase in January 2000, a 10-per-cent increase in September 1999 and a 10-per-cent increase in January 1999.

When one takes into account those increases are compounded on one another, natural gas prices have climbed an extraordinary 72 per cent for Lower Mainland residential customers since January 1999.

But BC Gas Inc., which reported profits of $54 million during the first half of 2000, says the company is not pocketing any additional profit due to continent-wide increases in natural gas prices.

"We're only a distribution company," Prior said. "The price of the commodity is market driven, and beyond our control."

Even industry watchdogs like Gathercole conceded that point.

Before 1986, provincial governments set the natural gas prices that consumers paid, but that year the provincial and federal governments agreed to de-regulate the industry. For many years, there was a glut of natural gas and there weren't pipelines to carry B.C. and Alberta's natural gas to U.S. markets.

Now, however, there are pipelines to energy-intensive eastern U.S. markets, and more natural gas drilled in western Canada is being sold across North America at continental market prices.

Gathercole said the deregulation of U.S. utilities during the past decade has increased North American demand for natural gas and driven up commodity prices. Over the years, states with higher electricity prices allowed more and more competition, making higher-cost coal and nuclear-generated power less attractive to power companies, which built new natural gas-fired electricity power plants. The controversial proposal for a new natural gas-fired power plant in Sumas, Wash. just south of Abbotsford is just one of the new projects cashing in environmental concerns about nuclear waste disposal and pollution from coal-fired power plants, which cause more local pollution and generate more greenhouse gases than natural gas-fired power plants. And the North American Free Trade Agreement prevents the B.C. government from setting lower natural gas prices for B.C. consumers.

"Now that it's a freely traded commodity like pork bellies, I believe that NAFTA provisions would apply," said Grant of the B.C. Utilities Commission.

"Now, with the pipelines being fully integrated in North America, the price is largely a North American price, less the transportation charges."

Added Gathercole: "The market rules. Even if the B.C. government or the Utilities Commission wanted to do something to turn off the tap to the U.S., they can't because we have NAFTA."

http://www.vancouversun.com/newsite/news/001019/4713742.html

-- Martin Thompson (mthom1927@aol.com), October 19, 2000


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