Residential Enbridge Gas customers will start paying 'fair share'

The general manager of Enbridge Gas New Brunswick says residential customers are going to have to start paying more of their fair share of the costs of providing the service, but the increase will be spread out over decades and could be offset in part by attracting new customers.

As it stands, residential customers are paying only about 49 per cent of the cost of serving them, said Gilles Volpé.

"We have an imbalance right now, where residential customers are heavily subsidized by commercial and industrial customers. And over time, utilities — and it happens in every utility — you try to rebalance that subsidy," he said.

"So the rates will go up slightly for residential [customers] over a long time, decades typically, and the same thing for commercial and industrial customers, the rates will go down over a long time."

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On Tuesday, New Brunswick's public intervener raised concerns about what the provincial government's settlement of a lawsuit with Enbridge could mean for residential rates.

Under the deal, Enbridge can increase residential distribution rates by a maximum of three per cent in 2018 and again in 2019, while rates are frozen for commercial and industrial customers, said Heather Black.

And in 2020, when those caps are lifted, Enbridge will be allowed to use rate increases to help recover $144 million of the $178 million in debt it incurred building its pipeline network, she said.

Rates, however, are only one component of a customer's total bill, stressed Volpé. The other is the cost of the gas itself.

Historically, when the price of the commodity increased, Enbridge decreased its distribution rates and vice versa, all in order to keep the total cost stable and 20 per cent less than the price of electricity.

In 2015, for example, the price of gas went up to about $12 or $13 and the utility dropped its distribution rates by 52 per cent to keep the total cost around $19 per gigajoule.

So even though Enbridge has applied for a 30 per cent increase in distribution rates for residential customers, effective Jan. 1, and can charge up to three per cent more in each of the subsequent two years, Volpé contends the overall impact on their total bills "may actually be zero" if the price of gas goes down, as predicted.

Information Morning - Fredericton18:01Gilles Volpe - Enbridge

Terry Seguin talks to the general manager of Enbridge Gas NB about the deal Enbridge has made with the Gallant government.And while Enbridge will no longer be required to keep residential rates lower than electricity rates starting in 2020 as part of the lawsuit settlement, Volpé points out the utility does not want to lose customers through rate hikes.

"We're not going to price ourselves out of the market," he said.

In addition, the settlement agreement includes a 25-year extension on Enbridge's franchise, followed by another 25-year extension, which provides long-term stability, enabling the utility to invest more in attracting new customers to help shoulder the costs, Volpé said.

Enbridge has lost about 250 or 300 customers in the past 18 months because propane is cheaper than natural gas, but Volpé describes that as an anomaly.

The price of propane is increasing again "so that's going to rectify itself and we expect those customers will come back," he said.

The two lawsuits filed by Enbridge were for $650 million for breach of contract and $176 million, the amount it said the PCs were blocking it from accessing in the deferral account.

Enbridge has about 12,000 customers in New Brunswick.