Natural gas threatened in New Brunswick, says Enbridge Gas exec

Natural gas may not survive in the province if it is subjected to ongoing fierce price competition like it is currently enduring from propane, the head of Enbridge Gas New Brunswick suggested on Tuesday.

"At some point, if these extreme extraordinary competitive situations continue, we're going to have to reassess the viability of natural gas," EGNB general manager Gilles Volpé told the Energy and Utilities Board (EUB) during a rate hearing.

Enbridge is seeking a number of changes to its distribution rates, much of it designed to deal with aggressive competition from provincial propane retailers, which have poached more than 200 large natural gas customers in the past year.

That's not good news for homeowners, who haven't drawn the interest of propane retailers, due in part to their low consumption, and who are the only customer group facing rate increases.

Seeking 49% distribution hike for homeowners

Enbridge has asked the EUB to let it increase residential rates by 49 per cent to $7.24 per gigajoule, up from $4.85.

Enbridge contends the $2.39 per gigajoule increase should not be noticed since the price it is charging homeowners for natural gas itself has fallen $4.10 over the last 12 months.

It would amount to about $200 a year for the average homeowner, according to their figures.

But other than homeowners, most natural gas customers are looking at modest to major discounts.

Most significantly, Enbridge wants a $2 per gigajoule cut in distribution rates (16 per cent) for smaller commercial customers, such as stores, restaurants, and apartment buildings, which propane competitors have been trying to lure away.

Paid commercial customers not to switch

On Monday, Enbridge revealed 73 of its commercial customers had to be paid an average of $6,700 each to not switch to propane last year, and executives told the company's rate hearing the same is likely required to hang onto critical business customers again this year, even with price discounts.

"The retention program is targeting what we are defining as the highest value customers that are under attack by the propane alternative at this point, said Volpé.

There are no plans to advertise the program. Volpé said it will be up to customers, who are being offered better deals, to approach Enbridge about price matching.

It's in the best interest of everybody not to lose the customer because if you lose the customer, everybody's going to pay for the contribution he was making to the fixed costs.- Edwin Overcast, expert for Enbridge

"We will deal with those customers as they come in," he said.

Enbridge acknowledges it lost more than 200 commercial customers to lower cost propane last year and failed to sign up another 300 commercial accounts it had been budgeting to add to the provincial distribution system.

Propane prices hit a record low in New Brunswick last year and have stayed down most of the winter, wholesaling for as low as $5.00 per gigajoule at the central marketplace in Sarnia, Ont.  

Enbridge itself paid individual customers to stay last year, but the company is asking the EUB to let it charge customers for the cost this year.

Enbridge expert witness Edwin Overcast told the hearing that customers dropping off the natural gas system raise the cost for everyone left behind, and therefore all should help pay to keep them.

"It's in the best interest of everybody not to lose the customer because if you lose the customer, everybody's going to pay for the contribution he was making to the fixed costs," said Overcast.