Interrupter in action: How the UARB makes the call on gas prices

Stephen McGrath and Eric Kirby sat down across a boardroom table at the offices of Nova Scotia's Utility and Review Board last Friday.

It was time to talk about gas and diesel.

"In terms of price, so it was down, it dropped significantly yesterday. But was it up today?" asked McGrath, the review board's chair.

"Oh, yes. This morning, the market's back up as of noon," replied Kirby, the UARB's in-house expert on fuel prices. 

It could have been a conversation between any two Nova Scotians nervously eyeing the markets as the war in Ukraine drove fuel prices to painful new heights. 

But this was an official discussion to decide what drivers would be paying at the pumps on Saturday morning as the board invoked its "interrupter clause" on fuel prices. 

CBC News received permission to sit in on this conversation, which took place before the board even announced the interrupter would take effect. 

CBC News had to agree to keep the board's decision secret until after midnight, when the price is changed at the pumps.

An adjustment was inevitable.

The wholesale price of both gasoline and diesel fuels had already dropped on the New York market by more than eight cents, triggering an automatic price change on top of the routine weekly adjustment that took place that morning. 

Despite the drama of the discussion, at least for a reporter, McGrath said there is little leeway when determining how much fuel will go up or down. 

Secrecy essential

"We don't decide globally what it should be," he said. "It's based on the regulations, it's based on the formula, it's based on the New York prices. So we really have a limited scope in terms of the amount of adjustments that we can do."

The formula is public and the board posts the details of every decision online.

But there are still factors at play the public can't predict. One is the minute-to-minute fluctuation of wholesale fuel prices. 

The UARB pays $18,000 per year for a subscription to a real-time feed of New York market prices for gas and diesel. The subscription stipulates that the numbers can't be shared to the public.

The second unknown is the practice of "forward averaging," where the board makes price adjustments to offset gains or losses from market fluctuations between price changes. 

During Friday's discussion, Kirby suggested a forward averaging reduction of 3.6 cents per litre for gasoline, and four cents per litre for diesel.

"It provides a little bit more room if the price continues to go up today," Kirby said during his presentation to the chair. 

"And it also reduces the size of the magnitude of the interruption, which could help the retailers if they're stuck with any expensive gas in their tanks at this time." 

McGrath said confidentiality around these discussions is essential until midnight, when the new price is revealed. 

This keeps both drivers and fuel wholesalers from timing their purchases and deliveries at the expense of gas stations. 

Wholesalers do get an early peek at the new prices in a confidential email. They need the information in order to reprogram the pumps in time for the change.

After a roughly five-minute presentation, plus a minute of low-key discussion, McGrath accepted Kirby's recommendations. He signed an order to drop the price of gasoline by 9.8 cents per litre, and lowering diesel by 17.6 cents per litre.

Wild welcome

It was the fourth time the UARB had used the interrupter clause in 10 days. By comparison, it was used five times in the last five years.

"It's been a lot busier than it typically is the last few weeks," Kirby said. "As opposed to a couple-hour job a day and meeting once a week, it's been hours a day and three or four meetings."

McGrath used to be director of legal services with Nova Scotia's Department of Justice.

He became chair of the UARB on March 1. His first interrupter clause discussion took place that morning. 

"Well ... it's not a welcome introduction, but it is what it is. And we've got very good staff here who know what they're doing," McGrath said. 

"This has been an unprecedented couple of weeks," he said.

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