FortisBC is proposing to move to common rates and services across the province, which will be made possible by amalgamating its three natural gas utilities into one legal entity.
Bringing all three natural gas utilities together as one entity will allow FortisBC to offer consistent natural gas rates and services for all customers across the province, which will eliminate the current rate discrepancies.
If our application is approved, each customer in a given customer class will be charged the same rate, regardless of where they live. This provides significant benefits to a sizable portion of our customers, notably on Vancouver Island, Sunshine Coast and in Whistler over the longer-term.
We are committed to providing all our customers in British Columbia with economic and fair natural gas rates. Our application is revenue neutral to FortisBC and the proposed changes offer several benefits to many of our customers.
FortisBC’s current structure
Currently, FortisBC provides natural gas to customers across the province under three separate legal entities with entity-specific rate structures. These separate legal entities were formed as various natural gas utilities were acquired across the province. Each entity is responsible for providing natural gas service in different areas of the province and customer rates differ based on which region of the province a customer lives in. The three natural gas utilities are:
- FortisBC Energy Inc. – serving customers in the Lower Mainland, Columbia and Inland regions
- Fort Nelson, although legally part of FortisBC Energy Inc., is treated as a separate region and has its own rate base and rate structure
- FortisBC Energy (Vancouver Island) Inc. – serving customers on Vancouver Island, Powell River and the Sunshine Coast
- FortisBC Energy (Whistler) Inc. – serving customers in Whistler and Squamish
If the application is approved by the British Columbia Utilities Commission (BCUC), all of FortisBC’s regulated natural gas utilities will be one legal entity under the name FortisBC Energy Inc. The company’s electric operations will remain a separate utility with a separate legal name – FortisBC Inc. – with separate rates and service offerings for electricity customers. Customers will continue to know all of the companies under the shared name FortisBC.
Benefits of amalgamation and common rates
Overall, amalgamation offers several benefits including lower rates for some Vancouver Island, Sunshine Coast and Whistler customers, rate stability and simplicity for all, consistent programs and services, and greater reporting and operating efficiencies.
Lower rates for Vancouver Island, Sunshine Coast and Whistler customers
Without common rates, FortisBC’s forecasts indicate an approximate 20-40 per cent cumulative rate increase for Vancouver Island customers over the next three to four years, as a result of the expiration of the Royalty Revenue agreement with the provincial government at the end of 2011. This agreement was put in place to help offset the cost to Vancouver Island customers of bringing natural gas to the Island 20 years ago. Common rates will mitigate the impact of this.
For example, based on average consumption and approval of FortisBC’s 2012-2013 revenue requirements application, currently before the BCUC, typical residential customers on Vancouver Island and Sunshine Coast would see a decrease of approximately $256 to their annual bill, while typical residential customers in Whistler would see a decrease of approximately $615 to their annual bill.
Rate stability and simplicity
The costs to operate our business, including costs related to infrastructure investments, ongoing maintenance or system replacements required to meet new customer demand for natural gas, will be spread across all customers around the province. Also, loss of customers or a reduction in use per customer will have less of an impact with a larger customer base. For these reasons, amalgamation will help provide rate stability for all customers, particularly those in smaller service areas such as Vancouver Island, Whistler and Fort Nelson.
Consistency
FortisBC will offer similar services for similar prices and be able to expand its service offerings, such as the renewable natural gas program, to all customers across the province.
Reporting and operational efficiencies
FortisBC may see efficiencies in its reporting requirements for regulatory, legal and financial filings. Any savings arising from reporting and operational efficiencies will help to lower rates for natural gas customers.
Fort Nelson
For Fort Nelson, FortisBC is proposing no change to rates from the proposed 2013 revenue requirement application, currently before the BCUC, by deferring the impacts of common rates for a five year period after which a gradual annual increase will come into effect over a ten year period until Fort Nelson rates align with the rest of the province.
Over the longer term, Fort Nelson customers will benefit in a similar way as customers in Whistler. Costs from the region, such as significant localized investments in infrastructure, will be absorbed by the broader customer base, thereby stabilizing rates.
In addition to rate stability, Fort Nelson customers will benefit from access to new service offerings not previously offered such.
Lower Mainland, Columbia and Inland
FortisBC is proposing an initial small decrease to rates for typical residential customers in the Lower Mainland, Columbia and Inland areas in 2013. Based on average consumption and revenue requirements applications currently before the BCUC, typical Lower Mainland residential customers would see a decrease of approximately $4 to their annual bill, while typical Inland and Columbia residential customers would see a decrease of approximately $3 to their annual bill. By 2015, as a result of common rates, typical residential customers in the Lower Mainland, Columbia and Inland areas would see an increase of approximately $36-46 to their annual bill.
Next steps
Prior to filing our application, FortisBC held public information sessions in communities across the province to gather information and feedback on our proposal to move to common rates. We thank those who provided feedback. Your comments have been provided to the BCUC and will be reviewed as part of their regulatory process. To learn more about the BCUC regulatory process, visit bcuc.com.
FortisBC expects a decision on our application by early 2013. If the BCUC approves FortisBC’s application, there will be common rates and service offerings for all natural gas customers across the province prior to 2014.