CRITICS FEAR NATURAL GAS USERS WILL PAY FOR LNG PROJECTS
NDP critic says ratepayers could end up subsidizing pipelines and liquefaction plants for export
FortisBC’s natural gas customers could fund as much as $1.56 billion of LNG projects out of their own pockets because the B.C. government allowed the company to bypass a regulatory review which might have disallowed it.
“People will be pretty cranky when they find out,” said NDP resources critic Bruce Ralston. “Ordinary individuals heating their homes are paying for these projects.
“It’s good for the company, but is it in the interests of B.C.ers? There is no benefit to ratepayers,” he said.
The company has approval to include the upfront costs of its LNG investments as part of the “regulated base,” meaning general customers’ utility bills, even though LNG does not directly benefit them.
The government’s order-in-council last December allowed FortisBC to proceed with major projects without the customary review by the B.C. Utilities Commission, which decides whether rate capital expenditures are appropriately applied to the general customer base.
Energy Minister Bill Bennett provided the rationale on Jan. 23, saying that economic development needs “certainty that will support final investment decisions.”
“Our goal is to … make it easier for LNG proponents … to access and use natural gas,” said Bennett.
Critic Eoin Finn said it was “disturbing” that customers could have to pay for a $520-million pipeline from Coquitlam to Woodfibre on Howe Sound. The pipeline is for Woodfibre LNG, an export plant which awaits a final investment decision from Indonesian billionaire Sukanto Tanoto.
“The public didn’t ask for the Woodfibre line and shouldn’t have to pay for it,” said Finn. “This is public pain for private gain.”
Mark Jaccard, former head of the B.C. Utilities Commission which overseas public utilities, said the government’s decision was puzzling.
“One must ask why the B.C. government eliminated this prudent oversight unless they were afraid that the commission would find these investments too risky,” said Jaccard. “The commission’s role is to make sure that one group of customers is not subsidizing another.”
David Haslam, a spokesman for the Energy Ministry, said in an email the “full costs of expansion” will be covered by a “natural gas transportation tariff” for a new class of industrial customers.
“Wood fibre will pay an initial rate of 77 cents per gigajoule over a period of 25 years. The rate will be high enough to cover the marginal cost of service associated with the project,” he said.
FortisBC said in a statement that existing gas customers assume no financial risk from LNG projects.
“To the contrary, customers will actually benefit from the development of these projects,” FortisBC vice-president Douglas Stout said in an email.
“The rate these large industrial customers will pay both recovers the cost of the infrastructure upgrades, and in fact, provides an additional benefit that will lower natural gas delivery rates for all FortisBC natural gas customers.
“In addition, long-term contracts will be in place which provide financial security to mitigate risks to B.C. natural gas customers.”
FortisBC has almost one million natural gas customers in B.C.
Expansion began last October with construction of a $440 million storage tank and liquefaction facility at Fortis’s Tilbury Island site in Delta.
Barry Perry, president of parent company Fortis Inc., said on May 5 that $1.12 billion worth of upcoming projects have received approval from the B.C. government, but they are contingent on final investment decisions. The projects include:
A further $400-million expansion at Tilbury;
The $520-million pipeline to Wood fibre;
A $200-million investment to expand the coastal gas transmission system “in support of these projects,” said Perry.
The National Energy Board has approved up to 120 tankers per year delivering LNG via the Fraser River.
New Democrat MLA Bruce Ralston, seen here Wednesday at FortisBC’s Tilbury Island LNG project in Delta, has taken aim at exempting the project from regulatory review.