Government desire to erase a political black mark and the efforts of a consumer champion have come together to open a natural gas can of worms in Alberta. The coincidence has spawned a regulatory case to answer a tricky question: Who should pay the freight for delivering gas to the "core market" of residential, commercial and public service users such as hospitals and schools?
The lone but determined consumer has won a rare provincial hearing into a citizen demand for economic fair play that would cut Albertans' gas bills by C$680 million (US$666 million) a year. In agreeing to hear the request the fledgling Alberta Utilities Commission (AUC) sent a message that the province's energy regulators -- and by association, the Conservative regime that appoints them -- aim to change their reputation for listening only to big companies by granting the review, say participants in the case.
"You have to walk the talk," AUC spokesman Jim Law said. The new agency recently opened its Calgary headquarters with a pledge to "make sure people's rights are respected and their interests are recognized" by novice AUC Chairman Willie Grieve.
"People need to be assured that when we say we will listen to you, we will," Law said.
"It's encouraging to get your day in court," consumer crusader Russ Duncan said. His application for a new pipeline toll regime was the first citizen initiative to reach the AUC since its birth two months ago in an overhaul of the troubled Alberta Energy and Utilities Board (AEUB).
The changes followed a protracted, noisy Alberta scandal over the AEUB's handling of a hotly contested power industry application to build a new grid "backbone" transmission line between the province's biggest cities, Edmonton and Calgary. Two inquiries sided with resisting landowners and opposition political parties in vigorously condemning the AEUB after it admitted to hiring private detectives to eavesdrop on opponents of the project. The AEUB's security department was fired and three board members resigned. The AEUB was divided into the AUC as a power facilities utility services watchdog, and a revived Alberta Energy Resources Conservation Board, primarily responsible for gas and oil field and pipeline development.
Duncan's plan calls for core-market gas consumers to be treated the same way as big industrial users by obtaining benefits of a pipeline toll policy widely used in Alberta and known as "transportation by others."
About C$78 million (US$76 million) in annual delivery costs on separate or spur lines into industrial sites, such as refineries and oilsands plants, are covered by tolls taken from all suppliers using Alberta's main grid, Nova Gas Transmission, Duncan estimates. The practice has grown as a combination of expanding industry and additions to local distribution systems made Nova face potential competition and bypasses.
Duncan is urging the AUC to make Nova, a subsidiary of TransCanada Corp., also cover all delivery costs for home, commercial and public-service fuel distributors Atco Gas, AltaGas Services and Direct Energy Regulated Services.
His proposal would overthrow a practice as old as the Alberta gas industry of tacking all core market delivery charges onto monthly gas bills as service fees. An extension of deregulation to encourage retail market competition, still new in Alberta, is partly responsible for the forthcoming case. Until the policy change, pipeline charges were passed on as part of bundled gas service, which kept them out of consumers' sight on their bills.
Ending the tradition of making consumers pay the freight would give Duncan annual savings of C$227.64 (US$223) off fuel for a family cabin at MaMeO Beach, a resort about 100 kilometers (60 miles) southwest of Edmonton, and C$450.12 (US$441.12) for a Calgary condominium. The change would generate similar benefits in most Alberta locations.
The reform would increase gas suppliers' tolls on the Nova grid, currently about C$1.2 billion (US$1.17 billion) a year, by C$681.4 million (US$667.8 million), the precision-minded Duncan calculated in his application to the utilities commission.
But most of the 61% total toll hike would be spread across the natural gas industry as a relatively modest increase in fees for Nova's biggest business of providing the first leg in transporting exports, Duncan said. About 80% of Alberta production is sold outside the province. The majority goes to the United States. Gas export revenues were C$27.8 billion (US$27.2 billion) last year, according to records of the National Energy Board.
The consumer request comes complete with an attractive environmental facet. The Alberta government could take a share in the proposed consumer savings by cutting core-market winter gas rebates from the provincial treasury and use the money to invest in carbon emission-reduction programs, Duncan said. The AUC could prod the government into action by making policy recommendations as part of its eventual ruling on the pipeline toll case, he predicted.
Duncan is an amateur at pipeline tolling and regulation, but a veteran gas industry professional who also has experience in local politics. He is a 58-year-old engineer who had a long career with gas production firms before founding Skyhunter Exploration, which uses new airborne remote-sensing technology to sniff out drilling targets.
He is also a former MaMeO Beach municipal counselor who had a hand in advancing a contested sewer project as an environmental cleanup for the cottage community. He said fights over paying for sewers drew him to consumer affairs, such as gas bills, by showing that expense changes that seem modest to upper crust Albertans can be a serious matters for many families.
The review of his pipeline tolls proposal is only beginning and a decision is expected to take months. His case is tied into a wider AUC review of current and potential competition in gas transportation within Alberta. The new commission's decision to give a consumer proposal an airing was no surprise to the gas industry, whose economists and lawyers are peppering Duncan with written questions about his scheme.
"That's what the agency is there for," said Greg Stringham, a vice-president of the Canadian Association of Petroleum Producers (CAPP). "They want to ensure right out of the chute that they're open to all ideas," Stringham said.
"You've got to show you're balanced, open and efficient," the CAPP executive said. He added that CAPP favors a policy of ensuring the user pays for pipeline services. But in the eyes of consumers that position only asks the question in the Duncan case in a different way. Who is the user of the distribution lines -- the gas suppliers that make part of their living off the sales, or the customers that heat and cook with the fuel.
"We are encouraged," said Jim Wachowich, a veteran regulatory affairs lawyer for the Alberta Consumers Association and Liberal candidate for the next Canadian federal election. The group has not decided whether to support Duncan's proposal, but backed him for months of previously unsuccessful efforts to obtain a hearing, Wachowich said. "You often don't get a voice unless you fight for the right to have one," said the Edmonton lawyer.
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