About the Proposed Gas Cost Consolidation
Since 1968, PNG has safely and reliably delivered natural gas to our valued customers throughout northern B.C.
PNG’s pipeline systems and infrastructure deliver gas to heat to homes and businesses in the communities we serve. We operate effectively and efficiently, working hard to keep our costs low and to keep rates stable and fair.
In response to customer feedback and direction from our regulator, the British Columbia Utilities Commission (BCUC), PNG has evaluated new pricing methods for allocating gas costs to our customers.
As a result of that process, PNG now proposes to consolidate gas costs across our five service areas: PNG West, Granisle, Dawson Creek, Fort St. John and Tumbler Ridge.
Today, customers in each service area pay a different price for gas. Under our proposal, customers will pay the same price. We believe this proposed gas cost consolidation will provide customers with the right balance of pricing simplicity, fairness and efficiency. Other utilities in British Columbia also have consolidated commodity charges.
Moving to consolidated gas costs will result in modest bill reductions for most residential and small commercial customers. For example, a residential customer in PNG West, Dawson Creek and Fort St. John will see an average annual bill reduction of approximately 1%. This equates to bill savings of about $10 to $20 per year, depending on the size of the home. Customers in Granisle and Tumbler Ridge will see larger bill reductions because they currently pay much higher prices for gas. A limited number of large commercial and small industrial customers in all service areas will see a modest bill increase of approximately 1% to 3%.
Understanding How Rates are Set
PNG’s rates are regulated by the BCUC, an independent regulatory body that sets rates for energy utilities in British Columbia.
Natural gas and propane are energy commodities traded on the open market like other commodities, such as wheat, coffee or lumber. As with most commodities, the market price is primarily driven by supply and demand. When demand is high and supply is low, the price typically rises. When demand is low and supply is high, the price typically drops.
PNG buys gas on behalf of our customers. We pass on these direct costs to you without markup. Simply put, you pay what we pay.
The gas commodity charge on your bill is made up of three parts:
- the market cost of buying gas;
- the delivery cost of transporting the gas from market to each PNG service area;
- and the cost of storage to ensure the gas is available when you need it.
PNG consolidates these gas costs into a single $/GJ charge, called the Commodity Charge on your bill. This charge on your bill reflects the actual cost of gas you’ve consumed during each billing period.
The BCUC approves the pricing methodologies we use to allocate total energy commodity costs to customers. Because the cost of gas fluctuates with changes in market prices, the Commodity Charge rate on your bill can go up and down.
Currently, PNG’s pricing methodology allocates gas commodity costs based on service territory, as well as by rate class. Consolidating gas costs would provide all customers in the same rate class with the same rate for the same service, regardless of where that customer is located within our system.
The other main component of your bill is the Delivery Charge. The Delivery Charge covers the costs of operating and maintaining PNG’s natural gas pipeline system to deliver safe and reliable gas service to your home or business. No changes are being proposed to the delivery charge at this time. PNG plans to engage with the public on this topic in 2023.
Go to Understanding Rates for more information on how rates are set.
Impacts to Customers
The impacts of consolidating gas costs will vary depending on a customer’s location (service territory) and by rate class (i.e., residential, commercial or industrial).
Moving to consolidated gas costs will result in modest bill reductions for most residential and small commercial customers in the PNG West, Dawson Creek and Fort St. John service areas. For example:
- Residential customers will see an average bill reduction in the range of 0.8% to 1.2% per year, for a typical annual savings of approximately $10 to $20.
- Small commercial customers will see an average bill reduction in the range of 0.7% to 1.0%, for a typical annual savings of approximately $45 to $60.
Customers in Granisle and Tumbler Ridge—who currently pay the highest rates due to the higher costs of serving energy to these communities—will see larger bill reductions. For example:
- In Tumbler Ridge:
- Residential customers will see an average bill reduction of 3.2%, for a typical annual savings of approximately $50.
- Small commercial customers will see an average bill reduction of 3.8%, for a typical annual savings of approximately $250.
- In Granisle, which has a population of just over 300 people and is served entirely by propane:
- Residential customers will see an average bill reduction of 45.3%, for a typical annual savings of approximately $650.
- Small commercial customers will see an average bill reduction of 48.4%, for a typical annual savings of approximately $2,350.
Bill savings are higher in Granisle because of the price difference between natural gas and propane, with propane being more expensive
Large commercial customers across PNG’s service areas will see modest bill changes, ranging from an average 4.2% bill decrease in Tumbler Ridge to a 0.8% bill increase in PNG West, and a 1.1% bill increase in Dawson Creek and Fort St. John.
Small industrial customers across PNG’s services areas will see modest bill changes, ranging from an average 0.1% bill increase in Dawson Creek, 0.2% average bill increase in Fort St. John, to a 1.1% average bill increase in PNG West.
PNG has a robust set of Smart Energy Solutions rebates and incentive offers available to business customers to help use less energy and save money, mitigating bill impacts. Visit our Smart Energy Solutions page to learn more about current offers. We recommend checking our website before planning any upgrades, as the Smart Energy Solutions page will be updated as new offers become available.
How Consolidated Gas Rates Work
PNG’s current pricing methodology allocates gas commodity costs based on service territory, as well as by rate class. PNG’s proposed pricing methodology removes location as a factor in allocating gas costs.
Consolidated gas cost rates, also known as “postage stamp rates”, will provide all customers in the same rate class with the same rate for the same service, regardless of where that customer is located within our system.
This method of cost is common to gas and electricity utilities, including FortisBC and BC Hydro, and is used in most jurisdictions across North America.
PNG believes that consolidating gas costs will provide customers with the right balance of pricing simplicity, fairness and efficiency.
Beginning in fall 2022, PNG launched a public awareness and engagement campaign to gather customer and stakeholder feedback. Our activities have included:
- Digital advertising
- Social media content
- Virtual community information sessions hosted on November 9 and 10, 2022
- Direct engagement with key stakeholders, local government and customers most impacted by the proposed gas cost consolidation
- Information posted on PNG’s website
- A dedicated email address for anyone to provide feedback or ask questions
- Public participation through a feedback form, which closed November 24
PNG is providing stakeholder and customer feedback, as well as an outline of our engagement activities, to support an application that we plan to submit to the British Columbia Utilities Commission this winter.
A copy of our Proposed Gas Cost Consolidation community information session presentation is available here.
For more information on the proposed Gas Cost Consolidation, you can also read our Frequently Asked Questions.
If you have any questions or feedback, please get in touch with us at GasCostConsolidation@png.ca
PNG is conducting public and stakeholder engagement to support an application to the British Columbia Utilities Commission by December 2022.