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Enbridge Gas letter

Enbridge Gas letter

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Published by mchardie
Enbridge Gas New Brunswick criticizes the provincial government's plan to reform the natural gas sector.
Enbridge Gas New Brunswick criticizes the provincial government's plan to reform the natural gas sector.

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Published by: mchardie on Jan 20, 2012
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01/20/2012

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Enbridge Gas New Brunswick
 
Enbridge Gaz Nouveau-Brunswick440, chemin Wilsey RoadSuite/Bureau 101Fredericton, NB E3B 7G5
January 18, 2012Dear Editor ,
Re: A public natural gas system
During the past month, the Government of New Brunswick used its legislative power to pass Bill 18, anAct to Amend the Gas Distribution Act, 1999. This legislation will have serious negative consequencesfor the public distribution of natural gas in New Brunswick and also for New Brunswick’s reputation as agood place to do business.Enbridge Gas New Brunswick (EGNB) entered into a franchise agreement with the Government of NewBrunswick in 1999. The franchise agreement was the end result of a competitive bidding process inwhich Enbridge proved to be the only qualified proponent. With the passage of Bill 18, the Governmenthas now decided to unilaterally change the underpinnings of this franchise agreement without EGNB’sconsent and in spite of its potentially serious consequences.When the Government introduced this legislation on December 9, 2011, it stated its concerns that “NewBrunswick has the highest natural gas distribution rates in North America”. In context however, when theGovernment compares natural gas distribution rates in New Brunswick to other jurisdictions in NorthAmerica, it fails to acknowledge the unique aspects of gas distribution in this Province.
Were it not forthe performance by EGNB over the past eleven years, there would not be any public natural gasdistribution system in New Brunswick at all.
 
Rather, there would merely be direct transmission tothose few large customers who are within feasible proximity of the main pipeline system. In short, thecomparison to be made is not with other gas distribution systems in North America,
but with the savingsthat EGNB has brought to New Brunswick energy customers versus the prospect of no naturalgas at all
.In 1999, in addition to EGNB’s general franchise, the Government also granted single-end-use franchisesto several large industrial customers who in aggregate use approximately 80% of all natural gasdistributed in the Province, but contribute nothing towards lowering delivery rates for customers on thepublic distribution system. Given that the costs of the public system must be borne by users of only 20%of the natural gas volumes distributed in the Province, there was no reasonable expectation or possibilitythat New Brunswick rates could be compared to those of mature gas utilities in other jurisdictions. In fact,it was this realization that led the Government and Enbridge to enter into the current distribution ratemodel, which has targeted the delivery of savings to every customer who has switched to natural gasfrom alternative sources of energy.The Government has suggested that Bill 18 will help to bring lower distribution rates and provide a greaterincentive for new customers to join the public system. If the Government proceeds to enact regulationsconsistent with the direction of Bill 18, then operational changes will have to occur within EGNB that arenot consistent with the Government’s stated goals. There will be very little growth of the public distributionsystem and any extensions to additional communities are likely to be uneconomic, given the expectedlower distribution rates. Any projects that may appear at first glance to be economic will be unable toattract new capital due to obvious concerns that the Government may again change the rules at somefuture point in time. With limited future growth prospects for the public natural gas distribution system, it islikely that a significant number of the 400 direct and indirect jobs that have been created by Enbridge’spresence in New Brunswick will be impacted adversely. This is something that EGNB will fight hard toprevent, but the reality of Bill 18 is that it threatens current jobs in the Province and diminishes thepotential for expanded availability of natural gas to public consumers in New Brunswick.The Government also suggests that lower natural gas distribution rates will attract new business to NewBrunswick, but based on Enbridge’s experience this notion is without foundation. Enbridge is not aware of

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