Union Gas has pocketed tens of millions of dollars in cost savings without fully sharing the money with ratepayers, some of Union’s biggest customers allege.
The customers compare it to a service business billing its clients for an executive class flight — but then flying economy and using the difference to boost its profit.
Only the difference in this case is about $60 million over five years.
Two customers, Canadian Manufacturers and Exporters (CME) and the Federation of Rental-housing Providers of Ontario (FRPO), are making that case before the Ontario Energy Board.
CME represents the country’s biggest manufacturers; FRPO members are landlords to 350,000 rental units.
Union Gas disagrees with its customers, arguing that it’s simply cutting costs.
In a stiffly worded letter to the energy board last week, the manufacturers and landlords say through a lawyer that Union’s actions have been “improper and invalid.”
“A utility cannot profit from its own improper acts,” says the letter from lawyer Peter C.P. Thompson.
The dispute hinges on a method that Union has found to reduce its costs of bringing gas from western Canada.
Union does not make a profit on selling gas. Instead, it makes money by collecting a fee for piping gas to customers.
The energy board regulates those fees, or rates. The board assesses Union’s costs, and allows it to charge fees that deliver an appropriate return to its shareholders.
One of Union’s costs is the fees it pays to other, long-distance pipeline companies that deliver gas from western Canada and elsewhere to Union’s system in Ontario.
CME argues that Union has been able to reduce its costs by taking advantage of credits awarded to customers under certain conditions on TransCanada Corp.’s main pipeline.
But, CME argues, it hasn’t passed a fair share of those cost savings on to customers. In effect, it says, Union is charging executive level prices while paying its suppliers economy rates.
In 2012 alone, it says, “Union is now expecting to realize $37.8 million in ‘profits’ from this executive/economy transportation services exchange approach.”
Over a five-year period, it claims, Union Gas will turn $61.4 million in extra charges into profits.
Without specific approval by the energy board, CME and FRPO say, Union’s approach to the matter is “improper and invalid.”
With the matter still before the energy board, officials on both sides were reluctant to comment in depth.
But Union Gas says the manufacturers and landlords have it all wrong.
Union says the energy board’s rules allow it to seek lower-cost solutions for shipping gas.
That issue was settled by the board in a 2008 ruling, argues Union’s lawyer Crawford Smith in his own submission to the energy board.
Andrea Stassof Union Gas said in an interview that the board built incentives into its rate structure.
“If we are able to save money or reduce costs, we share that money with our customers,” she said.
(A chart submitted by CME and FRPO shows that Union has shared $29.4 million since 2008.)
The current dispute is over the way that incentive plan works, she said. It’s not a case of Union acting without authority from the board, as the manufacturers and landlords claim, she said.
“They’re looking at the way we’re accounting for those things and sharing that income, and they have a different position than we do,” she said.
She said Union will be making detailed submissions next week as the two sides meet with board officials to discuss the disagreement.
Original Article
Source: the star
Author: John Spears
The customers compare it to a service business billing its clients for an executive class flight — but then flying economy and using the difference to boost its profit.
Only the difference in this case is about $60 million over five years.
Two customers, Canadian Manufacturers and Exporters (CME) and the Federation of Rental-housing Providers of Ontario (FRPO), are making that case before the Ontario Energy Board.
CME represents the country’s biggest manufacturers; FRPO members are landlords to 350,000 rental units.
Union Gas disagrees with its customers, arguing that it’s simply cutting costs.
In a stiffly worded letter to the energy board last week, the manufacturers and landlords say through a lawyer that Union’s actions have been “improper and invalid.”
“A utility cannot profit from its own improper acts,” says the letter from lawyer Peter C.P. Thompson.
The dispute hinges on a method that Union has found to reduce its costs of bringing gas from western Canada.
Union does not make a profit on selling gas. Instead, it makes money by collecting a fee for piping gas to customers.
The energy board regulates those fees, or rates. The board assesses Union’s costs, and allows it to charge fees that deliver an appropriate return to its shareholders.
One of Union’s costs is the fees it pays to other, long-distance pipeline companies that deliver gas from western Canada and elsewhere to Union’s system in Ontario.
CME argues that Union has been able to reduce its costs by taking advantage of credits awarded to customers under certain conditions on TransCanada Corp.’s main pipeline.
But, CME argues, it hasn’t passed a fair share of those cost savings on to customers. In effect, it says, Union is charging executive level prices while paying its suppliers economy rates.
In 2012 alone, it says, “Union is now expecting to realize $37.8 million in ‘profits’ from this executive/economy transportation services exchange approach.”
Over a five-year period, it claims, Union Gas will turn $61.4 million in extra charges into profits.
Without specific approval by the energy board, CME and FRPO say, Union’s approach to the matter is “improper and invalid.”
With the matter still before the energy board, officials on both sides were reluctant to comment in depth.
But Union Gas says the manufacturers and landlords have it all wrong.
Union says the energy board’s rules allow it to seek lower-cost solutions for shipping gas.
That issue was settled by the board in a 2008 ruling, argues Union’s lawyer Crawford Smith in his own submission to the energy board.
Andrea Stassof Union Gas said in an interview that the board built incentives into its rate structure.
“If we are able to save money or reduce costs, we share that money with our customers,” she said.
(A chart submitted by CME and FRPO shows that Union has shared $29.4 million since 2008.)
The current dispute is over the way that incentive plan works, she said. It’s not a case of Union acting without authority from the board, as the manufacturers and landlords claim, she said.
“They’re looking at the way we’re accounting for those things and sharing that income, and they have a different position than we do,” she said.
She said Union will be making detailed submissions next week as the two sides meet with board officials to discuss the disagreement.
Original Article
Source: the star
Author: John Spears
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