Fortis B.C. defends 80% hike in natural gas rate

Fortis B.C. is defending its decision to increase natural gas rates by 80 per cent, despite the fact the price on commodity markets has only increased by 26 per cent this year.

"We look at a number of factors that include supply and demand on the North American market, combined with looking at expected usage rates and the amount that we pay for certain amounts of gas," said Fortis B.C. spokesman, Michael Allison, to Daybreak South host Chris Walker.

Allison said natural gas rates are approved by the B.C. Utilities Commission every three months.

"We don't mark up the price of natural gas. Customers pay what we pay."

Projected vs. actual cost

But the rates are based on the projected cost of natural gas rather than the actual cost.

If the actual cost turns out to be lower than what customers are charged, Fortis B.C. is required to return the difference.

"We actually have been returning money to our customers for the past couple of years and that has ended," said Allison in explaining the difference between the price increase being passed onto customers when compared to the smaller price increase on commodity markets.

"So it's a little combination of the change in gas prices, and we've kind of drawn the accounts of returning extra money to customers. That does account for that discrepancy a little bit."

• Natural gas prices rising for Fortis B.C. customers
• BC Hydro smart meters, rate increases lead to more customers cut off from power, says advocate
• B.C. natural gas prices cut by Fortis B.C.

Allison pointed out that the cost of natural gas is only a small part what customers pay. There is also a basic daily charge, a delivery charge, and a storage and transportation charge.

So while natural gas rates are going up 80 per cent, the average bill will only go up 12 per cent, he said.

The B.C. Public Interest Advocacy Centre has frequently criticized utility rates in B.C.

But this is not a case of Fortis B.C. trying to grab more profits, said BCPIAC executive director, Tannis Braithwaite.

Different than electricity

In the case of electricity, the utility companies generate the electricity they sell themselves.

"Whereas with Fortis gas, they buy the commodity and then distribute it. So the profit that they make is on the distribution of the gas rather than the purchase of the gas itself," she said.

But that is likely cold comfort for people who still need to pay to heat their homes this winter, especially those with lower or fixed incomes.

"The cost is going up quite significantly," said Braithwaite.

She added that her organization considers gas and electricity to be essential services.

"And there are limited things that can be done to keep the costs of those lows, and so one of the things that we need to look at as a province are ways that we can assist people who aren't able to afford those essential services."

With files from CBC Radio's Daybreak South