Gas contract breach sends bad message, says Enbridge

The head of Enbridge Gas New Brunswick says if he had known the provincial government would renege on its 20-year contract, the company probably never would have set up shop.

"I'd say there'd be no natural gas distribution system in New Brunswick," said general manager Dave Charleson.

The province is setting a bad precedent by changing its deal with the company and sending a bad message to other potential investors, he said.

"Any investor who looks to invest in any jurisdiction expects to have a reasonable opportunity to recover that investment. If the climate changes such that it looks like new investment made can't be recovered, well then you're obviously going to be careful about where you put your money."

The Alward government wants to amend its deal with the company, which was signed more than a decade ago.

Energy Minister Craig Leonard introduced legislation Friday to amend the Gas Distribution Act, which he said will bring in price sustainability for natural gas users.

The reforms are going forward without the company's consent.

'The rate-setting methodology was the one put in place by the government and we followed that.' Dave Charleson, Enbridge Gas

Enbridge has lived up to the original agreement, which pegged the cost of natural gas to heating oil and electricity, said Charleson.

The price of natural gas has remained low, while oil has skyrocketed, leaving New Brunswickers with the highest gas distribution costs in North America.

"The rates have been established by the Energy and Utilities Board. The rate-setting methodology was the one put in place by the government and we followed that," Charleson said.

The company has a franchise agreement that it will be the sole natural gas distributor in the province until 2020.

Enbridge has invested $480M

It has invested about $480 million in the development of the provincial gas distribution and is currently serving customers in Moncton, Riverview, Dieppe, Saint John, Fredericton, Oromocto, St. Stephen, St. George and Sackville.

Enbridge and the provincial government began talks in May on how to lower the company's rates, but could not reach an agreement.

The company is waiting to see exactly what the government comes up with before deciding its next move, said Charleson.

"Obviously, depending on the rules that are there it may affect future investment that we make in the province."

Energy Minister Craig Leonard has said the natural gas distribution system was not built to cope with the changes in the natural gas marketplace, which are limiting customer growth and forcing higher rates.

The distribution system is based on a system that has 30,000 homes and businesses on it. So far, Enbridge has 11,000 customers.

The legislation sets out a series of reforms to the rate categories that Enbridge customers are now in. It also outlines several key dates on when the company must have its new rates approved by the Energy and Utilities Board.

Residential customers could see natural gas distribution costs fall by 10 to 15 per cent when the changes are implemented, while large industrial customers could see distribution costs fall by 40 to 50 per cent, Leonard said.