The president of J.D. Irving Ltd. is applauding the provincial government for trying to cut a deal with Enbridge Gas New Brunswick that could lower industrial rates for natural gas.
Jim Irving, the president of J.D. Irving, said in an interview Monday that his company and other employers recently pulled out of Energy and Utilities Board hearings over a proposed Enbridge rate hike.
The companies argued rate relief wasn't possible under the current structure.
That decision by some of the largest industrial natural gas users led the provincial government to open negotiations with Enbridge about the possibilities of a new deal.
Energy Minister Craig Leonard has said that new arrangement could eventually lower prices for large industrial natural gas users.
'The province is doing the right thing, going at this to try and fix it. It's broken. It's a mess ... It's out of control.'— Jim Irving, president, J.D. Irving Ltd.
Irving said industrial customers, such as his companies, are being charged too much to have natural gas delivered to them.
"The province is doing the right thing, going at this to try and fix it. It's broken. It's a mess. It's a mess for the industrial folks. We're not competitive, clearly not competitive. That's a well documented fact. It's out of control," Irving said.
The provincial government has said it may allow Enbridge to move to a rate model that better reflects the cost of providing the service in return for extending its monopoly in the province past 2019.
Irving said those reforms must happen if natural gas is going to take root.
"This thing is not right. If we're ever going to build a strong distribution network, we need volume. But we're never going to get volume with high costs. No one's going to sign up for it," Irving said.
"So the basics are, the province is coming at this the right way. Let's try and fix it. And we should fix it for the long term, so it works for all New Brunswickers."
Enbridge account stands at $170M
When Enbridge started creating New Brunswick's natural gas distribution network, the company put all of the costs associated with the development stage into a deferral account, which has to be repaid.
The deferral account has roughly $170 million in it currently. Enbridge paid $6 million into the deferral account in the first quarter of 2011.
However, the company has faced problems in attracting enough customers to quickly pay down its debt.
The average home in New Brunswick heated with natural gas pays about $1,000 a year in distribution charges. However, it costs Enbridge roughly $5,000 per house to supply the natural gas because it laid so much pipe and attracted so few customers.
Large industrial consumers, meanwhile, pay substantially more in distribution costs than it actually costs Enbridge to deliver the natural gas.
While the provincial government and Enbridge are in talks, the Energy and Utilities Board agreed to the company's request to hold off on planned rate increases for its largest users.
As well, Enbridge was given approval to suspend a planned rate increase for the LFO rate class that was supposed to come into effect on July 1.