New Brunswick

Enbridge asks court to overturn N.B. gas regulations

Enbridge Gas New Brunswick is asking the courts to overturn new regulations under the provincial Gas Distribution Act.
Enbridge says if it can't recover reasonable costs, including the cost of building the pipeline, it will have to layoff about 50 employees.

Enbridge Gas New Brunswick is asking the courts to overturn new regulations under the provincial Gas Distribution Act.

Otherwise, the company could lose more than $9.7 million a year and be forced to cuts its staff in half and reduce services in the province, it claims in documents file with the Court of Queen’s Bench.

Enbridge is also seeking an injunction that would prevent it from having to make a new rate application by the end of this month because it contends the new regulations are invalid.

The court action comes on the heels of a lawsuit Enbridge filed against the province last week.

Enbridge is seeking more than $650 million, alleging the government has not lived up to the terms of a contract signed in 1999 and has hurt the company’s bottom line.

General manager Dave Charleson said he hopes to have a court hearing date soon.

The government has declined to comment while the matters are before the courts.

Will decrease revenue

Dave Charleson, general manager of Enbridge Gas New Brunswick, says the company could lose more than $9.7 million a year. ((CBC))

In the court documents, Enbridge claims changes to the way natural gas rates are set will stifle growth of the province's pipeline network and decrease revenues.

In fact, if Enbridge maintains current operations under the new regulations, the company would lose more than $9.7 million a year, Charleson states in an affidavit.

If the company can't recover reasonable costs, including the cost of building the pipeline, "we're looking at a reduction of about 50 per cent of our employees, or about 50 to 60 people," he wrote.

"There may be other models where we don't have to go quite that far, but you're still looking at job losses, and little to no investment in the province by Enbridge."

The provincial government passed legislation in December that forced Enbridge to lower distribution fees and allowed other companies to distribute natural gas in northern New Brunswick.

The reforms were intended to reduce rates for natural gas users and lead to price sustainability.

"At this time of historic low prices, New Brunswickers are paying amongst the highest natural gas distribution rates in North America with no relief in sight," then-energy minister Craig Leonard had said.

"This is an example of the problems that have developed in the current model which have put in question the sustainability of the current system," Leonard said at the time.

Legislation in 1999 gave Enbridge sole distribution rights for 20 years and allowed the company to recover costs to build a pipeline system.

The new 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.

Enbridge must make a new application to the EUB under the new rules by May 31. The rates for residential electricity and residential oil clients are expected to be merged on June 1, then the EUB will make an order setting rates and tariffs.

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

Both sides stand to lose

An expert in strategic management says both sides stand to lose in the legal dispute.

"When you go to trial, it's a public record," said Ian Lee, an associate professor at Carleton University's Sprott School of Business in Ottawa.

"And then you haul in deputy ministers and they're testifying under oath and likewise the company officials. And you're starting — to use a cliché, a very well-known cliché — washing your dirty private linen in public.

"And corporations don't like doing that and governments don't like doing that either," he said.

Lee believes there is great pressure on both sides to settle a lawsuit out of court.

"You don't sue customers at the drop of a pin. First off, it's very expensive, takes a long time, you may not win, it creates bad public relations — and so it's something you really want to avoid," he said.

Meanwhile, "the government of New Brunswick has been doing a very good job of courting foreign investment and this is not the sort of information you want floating around as you are assiduously courting new investors to New Brunswick," he said.

With files from the Canadian Press