ORDER NO. G-43-97 SIXTH FLOOR, 900 HOWE STREET, BOX 250 a TELEPHONE: (604) 660-4700 VANCOUVER, B.C. V6Z 2N3 BC TOLL FREE: 1-800-663-1385 CANADA FACSIMILE: (604) 660-1102 IN THE MATTER OF the Utilities Commission Act, S.B.C. 1980, c. 60, as amended and An Application by Pacific Northern Gas Ltd. for Approval of its 1997 Revenue Requirements with respect to Flow-Through of Pacific Northern Gas Ltd.Õs 1996/97 Hedging Gain BEFORE: L.R. Barr, Deputy Chair and ) Acting Chairperson; and ) K.L. Hall, Commissioner ) April 17, 1997 O R D E R WHEREAS: A. The Settlement Agreement that dealt with the 1997 Revenue Requirement Application of Pacific Northern Gas Ltd. (ÒPNGÓ), which is Appendix A to Order No. G-21-97, stated that the issue of how the gains from PNGÕs 1996/97 gas price hedge will be passed through to its customers, would be dealt with separately from the Settlement; and B. In a letter dated February 21, 1997 Methanex Corporation supported PNGÕs existing treatment of gains and losses from hedging and stated it would be unfair, in the absence of a review of related rate design concerns, to stream hedging gains only to firm sales customers; and C. In a letter dated April 3, 1997 the British Columbia Public Interest Advocacy Centre, on behalf of ConsumersÕ Asociation of Canada (B.C. Branch) et al., stated that it is not appropriate for PNG to include volumes for large industrial customers in its price risk management (hedging) activities, and that all the benefits and costs of hedging should be reflected in the rates of core customers; and D. In a letter dated April 10, 1997 PNG addressed the points raised in the other submissions, and provided data to show that industrial customers continue to buy interruptible gas from PNG even when the utilityÕs hedges show a loss; and .../2
2 E. The Commission has reviewed the submissions and considers that the assessment of the situation, which is set out in PNGÕs submission, is reasonable in the present circumstances which include PNG's current rate design, and determines that the present flow-though methodology should be maintained at this time. NOW THEREFORE the Commission orders as follows: 1. PNG is directed to continue its gas cost allocation practice of flowing through gains and losses from price risk management (hedging) activities to all sales customers, including industrial interruptible customers. 2. As part of the rate design application, to be filed by September 1, 1997, PNG is directed to establish the methodology it proposes to use to flow-through hedging gains and losses to commence on January 1, 1998. DATED at the City of Vancouver, in the Province of British Columbia, this ÊÊÊÊÊÊ18thÊÊÊÊÊÊÊÊday of April, 1997. BY ORDER Original signed by: Lorna R. Barr Deputy Chair and Acting Chairperson Order/PNG Hedging Flow-Thru
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