Province, Enbridge reach deal over lawsuits

The New Brunswick government has struck a deal with Enbridge Gas New Brunswick to settle two lawsuits by the company against the province.

The deal puts a cap on rate increases for natural gas customers through 2019, but at a Friday news conference Premier Brian Gallant and an Enbridge executive made only vague commitments to what would happen to rates after that.

The company was claiming $820 million in the two lawsuits over a 2011 PC law that imposed new rules on rate increases the company could charge natural gas companies.

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Asked what kind of rate increases might kick in starting in 2020, Gallant said "there's lots that can happen" and tried to emphasize that taxpayers had dodged the risk of paying Enbridge $820 million if the lawsuit had gone ahead and the province had lost.

"It would have very much hindered our ability to invest in education, health care, and the economy," he said, "so we always have to look at what the alternate path would have been, and for us it was one that didn't look very rosy."

Gallant returned again and again to how the province was avoiding the risk of an expensive court-ordered financial award.

Rate increases on horizon?

The province isn't paying Enbridge any cash to settle the suit, but it is giving the company more flexibility in setting rates in New Brunswick.

The deal caps rate increases by Enbridge for 2018 and 2019 at three per cent for residential customers and at zero for industry. But starting in 2020, Enbridge can apply to the Energy and Utilities Board for larger increases.

Cynthia Hansen, Enbridge's president of gas distribution and power, wouldn't say what the company's modelling shows it may require in rate hikes then.

"I wouldn't comment at this time as to what that is," she said. "We're in a position where we want to support the agreement and ensure that that goes through so we can continue to provide that quality of service."

The agreement lets Enbridge use rate increases to pay down $144 million of the debt it incurred building its pipeline network in the province. The 2011 PC law prohibited it and the EUB from factoring that debt, held in a deferral account, into rate applications.

Starting in 2020, Enbridge can recover $4 million a year of that amount through rate hikes, which Green party leader David Coon says will put "significant pressure" on rates to go up.

Pushed on what kind of rate hike might happen in 2020, Hansen seemed to lean on the idea that the EUB would reject any attempt by her own company to get a big increase.

"It's hard to predict what's going to happen between now and 2020, but I can guarantee you that with a regulated approach, you will ensure that the interests of the customers are maintained."

Enbridge Gas New Brunswick general manager Gilles Volpe pointed to one factor that he said should help the company avoid big rate hikes: new fees that will be paid by several large industrial gas users.

In 1999 the province let those big customers bypass Enbridge and its distribution rates, allowing them to buy directly from the Maritimes and Northeast pipeline.

The PCs passed a bill in 2014 that will force those customers to pay a fee in lieu of the distribution rate, making up for some of Enbridge's lost revenue.

Monopoly restored

The 2011 PC legislation that prompted Enbridge's lawsuits also let other companies enter the natural gas market to compete with Enbridge.

The legal settlement undoes that as well, restoring Enbridge's monopoly. There are exceptions for companies that have already started buying compressed gas by truck from Enbridge competitors such as Irving Oil, and for customers who aren't near Enbridge's existing lines.

Enbridge had filed two lawsuits in response to the PC legislation: one for breach of contract claiming $650 million and one for $176 million, the amount it said the PCs were blocking it from accessing in the deferral account.

Enbridge has about 12,000 customers in New Brunswick.

Another part of the deal will extend Enbridge's franchise agreement in New Brunswick for another 25 years, to 2044.

Coon says the possibility of big rate hikes starting in 2020 makes it even more important the government use revenue from a proposed price on carbon to subsidize more energy efficiency programs in homes.

PC opposition leader Blaine Higgs said Friday it was too early for him to comment on the settlement.

Gallant's news conference took place just as Higgs was about to deliver the opposition's official response to the government's Throne Speech, and he only learned about the terms of the deal from reporters.