Enbridge Gas grilled over future in province amid stagnant growth

New Brunswick consumers have not embraced natural gas as expected over the last 15 years and as the latest rate hearing for the province's gas distributor Enbridge concluded in front of the Energy and Utilities Board onWednesday there were sombre questions about whether the service can survive at all in the province.

"Is Enbridge at a point where there isn't a lot of opportunity for new business at this point," asked EUB chairman Raymond Gorman looking at the company's dismal growth projections out to 2019.

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"We heard a lot of evidence about potential growth over the next two, three, four years and really there isn't any growth to speak of. What's left to develop in terms of business?"

The answer was not much.

Gilles Volp, the general manager of Enbridge Gas New Brunswick, opened the hearingon Mondaywith a laundry list of problems facing the gas utility.

Hedetailed everything from cheap propane that has been luring customers, to periodic natural gas price spikes in markets north of Boston that have upset consumers to unilateral changes to Enbridge's contract with the provincial government back in 2012 that upset its parent company.

"The public utility's viability and sustainability have been placed at risk on a number of fronts," he said.

And as the hearing wore on it was clear all of those individual problems were made worse by a bigger problem, an ongoing lack of natural gas customers in New Brunswick

"The evidence is clear that EGNB is struggling to face very serious challenges and risks," said Heather Black, the public intervener.

Stagnant growth

Enbridge, the hearing was told, now expects to reach 12,264 paying natural gas customers by 2019, a nearly stagnant 71 more than it had five years earlier.

At its inaugural hearing in 2000, Enbridge predicted robust growth and 71,000 customers by 2019 and piled up enormous debt building infrastructure to prepare for that.

St. Stephen manufacturer Flakeboard is a major gas consumer in New Brunswick and Christopher Stewart, its lawyer at the rate hearing, also participated in those original meetings in 2000.

He said it's time to face the fact that natural gas is a choice most potential New Brunswick customers have rejected.

"Thegroundhas shifted under all of us," said Stewart on Wednesday.

"We were all there.There were going to be thousands more customers, significant more throughput and we've all been waiting for it to develop to that level. But it's not going to and it's time the ratepayers and the regulator recognize that fact."

Complex problems

But Volp said Enbridge's problems in New Brunswick are more complex than that.

He said customers have stopped coming to natural gas because New Brunswick's weak economy is not generating any new demand where the company already has pipes in the ground.

And he said Enbridge's parent company is nervous about expanding further in New Brunswick since the legislature unilaterally changed its franchise agreement in 2012, largely to benefit industry.

"The difficulty we have is attracting capital for expansion, because the owners don't want to put any more money at risk in New Brunswick until there is more certainty in the future," said Volp.

Expiring franchise agreement

Another problem is that Enbridge's 20-year franchise agreement with the provincial governmentexpiresin three yearsand the company is hesitant to invest further until it knows what is happening after 2019.

"Will they have a franchise past 2019, and will the rules of operation be conducive to have a successful utility," Volpsaid.

Theseare questions preventing Enbridge from investing heavily to support any growth in its New Brunswick system, the company official said.

It was a bleak assessment from all sides.

But Edwin Overcast, a U.S. gas utility expert, urged all sides to find some way to make thenatural gas distribution work, for the sake of the province.

"I think there is a future here, and it may take some patience and it may take some organic growth in the province," said Overcast.

"But see if you didn't have a gas company, then you might not even be able to get that organic growth, because there will be people who will come here that need gas as a fuel."