News Release
Aug. 02, 2002

BCUC ISSUES DECISIONS ON PNG'S 2002 RATE APPLICATIONS

VANCOUVER, BRITISH COLUMBIA - On July 31, 2002 the British Columbia Utilities Commission (BCUC) issued decisions on Pacific Northern Gas' (PNG) 2002 revenue requirement applications. The decisions set the 2002 rates for the PNG-West division and for PNG's subsidiary, Pacific Northern Gas (N.E.) Ltd. (PNG(N.E.)).  The PNG-West division serves about 23,000 customers in west central British Columbia and PNG(N.E.) serves about 16,000 customers in north east British Columbia.  The applications were originally filed with the BCUC in November 2001.  An oral public hearing into the PNG-West application was held in Terrace in March and concluded in Vancouver in May 2002.  The PNG(N.E.) application was considered through a written hearing process that ended in June 2002. 

 

PNG-West Decision

The BCUC approved a new long-term contract between PNG and Methanex Corporation, PNG's largest customer.  The term of the new contract is from November 1, 2002 through October 31, 2009.  The new contract replaces three existing contracts between PNG and Methanex.  It provides for a significant increase in the firm volume commitment by Methanex at a substantially reduced firm transportation service toll. The contract also provides a profit sharing mechanism during periods of high methanol prices and relatively low natural gas prices.

 

The applied for 2002 revenue requirement was decreased by an estimated $2.1 million by the BCUC compared to what was approved on an interim basis effective January 1, 2002.  Rates will be based on higher forecast revenue in 2002 as the BCUC increased projected gas deliveries to residential, commercial and small industrial customers and to one large industrial customer by approximately 0.9 petajoules, or 10 percent, compared to PNG's forecast. 

 

Downward adjustments to certain components of the 2002 operating budget and some deferral accounts represent about $1.1 million of the reduction in the revenue requirement for 2002. The deferral account adjustments will reduce net income by approximately $0.5 million in 2002.  The total effect on net income of the BCUC decision will depend upon actual gas deliveries in 2002 and the Company's ability to further reduce operating and administrative expenses.

 

PNG applied to increase its deemed common equity from 36 to 45 percent and to add 25 basis points to its risk premium of 75 basis points relative to the low risk benchmark utility.  The BCUC denied both of these adjustments. The approved return on common equity for 2002 is therefore 9.88 percent. Since the interim rates approved January 1, 2002 were based on a 36 percent common equity ratio and a 9.88 percent return, the BCUC's decision in this regard is revenue neutral.

 

PNG will be recalculating its 2002 revenue requirement based on the BCUC directions.  The resulting rates effective January 1, 2002 will be lower than the current interim rates being charged to customers.  For the January to August 2002 period, customers will be rebilled at the approved lower permanent rates and a credit adjustment will appear on a subsequent bill this fall.  The new rates will apply to gas deliveries made on and after September 1, 2002

 

Roy Dyce, President and CEO of PNG said  "The Company is pleased with the decision by the Commission to approve the new long term agreement with Methanex.  However, the Commission's directions to increase forecast sales and reduce other costs do not fully acknowledge the substantial reduction in operating costs achieved by the Company through its reorganization in late 2000."

 

PNG (N.E.) Decision

The applied for 2002 revenue requirement for PNG(N.E.) was decreased by an estimated $0.75 million by the BCUC compared to what was approved on an interim basis effective January 1, 2002.  Rates will be based on higher forecast revenue in 2002 as the BCUC increased projected gas deliveries to residential and commercial customers and to one industrial customer compared to PNG(N.E.)'s forecast.  Downward adjustments to certain components of the operating budget will also reduce the 2002 revenue requirement.

 

The BCUC denied PNG(N.E.)'s requests to increase its deemed common equity from 36 to 40 percent for its Fort St John/Dawson Creek (FSJ/DC) division and to 45 percent for its Tumbler Ridge division.  The 50 basis points risk premium relative to the low risk benchmark utility for the FSJ/DC division and 75 basis points for the Tumbler Ridge division were reaffirmed by the BCUC.  The FSJ/DC approved return on common equity for 2002 is 9.63 percent and the Tumbler Ridge return is 9.88 percent.  Since the interim rates

approved January 1, 2002 were based on a 36 percent common equity ratio and the 9.63 and 9.88 percent returns, the BCUC's decision in this regard is revenue neutral.

 

PNG(N.E.) will be recalculating its 2002 revenue requirement based on the BCUC directions.  The resulting rates effective January 1, 2002 will be lower than the current interim rates being charged to customers.  For the January to August 2002 period, customers will be rebilled at the approved lower permanent rates and a credit adjustment will appear on a subsequent bill this fall.  The new rates will apply to gas deliveries made on and after September 1, 2002

 

Headquartered in Vancouver, British Columbia, Pacific Northern Gas Ltd. (TSX:PNG.A/ PNG.PR.A) owns and operates natural gas transmission and distribution systems.  The Company's western transmission line extends from the Duke Energy Gas Transmission (formerly Westcoast Energy) system north of Prince George to tidewater at Kitimat and Prince Rupert, and provides service to 12 communities and a number of industrial facilities.  In the northeast, Pacific Northern's subsidiary Pacific Northern Gas (N.E.) Ltd. provides gas distribution service in the Dawson Creek, Fort St. John and Tumbler Ridge areas.  www.pacificnortherngas.com 

 

Contact: Greg B. Weeres -- Media Contact
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