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Gas price inquiry questions Trans Mountain capacity, company denies collusion

One of the largest fuel companies in British Columbia says there’s no retail market more competitive than gasoline in Canada and an executive denies any price setting between competitors.

Ian White, senior vice-president of marketing and innovation for Parkland Fuel Corp., told a three-member panel leading a public inquiry into the province’s gas prices on Wednesday that a price difference of one-tenth of a cent per litre can be enough to lose customers.

Parkland Fuel operates gas stations under Chevron and other banners, supplies fuel to airlines and BC Ferries, and owns and operates a refinery in Burnaby.

White said while factors like clean washrooms and convenience stores can influence consumers, they simply won’t visit your gas station if you don’t have a competitive price for fuel.

Economist Henry Kahwaty, who was hired by Parkland, told the panel that the competitive environment leads retailers into a race to the bottom until they reach unprofitable prices, at which point there is typically a price jump and the process repeats itself.

But he said controlling that process would require a significant level of co-ordination considering almost half of the gas stations in B.C. are run by independent dealers rather than companies.

“This is not evidence of collusion,” Kahwaty said.

Representatives from Shell also told the panel the market is competitive, adding the company sets wholesale prices independently from other firms.

Premier John Horgan called the public inquiry in May as prices at the pump reached a record-breaking $1.70 per litre.

At the time, the B.C. Liberals and Alberta government bought advertising blaming Horgan and linking his government’s resistance to the Trans Mountain pipeline expansion and taxes to the surging costs.

Jean-Denis Charlebois, chief economist for the National Energy Board, told the inquiry panel he can’t account for an independent report that contradicts the board’s claim that the Trans Mountain pipeline is operating at capacity.

Charlebois told the three-member panel that in the first quarter of 2019, the Trans Mountain pipeline was operating at 98 per cent capacity.

The panel asked if he could shed light on a report by economists Robyn Allan and Marc Eliesen, the former president of the Insurance Corporation of B.C. and chief executive of BC Hydro, respectively.

Allan and Eliesen’s analysis found the Trans Mountain capacity is 400,000 barrels a day, falling to 300,000 barrels a day only if 20 per cent of the capacity is taken up by heavy oil. But it rarely reaches that threshold of heavy oil and Allan and Eliesen claim there were 97,000 barrels a day of capacity in the first quarter of 2019 that were not used.

Allan and Eliesen are scheduled to appear before the panel on Thursday.

The inquiry is tasked with exploring factors that may be influencing gas and diesel prices in B.C. since 2015 and the mechanisms the province could use to moderate price fluctuations.

Kahwaty warned that regulating wholesale prices by setting them artificially low would have the effect of actually raising retail prices because supply would be pulled out of the market as a correction.

“Wholesale regulation would have the impact of actually increasing the retail margin because we’re not allowing the market to fully clear,” he said.

“At first blush, its a counterintuitive point to make.”

Such regulation in the Atlantic provinces has targeted volatility, rather than high prices, he said.

Earlier Wednesday, Liberal Leader Andrew Wilkinson issued a statement criticizing the government for the inquiry’s short timeline and terms of reference that limit it from investigating government activity that affects gas prices.

“It is outrageous that an investigation into fuel costs would be barred from considering the impacts of fuel taxes, transit taxes, and the government’s opposition to increasing pipeline capacity,” Wilkinson said.

The panel could hear up to four days of oral submissions in Vancouver this week.

The inquiry will conclude with a final report by the panel due Aug. 30.

 


Most fuel suppliers won’t release profit margin details to B.C. gas price probe

Most gas suppliers in British Columbia are refusing to share how they set prices at the pump just days before hearings on the issue are set to begin at a public inquiry.

The B.C. Utilities Commission has been ordered to review the last four years of gas and diesel pricing in the province and asked suppliers to complete a questionnaire about various business aspects including their profit margins.

Commission CEO David Morton said the inquiry panel is working to determine if it needs the financial information and to assure the companies that it won’t release confidential information.

“I don’t think there’s any cause for alarm,” Morton said in an interview last week.

The suppliers range from Shell and Imperial to Suncor, Husky, Super Save and 7-11, but documents submitted to the commission show that only 7-11 has responded with details about how it sets the price per litre at the pumps.

It has requested the information not be released publicly and the utilities commission has complied, posting a redacted version of 7-11’s questionnaire response on its website.

The other suppliers offered almost identical reasons for withholding profit margin data, with Husky’s submission citing “commercially sensitive information” that is “not shared publicly or between refiners.”

As the price of a litre of regular gasoline climbed above $1.70 in mid-May, Premier John Horgan ordered the probe, saying that gas and diesel price increases were “alarming, increasingly out of line with the rest of Canada, and people in B.C. deserve answers.”

The inquiry timetable calls for the release of the second phase of the utilities commission consultant report today, followed by up to four days of oral submissions, where panel members can question industry representatives, including gas and diesel suppliers.

Bruce Ralston, minister of jobs, trade and technology, said in a statement that he’s disappointed with the companies that refused to provide the information and urged them to co-operate.

“People deserve to know why the price of gasoline in B.C. has seen such wild swings,” Ralston said.

But Morton said he’s not surprised that most of the companies withheld the information.

The utilities commission has established procedures for dealing with confidential information, including commercial information around prices that would harm the company if released, but it typically works with gas and electric utilities.

“Many of the participants aren’t as familiar with our approach to confidentiality so we understand there may be some apprehension around it,” Morton said.

If the organizations can show they would experience harm because a competitive price became public, then the utilities commission would typically honour that, he said.

“If there’s information critical to the inquiry of that nature, then the panel would review that information and we would make a decision but we wouldn’t make a reference to any of those numbers in the decision.”

The commission generally tries to avoid confidential information in its proceedings because it means decisions may have to be redacted, which it doesn’t consider to be “the best outcome,” Morton said.

Morton, who is on the inquiry panel, said they are in the process of reviewing the submissions and may determine that they don’t actually need specific numbers to answer the inquiry’s questions of why B.C.’s gas prices are different from the rest of the country and why the prices swing.

If the panel determines the figures are vital to the inquiry, and the companies still refuse to share them, the commission can apply through the B.C.Supreme Court for access.

That would set back the inquiry’s timeline but it remains on schedule so far, Morton said.

When the commission unveiled the process for the inquiry in May, the utilities commission said it would explore factors potentially affecting prices in B.C. since 2015, including competition and the amount of fuel in storage.

It is also expected to examine mechanisms that could be used to moderate price fluctuations and increases.

The three-person inquiry panel must submit its final report by Aug. 30.


Oil companies may be called to testify under B.C.’s gas price probe

British Columbia’s independent energy regulator will have the power to call oil company representatives as witnesses into an investigation of high gasoline prices in the province.

Premier John Horgan has tasked the B.C. Utilities Commission to examine the market factors that affect wholesale and retail gas prices, and he wants a report by Aug. 30.

Gas prices hovering around $1.70 per litre in the Metro Vancouver area have been the highest in Canada for several months.

Horgan says he’s given the utilities commission broad terms of reference to conduct a fair and transparent investigation that would include concerns about competition and why recent gas refining margins for Vancouver have been more than double the Canadian average.

Liberal Leader Andrew Wilkinson has been calling on the New Democrats to reduce provincial gas taxes and has applied to participate in the investigation as an intervener.

Horgan says in a statement the terms of reference give the utilities commission the reach to investigate price fixing and gouging and to make recommendations.