Nanaimo mayor John Ruttan will be asking the province for a level playing field for Nanaimo and other Vancouver Island and Sunshine Coast municipalities when a 25-year-old contract between FortisBC Gas and the province expires in February 2012.
Currently, under the Vancouver Island Natural Gas Pipeline Act, Vancouver Island and Sunshine Coast communities are prohibited from receiving franchise fees from the gas provider to pay for repairing infrastructure damaged by FortisBC’s activities.
Since 1957, when the province’s original pipeline was installed by the Inland Natural Gas Company, Interior communities received millions of dollars collected through a three-per cent fee on customers’ bills to help pay for infrastructure damaged by the gas company.
Ruttan said with the original agreement almost up, Nanaimo and other cities currently not receiving similar money should be given the same contract.
“What happens now is the contract is about to mature and we’ll have an opportunity to do this and achieve some kind of equity,” said Ruttan, who met with FortisBC officials recently at an Association of Vancouver Island Coastal Communities meeting in Saanich. “Down the road the mayor and council will have to decide if we want to impose that tax on the gas users.”
If that happens, FortisBC customers will be required to pay a three-per cent tax on their gas bill which will then be collected by FortisBC and returned to municipalities to use how they see fit. Ruttan said it would likely be used to repair infrastructure damaged by gas company activities, which currently is an increasing portion of Nanaimo’s annual budgets.
About half of Nanaimo’s residences are hooked up to gas services.
“When they dig up a road or a sidewalk to add or repair a gas line all they do is patch over it,” said Ruttan. “It’s left up to the city to do the permanent repairs and it is costly.”
Since 1990 Kamloops has received $19.2 million in franchise fees while Penticton has received $6.2 million and Kelowna $20 million.
Nanaimo received $323,000 for a pre-existing propane agreement that expired in 1993 and has received nothing since.
Prior to 1991 when a gas pipeline was installed on Vancouver Island to service residents here, propane tankers were shipped over to Vancouver Island from the Lower Mainland for distribution to homes in Nanaimo’s downtown core. At the time, people who received the service paid a three per cent operation fee, which was then paid back to the city by Vancouver Island Gas, the predecessor to FortisBC Gas.
Ian Gartshore, president of Energy Solutions for Vancouver Island, said the gas provider of the day (now FortisBC) was given several incentives by Bill Vander Zalm’s provincial government to build a pipeline to Vancouver Island.
“The province said ‘well, it’s good to get natural gas there’ so in order to make it feasible the province said it would pay the company every year for 25 years to supply [natural gas] which was essentially guaranteed income,” said Gartshore. “Then the province sweetened the pot further by saying the price of natural gas will be set according to an average price of electricity and home heating oil. They also said, to sweeten the pot further, the gas company doesn’t have to be responsible to the municipalities like in other parts of the province. It’s a different set of rules for Vancouver Island and the Sunshine Coast than other parts of the province.”
Through that agreement, it was left up to Vancouver Island and Sunshine Coast municipalities to figure out where gas lines were buried and to repair, at the city’s expense, any infrastructure damaged by the gas company’s actions. It is not known how much infrastructure repair costs Nanaimo taxpayers annually, but simply locating gas lines costs around $150,000 annually.
Ruttan said the agreement hasn’t been any kind of windfall for FortisBC or its predecessors because Vancouver Island residents have never paid the three per cent premium, though he noted that natural gas on the Island is more expensive than on the Lower Mainland.
“Our gas prices are expected to go down according to our discussion [with FortisBC],” said Ruttan. “And I would suggest that the reduction would be equal to or slightly more than the three per cent tax, and mainlanders will be paying slightly more than they are now.”
The FortisBC website says it remains neutral with respect to operating fees and neither supports nor opposes their implementation.
All operating agreements between the province and FortisBC must be approved by the B.C. Utilities Commission.
The original agreement established for Interior cities was to give the gas company a level of certainty that a municipality would not permit a competing natural gas company to serve customers within the municipality.
