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Media Release: Union Gas Gobbles Up Ontario Storage Competitors

For Immediate Release

November 29, 2007

Recent announcements by Texas-based multinational corporation, Spectra Energy Inc., owner of Union Gas Limited, reveal that it intends to gobble up what little competition it currently faces from Ontario storage providers. The gas pools of Midway Petroleum Company located in Sarnia, Ontario as well as a controlling interest in storage gas pools to be developed in Goderich Township by Tipperary Gas Corporation will be picked up by Spectra through its subsidiary, Union Gas. Storage is needed to serve all natural gas customers, with gas being stored in the summer, and withdrawn for the increased heating needs of winter days.

The Vulnerable Energy Consumers Coalition (VECC), a coalition representing residential customers of limited means in Ontario slammed the Spectra moves.

“These developments make it clear that consumers are unlikely to see a competitive market for natural gas storage that will make energy markets more cost-effective for consumers” said Michael Janigan, general counsel for the Public Interest Advocacy Centre (PIAC) that represents VECC in energy regulatory proceedings.

The acquisitions by Spectra highlight the importance of the petitions by Ontario consumer groups, including VECC, as well as the Consumers Council of Canada (CCC) and the Industrial Gas Users Association (IGUA), that are currently before the Ontario cabinet. The petitions seek to overturn the decisions in 2006 and 2007 of the Ontario Energy Board (OEB) that deregulated the Ontario natural gas storage market. The OEB decisions gave Union Gas the right to keep the difference between the costs of supplying gas storage (developed with customer rates), and the revenues obtained from renting out the storage to big customers, such as other distribution and gas services companies, outside of Union’s franchise area. Janigan noted the financial results of deregulation:

“The information on record with the OEB and Union’s Interim Report for the Third Quarter ending September 30, 2007, confirm that Union’s earnings from $103M of investment the OEB considers Union to have made in its unregulated storage business could be as much as $135M per annum. By any standard, such level of earnings are supernormal and unconscionable”

About 75% or over $100M per annum of this revenue would be credited to Union’s ratepayers if the Cabinet grants the relief VECC and others have requested in their Petitions.

“With the prospect of little competition in the Ontario gas storage industry through Spectra’s dealings, the OEB’s decision will result in a gift from Union Gas’ customers to their American shareholders that keeps on giving and growing, “ added Janigan.

The OEB’s deregulation decisions envisioned a fully competitive market by 2011.

While Ontario gas distributors, Union Gas and Enbridge Gas Distribution both own gas storage facilities; only Union owns natural gas storage that is available for use on a long-term basis in the province. The Midway and Tipperary storage developments are expected to add over 4 BCF of storage to the system.

For further information contact:

Michael Janigan
General Counsel
Public Interest Advocacy Centre
Ottawa, ON
613-562-4002×26
613 562-0007 fax
mjanigan@piac.ca
www.piac.ca

 

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