| 08/30/2007 - Ontario Energy Board’s Decision on Enbridge Gas Distribution Inc’s Application |
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August 2007 - On July 5 2007, the Ontario Energy Board (OEB or Board) released its Decision with Reasons – Phase 1 in Enbridge Gas Distribution Inc.’s (EGD or Enbridge) application for approval of delivery rates for its fiscal 2007. Enbridge previously used a Risk Management Program which fixed the system gas price on up to 65% of the system gas volume for terms of up to 9 months. The OEB has effectively rejected Enbridge’s Risk Management Program and therefore, Enbridge has stopped hedging the price of system gas with the last hedge scheduled to terminate on September 30th 2007. Thus, the future system gas price is expected to closely track the daily and monthly spot price indexes. The end-result is that, going-forward, both the system gas price and the subsequent adjustments to correct for any under or over recovery of prices will be significantly more volatile. The decision also means, in our view, that the Ontario system gas price algorithms will gravitate towards those of Alberta’s and we can therefore expect to see similar price trends. The below figure outlines Alberta and Enbridge system gas prices for November 2006 to August 2007, and shows the marked volatility in the Alberta system:
Union Gas system gas pricing will be subject to the same ruling in the upcoming future. Energy Advantage’s advisory is that all Ontario mid size and large gas consumers should consider hedging strategies to guard against system gas price volatility. - 30 - Editorial Contacts:
Dan Morel |
