March 25, 2013

Mechanical Contractors Association hails marketplace decision

PETER CAULFIELD

correspondent

The Mechanical Contractors Association of B.C. (MCABC) is applauding a recent report by a provincial regulating agency highlighting the principles and guidelines under which installation work by utilities can be brought under regulatory control.

The association said the report by the B.C. Utilities Commission (BCUC) is a victory for the B.C. marketplace.

The MCABC said the commission’s Dec. 27, 2012 report denied the request of energy utility FortisBC Energy Inc. to bring installation work in three B.C. school districts under regulatory control.

MCABC said that, had FortisBC’s request been approved, it would have created a new monopoly market, isolated from competition.

“In the absence of competition, locked-in rates would guarantee a healthy rate of return for FortisBC,” said MCABC executive vice president Dana Taylor.

“The problem, recognized by the commission, is that FortisBC was attempting to create an island of regulation in a sea of competition, which is unprecedented in any other jurisdiction in North America. A host of private businesses, many of them small family-owned operations, are already engaged in a highly competitive market in B.C.”

Like Taylor, Philip Hochstein, president of the Independent Contractors and Business Association of B.C., was pleased with the report.

“The BCUC deserves hearty congratulations for its decision on a request from FortisBC that would create a new regulated market for the heating and cooling systems in public and multi-family residential buildings,” Hochstein said.

FortisBC spokesman Michael Allison said the company had introduced a number of new services for customers in recent years.

They included Energy Efficiency and Conservation (EEC) programs, renewable natural gas (biomethane), natural gas for transportation (compressed natural gas and liquid natural gas) and thermal energy services projects (also called alternative energy services).

FortisBC applied to the BCUC for approval, through the Utilities Commission regulatory Certificate of Public Convenience and Necessity process, of three Alternative Energy Services (AES) projects in the Delta, Abbotsford and Central Okanagan school districts that are outside of traditional gas distribution utility activities.

As part of its application to the BCUC, FortisBC requested approval to construct and operate the equipment and to set customer rates for provision of the energy in the same manner that it currently does for traditional regulated services like natural gas or electricity.

In 2011, the Energy Services Association of Canada (ESAC), an industry association of energy service companies, asked the BCUC to inquire into the “practices and conduct of FortisBC in the AES market.”

ESAC raised a number of concerns with the utilities commission including: a possible lack of adequate public consultation by FortisBC; the possible use and distribution of provincial Energy Efficiency and Conservation funds by FortisBC; FortisBC’s role as a regulated utility in the delivery of AES and the potential cross-subsidization of AES activities by natural gas rate-payers; and the use of sensitive<0x000A>market information within FortisBC.

In mid-2011, the BCUC initiated an “Inquiry into FortisBC Energy Inc.’s Offering of Products and Services in Alternative Energy Solutions and Other New Initiatives” (AES Inquiry).

The commission said the inquiry would address issues at a principles level and focus on FortisBC, while recognizing that the principles set out may have application beyond FortisBC.

Taylor said his association began to take an interest in the matter in summer 2012, after some members brought it to the board’s attention.

“We met with the assistant deputy minister and Rich Coleman’s executive assistant in the Ministry of Energy, Mines and Natural Gas,” he said.

“In addition, MCA members began writing to the B.C. Utilities Commission, the Ministry of Energy, the Ministry of the Environment, the Ministry of Advanced Education, as well as a number of school district trustees and facilities managers with signed memoranda of understanding with FortisBC.”

In December 2012, the BCUC issued its 145-page report.

In it, the commission laid out a number of principles and guidelines for regulation of utilities.

They are: Regulate only where required; regulation should not impede competitive markets; where regulation is required, use the least amount of regulation needed to protect the ratepayer; and the benefits of regulation should outweigh the costs.

Despite claims to the contrary, the utility commission’s report is not the end of the story.

Alison Thorson, BCUC director of policy, planning and customer relations, said commission staff are drafting a regulatory framework for thermal energy services/alternative energy services that meets the regulatory requirements of the Utilities Commission Act and that is also more streamlined, in order to handle future applications for regulation by utilities.

Thorson said the draft will be completed in 2013 and then made public for feedback and discussion.

A final version of the regulatory framework is expected later this year.

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