The NDP government has suddenly found itself holding a $490-million hand grenade that could go off if it is not defused quickly.
I am referring to the B.C. Utilities Commission’s gas inquiry panel finding that 13 cents a litre of gas prices in Metro Vancouver cannot be attributed to any factor. The panel says that works out to about $490 million a year, which means that is how much drivers are being ripped off at the pump.
The problem for the government is that it raised expectations for taking some kind of action that would lead to lower gas prices when it asked the commission to examine the situation. It is now staring at an awkward situation.
To most everyone’s surprise – including, I think, the NDP government – the panel came up with this mysterious 13 cents a litre of gas at the pump that cannot be accounted for. Taxes, productions costs, distribution costs, spot gas prices and other factors are all assigned a portion of what makes up the cost of gas at the pump, leaving this unexplained 13 cents a litre.
In addition, the panel made the case that, while there is no evidence that the gas companies are acting in collusion to fix prices, those prices are not determined in a true open market situation. Rather, the five major companies are acting like an oligarchy with little competition.
Jobs, Trade and Technology Minister Bruce Ralston was quick to agree with the panel’s key finding – that drivers are being hosed at the pump.
“The BCUC found that the wholesale gasoline market is not truly competitive, which results in unexplained gas prices for consumers, and potentially higher profits for oil gas companies,” Ralston said, sounding like his cabinet colleagues are going to ride to the rescue.
So the table has now been set for the government to take action. But the question is what exactly can be done?
Ralston bought some time by agreeing with the panel’s suggestion that its work be extended a month to give the industry time to respond to the suggestion it is systematically robbing drivers every time they fill up at the pump.
Perhaps the gas companies can explain themselves. However, the panel was given quite a bit of information by the companies and others (it examined more than 3,000 pages of evidence) so it is difficult to see where the explanation lies.
In any case, do not expect the hefty taxation portion of gas prices to be changed. The panel was instructed by the government not to even examine the taxation issue and that revenue stream is already dedicated for such things as transit use.
Interestingly, the panel did seem to endorse the Trans Mountain pipeline expansion by recommending that “the B.C. government should ensure there is infrastructure for more refined product to B.C.,” although inquiry chair David Morton noted that unless pipeline allocation rules were changed, another pipeline would not necessarily guarantee more refined gas being shipped to this province.
One option down the road for the NDP government – after the month-long review – is to implement some kind of regulatory scheme that, among other things, limits the markup of wholesale gas. Maritime provincial governments and some U.S. state governments have regulations to varying degrees, and no doubt, the government is going to be looking hard at them.
However, even the panel warned there might be no easy fix to be found. It did not take a position on whether a regulatory framework should be used, but it did warn of unintended consequences of putting new rules into what is supposed to be a competitive market but is not working that way.
In the meantime, the longer that $490 million hand grenade is left lying around without any action taken to defuse it, the greater the chance this exercise in consumer protection could come back to haunt the government.