Officials from the Department of Natural Resources and Energy Development faced a number of questions Friday from lawmakers on why new fuel charges are being passed on to consumers and who exactly stands to benefit.
Department deputy minister Tom MacFarlane told MLAs during a meeting of the legislature’s public accounts committee that the carbon adjuster charge on gasoline is intended to protect retailers from “getting squeezed.”
The carbon adjuster is a mechanism put in place by the provincial government that allows the Energy and Utilities Board (EUB) to add a charge to fuel based on the costs faced by refiners in complying with federal clean fuel standards. Right now that charge adds an extra 6.22 cents per litre of gasoline sold in the province, but has added as much as seven cents since it was introduced in July.
MacFarlane said the charge is necessary in the province’s regulated system, which sets the maximum price at which fuel can be sold. The rationale is that if refiners’ costs go up, so does the price they charge to wholesalers and, in turn, the price retailers have to pay for the gas they sell.
“If I have to pay five cents more for the gas because of this new regulation, but I can’t capture that five cents because the maximum price doesn’t reflect it and I can’t go to whatever it is, $1.50, then the retailer is the one who gets squeezed,” he said.
But concerns were raised about who stands to benefit from the changes. Government MLA Andrea Anderson Mason asked repeatedly where that extra six cents goes. MacFarlane replied that it’s impossible to say how the charge trickles through the system and if anyone along the chain sees increased profits from it.
After the meeting, Anderson Mason said the government has yet to justify why consumers are facing the increased price at the pump.
“I don’t think we’re there yet,” she said.
“I don’t think we got clear answers one where exactly those seven cents at the pump are going and my only hope is that if this does go back to the EUB and there are changes, perhaps at that time the public intervener can dig in a little further and make sure that the answers are there for the residents of New Brunswick because they certainly deserve to know when they’re paying that seven cents at the pump where exactly it’s going.”
The federal government has argued that the charge was intended to be borne by refiners. As a charge based on the carbon intensity of fuel production, the idea is to push refiners into investing in technology that will reduce emissions. Federal Climate Minister Stephen Guilbeault has said the price impacts shouldn’t be felt this quickly in the overall price of gasoline.
New Brunswick is one of the few regulated fuel environments in the country, but in Nova Scotia, which has a similar regulated system, the charge on a litre of fuel is only three cents.
The formula used by the EUB to arrive at the 6.22-cent charge for the carbon adjuster was suggested by a consultant hired by Irving Oil. No other party presented counter-arguments, leading the EUB to adopt the formula. Ottawa says it will argue in favour of lower costs next time the EUB considers the carbon adjuster, which will likely happen this fall.
Green Leader David Coon asked what consequences there would be if the EUB decides to set a lower price, but department officials say the board can only rule on the evidence presented to it.
“So the board makes decisions based on the evidence they have at the time they make their decision and it wouldn’t be unlike any other decision they make for any other regulated environment,” said Heather Quinn, the director of the energy division of the Department of Natural Resources and Energy Development.
“So the current decision is correct based on the information they had at the time and when they look at it again it will be based on whatever’s provided at that time.”
But Coon says that will be of little comfort to consumers if the board finds the current carbon adjuster to be too high.
“So if it turns out we got ripped off for six months, we pay the piper,” he said.