Prices will go up by 8 cents in New Brunswick on Friday, but only 4 cents everywhere else
Nova Scotia’s Utilities and Review Board has decided that gas prices will go up by 3.74 cents per litre and diesel prices will go up by 4.17 cents per litre to cover the cost of new federal clean fuel regulations. This will start happening on Friday.
Early Thursday morning, the same fees were put in place in Newfoundland and Labrador.
The amounts are half of what you would expect to pay in New Brunswick, which is eight cents.
David Roberts says that people in the petroleum industry in Nova Scotia tried to get the province to follow New Brunswick’s eight-cent plan, but the board didn’t like that idea.
“No one thought it would really cost that much,” said Roberts, who is the consumer advocate for Nova Scotia.
He said that an eight-cent increase is much more than what oil companies are likely to have to pay and would unfairly punish drivers.
He said in an interview, “Consumers won’t get any rebates if it turns out they were paying four or five cents more per liter than the clean fuel regulations would have required to compensate suppliers.”
Campaign launched over cos
The government of New Brunswick has been running a big campaign on social media and in ads to convince people that the upcoming eight-cent increase in gasoline and diesel prices is necessary.
It says that the full amount is needed to help oil companies pay for the high cost of federal clean fuel regulations, which they would have to pay for themselves otherwise by taking money from small retailers they supply.
“New Brunswick has changed how regulators set maximum prices because, if this change wasn’t made, small retailers in the province would have to pay the extra cost of the federal government’s clean fuel regulation,” the province wrote in materials sent out last week, which included rare full-page newspaper ads.
“The clean fuel regulations could cause prices to go up by as much as eight cents per litre.”
But Nova Scotia has decided that four cents is enough. This means that consumers in that province will pay about $1 million less a week for clean fuel than consumers in New Brunswick.
Clean fuel rules went into effect in Canada on July 1, but Nova Scotia and New Brunswick will include the costs of those rules for the first time this Friday in the formulas that set regulated prices.
The goal of the national rules is to lower the “carbon intensity” of fuels sold all over the country.
They are meant to get fuel refiners and importers to lower the amount of pollution in the products they make or sell by setting goals for emissions and giving financial rewards and punishments for reaching them.
The rules don’t apply to heating fuels or oil products that are shipped out of Canada.
By making changes, companies can earn credits
Refiners can follow the new rules in different ways, such as by putting more ethanol in gasoline sold in the United States, selling biodiesel products, or finding ways to cut their own emissions from refining.
Companies that emit less than the federal government’s limit will get credits that they can sell on a market that is being set up for that purpose. If other producers run out of fuel, they can buy those credits.
You can also get credits by investing in things that have nothing to do with refining, like charging stations for electric cars.
Oil companies have said that making these changes will be expensive, so the governments of New Brunswick and Nova Scotia each passed new laws that let consumers pay for these costs.
The New Brunswick Energy and Utilities Board and Nova Scotia’s Utilities and Review Board each held its own hearing to determine what those costs might be, but ultimately reached different conclusions.
Angie Brown, who works for the consulting firm Grant Thornton, was hired by both regulators to report on what would be fair.
She built a model based on California’s existing clean fuel rules and credit-trading markets. Based on California’s experience, she estimated that adding about eight cents per liter to the retail prices of gasoline and diesel in both provinces would be enough to compensate refiners and importers.
Brown was asked if it made sense to use California data to figure out how much the new Canadian policy would cost, but she said there weren’t many good examples to look at.
Brown said in her Nova Scotia testimony, “I know this isn’t a perfect solution, and I think you’d get a better result if you used real data.”
She said, though, that if oil companies weren’t paid enough for the new costs, they might stop selling to local markets.
She said, “I think there are some pretty big risks if you just wait and see what happens.”
Consultant says it’s too early to set prices
Brown’s modeling and suggestions were mostly accepted in New Brunswick, but they were questioned in Nova Scotia.
The Nova Scotia board hired a second expert who said that consumers shouldn’t have to pay for the new clean fuel rules yet because no one knows how much they will cost.
Vijay Muralidharan, who works for Calgary’s R Cube Economic Consulting Inc., agreed that the new rules will cost oil companies more money, but he said that regulators should wait at least a couple of months to see how the companies respond to the rules.
“At this point, any estimate of costs would be a guess with a high chance of being wrong,” Muralidharan said in his evidence.
“Because of this, we suggest that the Board wait until the new Clean Fuel Standard is in place and then do a study with the main fuel suppliers to see how it affects their business before changing the current regulatory framework.”
The reasons for the decision have not yet been given, but the decision to add four cents to the cost of clean fuel falls in the middle of Grant Thornton’s recommendation of an eight-cent increase and R Cube’s suggestion of no immediate increase.
Roberts said that R Cube’s presence at the Nova Scotia hearing probably had a big effect on the outcome, which wasn’t the case in New Brunswick.
“The difference is that the New Brunswick board was only given the scenario in the Grant Thornton report,” said Roberts.
“The board in New Brunswick agreed with Grant Thornton’s suggestion, but the board in Nova Scotia did not.”
Regulators in Newfoundland and Labrador haven’t held a hearing on clean fuel costs yet, but the province told them to implement an interim charge. They chose Nova Scotia’s amounts as their own on Thursday.