enbridge gas letter

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    Enbridge Gas New BrunswickEnbridge Gaz Nouveau-Brunswick440, chemin Wilsey RoadSuite/Bureau 101Fredericton, NB E3B 7G5

    January 18, 2012

    Dear Editor ,

    Re: A public natural gas system

    During the past month, the Government of New Brunswick used its legislative power to pass Bill 18, anAct to Amend the Gas Distribution Act, 1999. This legislation will have serious negative consequencesfor the public distribution of natural gas in New Brunswick and also for New Brunswicks reputation as agood place to do business.

    Enbridge Gas New Brunswick (EGNB) entered into a franchise agreement with the Government of New

    Brunswick in 1999. The franchise agreement was the end result of a competitive bidding process inwhich Enbridge proved to be the only qualified proponent. With the passage of Bill 18, the Governmenthas now decided to unilaterally change the underpinnings of this franchise agreement without EGNBsconsent and in spite of its potentially serious consequences.

    When the Government introduced this legislation on December 9, 2011, it stated its concerns that NewBrunswick has the highest natural gas distribution rates in North America. In context however, when theGovernment compares natural gas distribution rates in New Brunswick to other jurisdictions in NorthAmerica, it fails to acknowledge the unique aspects of gas distribution in this Province. Were it not forthe performance by EGNB over the past eleven years, there would not be any public natural gasdistribution system in New Brunswick at all. Rather, there would merely be direct transmission tothose few large customers who are within feasible proximity of the main pipeline system. In short, thecomparison to be made is not with other gas distribution systems in North America, but with the savingsthat EGNB has brought to New Brunswick energy customers versus the prospect of no natural

    gas at all.

    In 1999, in addition to EGNBs general franchise, the Government also granted single-end-use franchisesto several large industrial customers who in aggregate use approximately 80% of all natural gasdistributed in the Province, but contribute nothing towards lowering delivery rates for customers on thepublic distribution system. Given that the costs of the public system must be borne by users of only 20%of the natural gas volumes distributed in the Province, there was no reasonable expectation or possibilitythat New Brunswick rates could be compared to those of mature gas utilities in other jurisdictions. In fact,it was this realization that led the Government and Enbridge to enter into the current distribution ratemodel, which has targeted the delivery of savings to every customer who has switched to natural gasfrom alternative sources of energy.

    The Government has suggested that Bill 18 will help to bring lower distribution rates and provide a greater

    incentive for new customers to join the public system. If the Government proceeds to enact regulationsconsistent with the direction of Bill 18, then operational changes will have to occur within EGNB that arenot consistent with the Governments stated goals. There will be very little growth of the public distributionsystem and any extensions to additional communities are likely to be uneconomic, given the expectedlower distribution rates. Any projects that may appear at first glance to be economic will be unable toattract new capital due to obvious concerns that the Government may again change the rules at somefuture point in time. With limited future growth prospects for the public natural gas distribution system, it islikely that a significant number of the 400 direct and indirect jobs that have been created by Enbridgespresence in New Brunswick will be impacted adversely. This is something that EGNB will fight hard toprevent, but the reality of Bill 18 is that it threatens current jobs in the Province and diminishes thepotential for expanded availability of natural gas to public consumers in New Brunswick.

    The Government also suggests that lower natural gas distribution rates will attract new business to New

    Brunswick, but based on Enbridges experience this notion is without foundation. Enbridge is not aware of

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    any large industrial project that has chosen not to invest in New Brunswick due to natural gas distributionrates. In fact, our current customers are more competitive than they would otherwise be if natural gashad not been available, due to the savings our rates offer. Additionally, no proponent of any potentialnew project that EGNB has spoken with directly has ever identified natural gas rates as a concern. Wealso continue to see a number of mid and large sized commercial businesses establish operations in NewBrunswick that are using natural gas as their fuel of choice.

    Conversely, the Governments apparent attempt to foster new economic development - by unilaterallychanging the rules under which Enbridge has in good faith invested nearly $500 million in New Brunswick- can only be seen as a negative signal to organizations evaluating New Brunswick as a place to investand do business. This adverse reputational risk is a far more serious threat to economic development inthe Province than any concerns about natural gas distribution rates.

    EGNB has previously acknowledged that its public distribution system has not developed as quickly asoriginally expected and we have consistently strived to work with Government, the Energy and UtilitiesBoard and others towards improved solutions. As we have also consistently stated, if loweringdistribution rates for all customers is truly the objective of the Province, then the participation of allstakeholders, including EGNB, the Government, single-end-use franchise holders and customers will berequired to achieve a mutually satisfactory result. The right answer cannot be achieved by the

    Governments unilateral and specific targeting of EGNB through its passage of Bill 18.

    Our position has not changed since we accepted the responsibility in 1999 to develop a public natural gasdistribution system in New Brunswick. At that time we placed our confidence in the sincere belief that ourfranchise agreement was secure and that the Government of New Brunswick would work closely with usto bring energy savings and natural gas advantages to as many public consumers as possible. We callon the Government of New Brunswick now to reaffirm the basis of that confidence, which its recentlegislation has eroded so seriously.

    Respectfully,

    Guy JarvisPresident of Enbridge Gas DistributionChair of the Enbridge Gas New Brunswick Board of Directors