Credit to Author: Gord Kurenoff| Date: Fri, 15 Nov 2019 23:17:34 +0000
VICTORIA — While the B.C. Utilities Commission is standing by its finding of an unexplained markup in gasoline prices, it is also cautioning the province against moving to quickly to regulate the market.
The commission acknowledged a possible need for regulation in B.C. because the major players preside over a closed oligopoly rather than an open competitive market.
“Any regulation that is introduced should not reduce investment incentives,” wrote a three-member panel of commissioners in a supplementary report on gasoline prices released this week.
“However, there is no evidence there are currently any realistic investment opportunities for any other parties to invest,” they underscored.
“The existing members of the oligopoly have an incentive to invest because the returns are high. Those returns are realized through higher prices for customers than they would pay in the absence of an oligopoly exercising market power.”
That oligopoly power was reflected in a markup as high as 13-cents-per-litre of gasoline at the pump, according to the panel’s initial report back in August.
Having reiterated that finding this week, the panel cautioned against moving too quickly to regulate retail prices because of a dearth of understanding of both the market and customer concerns.
“We believe this remains the most appropriate approach to determining a better understanding of the problem and developing a balanced solution,” wrote the commissioners in what may not be their final word on the subject.
For the New Democrats are preparing legislation that would put the challenge back to the commission in sorting out the mysteries of the market.
“We have got some ideas that we will be bringing forward in the legislature,” Premier John Horgan confirmed this week in reacting to the latest report from the commission.
He was referring to a bill that is expected to be tabled after the house resumes Monday for the final two weeks of the fall session.
Cabinet minister Bruce Ralston discussed the government’s legislative intentions in a recent interview with Rob Shaw of The Vancouver Sun.
“We are in fact considering legislation that would require industry to give information about their supply and prices to an independent regulatory body, likely the BCUC, for review,” said Ralston, whose jobs ministry includes responsibility for the gas price inquiry.
“They would be required to report in a prescribed form, so it would be comparable, managed data. They would have to make that publicly available at regular intervals.”
Similar legislation exists in Washington state and California. But the utilities commission was frustrated in its efforts to get information from the companies here in B.C.
They initially balked at handing over sensitive data on supply and price margins because of concerns that it might fall into the hands of competitors. They complied only when the commission assured them the information would be kept confidential.
Even at that, the commissioners were frustrated in the effort to account for the 13-cents-a-litre markup. The companies disputed the gap, but provided only hypothetical data to refute the finding, according to panel chair David Morton.
“The oil companies that made those arguments were not able to provide any single piece of evidence that would persuade us that was the case,” Morton told reporter Shaw this week.
“At the end of the day we said we really don’t have anything definitive so we’re not going to back off this 13-cent number.”
The commissioners also struggled to break down costs at the retail level.
“We don’t really know what the full story is on retail sales,” said Morton, noting lack of data on both the daily pricing cycle in Metro Vancouver and the apparently fixed prices in other places such as Squamish and Powell River.
While the panel urged further investigation of retail and regional markets, the cabinet mandate for the gas price inquiry ran out with the report released this week.
However, that is likely to change with the coming legislation. The New Democrats held off consulting the commission about their legislative intentions while the panel was still working on its report.
Morton, who is also CEO of the commission, welcomed the proposed legislative direction, having learned about it from the story in The Sun.
He indicated the commission was ready to cooperate if the legislation were to provide it with more routine data from the oil and gas companies on supply and pricing. He added the legislation ought to give the commission regulatory authority to do something with the information.
“Certainly if we were asked to participate further in trying to unravel this mystery, so to speak, yes it would be very helpful,” he told reporter Shaw.
Ralston, for his part, framed the legislation as the obvious next step arising out of the two reports from the commission.
The province hopes that if the companies were forced to hand over more information to a regulator, they might be more guarded in messing with prices, knowing they were being tracked.
“We’ll see how the industry responds,” said the minister. “I’m under no illusions about any specific response, but if it is more transparent, then that might have an effect on the way prices are set. We’ll see. It may not.”
But at the very least the information will allow the government to track the sector as a basis for future decisions said Ralston, hinting that the data-gathering could be the first step to full-blown regulation of gasoline prices.
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