Irving Wallboard offered special, secret rate to rejoin natural gas system

J.D. Irving Ltd.'s wallboard plant in Saint John may be rejoining New Brunswick's public gas distribution system after a seven-year absence, but the return hinges on it getting a price for service that is lower than rates offered to other large gas customers.  

How much lower is a secret.

Gilles Volpé, vice-president of Liberty Utilities, the operator of New Brunswick's gas distribution network, said in an interview a confidential rate for the Irving plant will help the company keep competitive information private. He said that's not uncommon in the natural gas industry.

"We know of at least several dozen other utilities in North America that have these special kinds of arrangements," said Volpé. "Actually, Heritage Gas (in Nova Scotia) has something similar."

In an application before the New Brunswick Energy and Utilities Board, Liberty is proposing to create what it calls a "large industrial contract service," or LICS, rate.

If approved, it will serve only Atlantic Wallboard Ltd., which also operates under the business name Irving Wallboard. It is a subsidiary of J.D. Irving.

In its evidence, Liberty says it is satisfied the wallboard plant's "use of natural gas would be uneconomic" under any other pricing category Liberty offers its current customers.  

Liberty has provided the EUB with documents showing what the proposed new rate will be and how much lower it is than what other customers pay but has asked for that information not to be made public.

"The documents contain proprietary financial and/or commercially sensitive information in relation to not only Liberty but also other potential customers of Liberty," Liberty lawyer Len Hoyt wrote in requesting secrecy.

J.D. Irving declined to comment on the proposal Monday, saying the application for a special rate for the wallboard plant belongs to Liberty.

According to the Energy and Utilities Board, any party can file a claim for confidentiality on documents filed with the body, although any other party may file an objection and ask for a ruling. No objections to confidentiality requested by Liberty have been filed in the current application.

Atlantic Wallboard was once the single largest customer on New Brunswick's public gas distribution system but left the network in 2015 in a dispute over pricing.  

The wallboard plant began using compressed natural gas trucked to the plant instead after the New Brunswick government under former premier David Alward loosened rules to allow it.  

Previously, customers of natural gas within reach of the distribution system had to use it, except for six large users with  specific exemptions.

The Irving Oil refinery, three J.D. Irving pulp and paper mills and two natural gas generating stations in Saint John have had special exemptions from using the distribution system since gas arrived in New Brunswick in the late 1990s. 

In its evidence, Liberty said it has been negotiating with Atlantic Wallboard since 2018 to lure it back as a customer and finalized a deal last June that now requires approval from the Energy and Utilities Board.  

Irving has committed to bringing a minimum of 600,000 gigajoules of gas per year through Liberty's network to the wallboard plant in exchange for a preferential rate. That's nearly double the consumption of Liberty's next largest customer, and Volpé said recapturing that volume will help all gas consumers.

"It means extra revenues that will reduce the overall revenue requirement of the whole system having the effect of reducing rates for all other gas users on the system," he said.

Liberty currently has six rate categories. The largest customers, which include major provincial hospitals, universities and some manufacturing plants, currently pay the cheapest rates.  

They are billed on average about $4 per gigajoule, not including the cost of the gas itself, to use the distribution system. Residential customers pay more than triple that amount for delivery.

One gigajoule of natural gas contains the energy equivalent of about 27 litres of furnace oil.

Liberty says it will not be offering the new low rate to any other customer unless it can match the volume of the wallboard plant and prove it has access to a cheap alternative supply of energy as well.

A full hearing into the proposal is scheduled for April.