'No true benefit' to regulating gas prices, Liberal minister says

The Holt government's natural resources minister has come out strongly in favour of completely eliminating gasoline price-setting rules — while defending his own role in establishing the formula for the controversial carbon-cost adjustor Liberals plan to eliminate.

John Herron has no official responsibility for gasoline regulations, but Premier Susan Holt said he's playing a key role in discussions thanks to his former job as a member of the Energy and Utilities Board.

At the EUB, Herron was part of the panel that decided how to calculate the carbon adjustor, which adds 4.6 cents to the price of a litre of gasoline this week.

It's a cost that Holt promised to eliminate as part of a package of campaign commitments to make life more affordable for New Brunswickers.

But it looks increasingly likely that the Liberals will get rid of the EUB price-setting system altogether.

"There is no true benefit in my perspective of having a regulated regime in New Brunswick but there is a cost," Herron told CBC News in an interview.

"We don't benefit from the opportunity for the market to compete down profit margins and compete down costs." 

WATCH | 'I trust the market forces,' says Liberal minister on gas rules:

What N.B. gas regulation changes could mean at the pumps

5 hours ago

Duration 3:12

Carbon costs would likely be ‘closer to a zero’ if the province were to stop setting gas prices, says John Herron, minister of natural resources.

Eliminating the price-setting mechanism completely would allow gas producers and distributors to reintroduce the carbon cost back into the supply chain and pass it down to customers.

"It's a cost of doing business in Canada, and that cost has to be included in the price," said Carol Montreuil, the vice-president for Eastern Canada with the Canadian Fuels Association, an industry group.

"One way or another, in all provinces in the country, that cost — coming from the federal policy on clean fuel standards — is being applied across the country. New Brunswick is no different."

Holt argued last week that eliminating price regulation will create more competition among gas retailers, potentially driving prices down. Herron said he agrees with that position.

"If we were in a non-regulated market, not only do you have a chance to compete down margins, you're actually able to compete down costs, including that of the adjustor," Herron said during Question Period on Wednesday.

But Montreuil said there's no way competition will push prices down far enough to completely eliminate the carbon cost.

"No, not that full amount, because that number is real. It exists elsewhere in the country," he said.

The Higgs government created the carbon cost adjustor in 2022 to allow gasoline refiners and distributors to pass on their costs from federal clean fuel regulations, designed to push gasoline producers to lower the greenhouse gas emissions from their products.

It was left to the EUB to figure out how to calculate the cost, and a consultant hired by the board came up with a formula using the California Low Carbon Fuel Standard as what it called "a reasonable proxy," at least temporarily.

Glen Savoie, leader of the Progressive Conservative Opposition, suggested Wednesday that Herron was flip-flopping, given the Holt government plans to repeal the mechanism he helped craft as a board member.

"How did he get from agreeing with the EUB's direction to agreeing with the government's direction?"

Herron said the board was required to implement whatever legislation was adopted at the time.

But he also suggested the formula has led to a higher price than warranted.

"At that time, the EUB had made it very clear that they were working with the best available evidence it had before it," he said.

"We knew it was not the most optimal evidence that was put before the board at that time."

The minister told reporters that given no refiners, wholesales or distributors have asked for a higher carbon cost adjustor since it took effect, it's more likely that it's too high than too low.

He predicted that if price regulation is eliminated and the carbon cost is put back onto the price, "I think it's more apt to be closer to the zero number than 4.6."

Herron said he trusts the free market — which determines prices outside the four Atlantic provinces that all have regulatory price-setting — to "ensure the actual number reflects what that number should be." 

But Savoie told reporters that with no publicly available price-setting formula, no one will be able to say for sure.

"Deregulating is not necessarily going to lower prices for people, and it's going to be difficult to track where the cost-of-fuel adjustor actually gets paid," he said.