Spectra Energy, the parent company of Union Gas Limited, has been hit with a 4th quarter $30 Million charge related to a decision by Ontario’s energy regulator. The Ontario Energy Board (OEB) determined that the revenues realized by Union Gas from the optimization of upstream transportation contracts must be reclassified as gas supply costs. As a result, approximately 90% of the total reclassified revenues, equaling approximately $30 Million will be refunded to customers, while the remaining 10% shall accrue to Union Gas as an incentive to continue to undertake optimization activities.
In reaching its decision, the OEB explained that it did not agree with Union Gas’ arguments that the optimization activities were sustainable efficiency improvements found by Union Gas in 2011 and 2012. Instead, the OEB held that the optimization revenues were clearly related to reductions in upstream transportation costs that resulted in an overall reduction to Union Gas’ supply chain costs. As such, given that these cost reductions are subject to “pass through” treatment, the OEB held that they must accrue to customers.
A link to the full decision can be found here.