Order No. P.910515
C A N A D A
PROVINCE OF
PRINCE EDWARD ISLAND
BEFORE THE PUBLIC UTILITIES COMMISSION
IN THE MATTER
of the Petroleum Products Act, Stats. P.E.I.
1990, c. 43;
- and -
IN THE MATTER of the prices
charged by wholesalers for petroleum products in the Province of Prince Edward
Island.
Wednesday, the 15th day of May, A.D., 1991
BEFORE
Linda Webber, Chairman
Anna C. Carr, Commissioner
C. C. Hickey, Commissioner
Decision and Order
Table of Contents
TITLE PAGE
TABLE OF CONTENTS
DECISION
I. INTRODUCTION
II. DISCUSSION
A. Crude Oil Prices
B. Ultramar Canada Inc.
C. Irving Oil Limited
D. Shell Canada Products Limited
E. Petro-Canada
F. Imperial Oil Limited
III. CONCLUSION
IV. OTHER - FUTURE
MONITORING
ORDER
Decision
I. INTRODUCTION
Further to the Commission's Decision & Order No. P.910415, the prices charged for petroleum products by five wholesalers doing business in this jurisdiction were reviewed by the Commission this date, primarily with respect to crude oil costs and how those costs should be reflected in present-day prices. These wholesalers are Ultramar Canada Inc., Irving Oil Limited, Shell Canada Products Limited, Petro-Canada and Imperial Oil Limited.
Representatives of Petro-Canada, Shell and Irving had filed submissions mid-April indicating that price decreases effective mid-May were not being sought, and Imperial and Ultramar did not make submissions in this regard.
A submission filed on 30 April 1991 with respect to this matter was filed with the Commission on behalf of the Minister of Energy and Forestry for the Province.
II. DISCUSSION
A. Crude Oil Prices
Exhibit 3 filed at the Commission's hearings held on 7 and 8 February 1991 was again updated by Commission staff on 29 April 1991 to include Brent crude oil prices to and including March, 1991, and a copy of this amended document is hereto annexed marked "A". This document indicates that since the issuance of the Commission's Order No. P.910415, a 1.6 cent per litre price reduction would be justified. The
source for this information is Energy, Mines and Resources Canada.
Following the Mid-East oil crisis, each oil company was granted increases based on its own applications, and the total increases authorized varied from 9.7 to 11.5 cents per litre. However, when crude oil prices decreased, only one company, Ultramar Canada Inc., made applications to reduce prices under the established guidelines. Some companies were ordered to reduce their prices, and in one instance, another applied for decreases once the decision of the Commission was known. To date, the prices of the various wholesalers were ordered decreased in amounts of from 9.7 to 10.8 cents per litre, and two companies applied for and received approval to further reduce their dealer tank truck prices for market conditions during this period.
The total increases granted in relation to the crude oil costs were based on crude oil costs over and above the 23.86 $CDN/BBL. average price on which the prices then in effect were based. The average cost indicated for February and March, 1991 is 22.50 $CDN/BBL. This would indicate to the Commission that prices should now be reduced by 1.0 cent per litre plus the difference which presently exists between the increases and decreases previously authorized. This conclusion is based on the following calculation:
$23.86 - $22.50 = $1.36 x .7 = .952 or 1.0 cent per litre.
The maximum increase allowed by crude oil changes since early 1990 has totalled 11.4 cents per litre (11.5 cents per litre for Petro-Canada because of rounding). This total reflected the change in the average crude oil prices from the Dec. '89/Jan./Feb.'90 price of $23.86 per barrel to the Oct./Nov.'90 price of $40.26 per barrel.
The maximum reduction ordered so far (reflecting changes from a $40.26 per barrel average to a $24.80 per barrel average) is 10.8 cents per litre.
Therefore, the maximum reduction left to bring prices down to the early 1990 level is 0.6 cents per litre (out of the 1.6 cents per litre change indicated by average crude oil price changes from Jan./Feb.'91 to Feb./March'91).
Since the prices of some companies did not go up the full 11.4 cents per litre, it would not be fair to order all companies to reduce their prices by amounts totalling 11.4 cents per litre. Rather, each company will be ordered, with respect to this 0.6 cent per litre component of the 1.6 cent per litre change noted at this time, to reduce its prices by the portion of this 0.6 cent per litre required to bring its company's price back to the early 1990 level. Petro-Canada must reduce its prices 0.7 cents per litre on this basis, because it was allowed, as noted above, to increase its
prices by amounts totalling 11.5 cents per litre.
Once these calculations have been made, each wholesaler will be ordered to reduce its prices by a further 1.0 cent per litre to reflect the balance of the 1.6 cent per litre change noted in the Feb./March'91 average, if such reductions are not already in place.
B. Ultramar Canada Inc.
Previous price increases based on increased crude oil costs granted Ultramar totalled 11.2 cents per litre, and decreases to date have amounted to 10.8 cents per litre. A price reduction of 1.4 cents per litre is therefore indicated for Ultramar Canada Inc.
C. Irving Oil Limited
With respect to the prices of Irving Oil Limited, Counsel for the Company submitted an affidavit of a company representative indicating that no price decreases to be effective mid-May based on crude oil costs were being sought.
Previously approved increases for this wholesaler based on crude oil costs totalled 10.9 cents per litre, with decreases since ordered totalling 10.8 cents per litre. A
price reduction for Irving Oil Limited of 1.1 cent per litre is therefore presently indicated.
D. Shell Canada Products Limited
Shell took a similar position to Irving, and filed in its submission information to the effect that it is still in an under-recovery position with regard to crude oil costs. Price increases based on crude oil costs previously approved for Shell totalled 9.7 cents per litre, while decreases since ordered totalled 9.7 cents per litre.
A price reduction of 1.0 cent per litre is therefore indicated for Shell Canada Products Limited.
E. Petro-Canada
Petro-Canada (formerly Petro-Canada Inc.) filed a submission indicating that while a 1.6 cent per litre decrease effective mid-May would appear warranted, Petro-Canada has to date been unable to fully recover earlier cost increases, and were therefore not seeking to reduce its prices mid-May.
As indicated in the Commission's Decision and Order No.
P.910415, the Commission received and approved an application by Petro-Canada for decreases in its dealer tank truck pricing schedule only. The reductions approved were 0.9 cents per litre on diesel, 1.2 cents per litre on regular unleaded, and 1.3 cents per litre on mid-grade and premium unleaded gasolines, said application being filed to enable Petro-Canada "to remain competitive in the market place". These reduced prices became effective 12:01 a.m. on 9 April 1991.
Increases granted Petro-Canada based on crude costs totalled 11.5 cents per litre and decreases totalled 10.8 cents per litre. Without considering the above-noted reductions, a price reduction based on crude oil costs of 1.7 cents per litre is now indicated for Petro-Canada.
However, the Commission believes it is reasonable to take into consideration Petro-Canada's voluntary reductions effective 9 April 1991 with respect to its dealer prices and
will therefore order reductions to its dealer tank truck prices which reflect only the differences between these voluntary reductions and the 1.7 cents per litre indicated. The reductions to be ordered on its dealer schedule would then be 0.5 cents per litre on regular unleaded, 0.4 cents per litre on mid-grade and premium unleadeds and 0.8 cents per litre on diesel fuel. The Company is to notify the Commission within 24 hours of receipt of this Decision if it wishes to apply to further reduce the prices contained in its dealer schedule. The Commission will order reductions on all products contained in its posted consumer pricing schedule of
1 .7 cents per litre.
F. Imperial Oil Limited
As indicated above, the Commission has received nothing in the way of an application or a submission from the wholesaler, Imperial Oil Limited, with respect to crude oil costs.
The Commission did, however, as reported earlier, approve an application dated 22 March 1991 from Esso Petroleum Canada (a Division of Imperial Oil Limited) to decrease the prices contained in its dealer tank truck pricing schedule by 0.9 cents per litre on diesel, 1.2 cents per litre on regular unleaded and 1.3 cents per litre on mid-grade and premium unleaded gasolines. This application was filed "in order to make Esso Petroleum's posted prices competitive in the marketplace". These reduced prices became
effective 12.01 a.m. on 26 March 1991. However, similar decreases were not applied for with respect to its posted consumer pricing schedule.
Three increases granted Imperial (mid-November/ mid-December 1990 and mid-January 1991) totalled 11.4 cents per litre, of which 11.0 cents per litre was based on crude oil costs and 0.4 cents per litre was based on non-crude costs (heavy fuel oil component). Decreases to date with respect to crude oil costs total 10.8 cents per litre. On this basis, a decrease of 1.2 cents based on the crude cost component of prices is therefore now indicated for Imperial Oil Limited.
As the reductions granted Imperial to its dealer tank truck prices were based on market conditions and were in addition to the 10.8 cents per litre decreases ordered with respect to crude oil costs, the Commission will order only a reduction of the difference between these voluntary reductions and the 1.2 cents per litre with respect to its dealer schedule, being a 0.3 cent per litre reduction in diesel fuel. However, Imperial is to notify the Commission within 24 hours of receipt of this Decision if it wishes to apply to further reduce the prices contained in its dealer schedule. The prices contained in its consumer pricing schedule shall be ordered reduced by 1.2 cents per litre.
III. CONCLUSION
As a result of reviewing the information outlined above and other statistical data available to the Commission through such sources as Energy, Mines and Resources - Canada, the Commission has determined that decreases in all prices contained in the dealer and consumer tank truck pricing schedules of the five above-named wholesalers effective 12:01 a.m. on 16 May 1991 are just and reasonable.
For the reasons set out in this Decision and
Order, the following wholesalers are hereby ordered to decrease prices as follows:
|
- |
Dealer
(cents/litre) |
Consumer
(cents/litre) |
|
Ultramar |
1.4 |
1.4 |
|
Irving |
1.1 |
1.1 |
|
Shell |
1.0 |
1.0 |
Petro-Canada
(Regular Unleaded) |
0.5 |
1.7 |
|
(Mid-Grade Unleaded) |
0.4 |
1.7 |
|
(Premium Unleaded) |
0.4 |
1.7 |
|
(Diesel) |
0.8 |
1.7 |
Imperial
(All Gasolines) |
0.0 |
1.2 |
|
(Diesel) |
0.3 |
1.2 |
Any adjustments necessary to bring the mid-grade unleaded gasoline to the price which is closest to the mid-way point between the prices authorized for regular and premium unleaded gasoline product are also to be undertaken at this time.
All reductions are to be effective 12:01 a.m. on 17 May 1991.
IV. OTHER - FUTURE MONITORING
Prices have now been adjusted to remove the impact of the Mid-East oil crisis and future monitoring should therefore allow for some market fluctuation.
In consideration of this, the Commission gives notice to all companies and interveners that until further notice, crude oil costs will be reviewed on a bi-monthly basis. Any companies wishing to apply or comment on crude oil cost changes and their relationship to the prices of refined product should file by the 15th of every second month (starting in June, 1991 (next filing would be 15 August). These documents will be made available to the public for comment by the 30th of that month. The Commission's decision will follow.
The Commission believes that it is in the best interests of all concerned to allow some fluctuation in the price of crude without constantly changing the approved prices to reflect every 1/10th cent per litre change. However, this procedure should allow for the flow-through of necessary changes in a timely fashion.
Any application submitted should be based on the average crude oil costs for the preceding two-month period--hence an application filed in August would relate to the June-July average. This average would be compared with the two-month crude oil cost average on which the last price adjustment based on crude oil costs was made, and also take into consideration any fluctuations since that time.
Order
THEREFORE IT IS ORDERED that the petroleum product prices contained in the dealer and posted consumer pricing schedules presently in effect in this Province for Ultramar Canada Inc., Irving Oil Limited, Shell Canada Products Limited, Petro-Canada and Imperial Oil Limited shall be reduced by the amounts indicated in the table outlined on page 11 of this Decision, effective 12:01 a.m. on Friday, 17 May 1991;
AND IT IS FURTHER ORDERED that the petroleum prices contained in the dealer pricing schedules of Petro-Canada and Imperial Oil Limited which will result from application of the decreases ordered shall be reviewed and confirmed by each company within 24 hours of receipt of this Decision and Order:
AND IT IS FURTHER ORDERED that any adjustments necessary with respect to approved prices of mid-grade gasoline shall be carried out:
AND IT IS FURTHER ORDERED that each wholesaler whose prices are affected by this
Order shall confirm its prices
with the Commission by filing revised dealer and posted consumer schedules on
or before 17 May 1991.
DATED at
Charlottetown this
15th day of May, A.D.,
1991.
BY THE COMMISSION:
Linda Webber, Chairman
Anna C. Carr, Commissioner
C. C. Hickey, Commissioner