Order P.910828- Petroleum - Various Wholesalers

Participants in the hearing and the parties for whom they appeared were as follows:

In the Commission's Decision and Order No. P.910213 dated 13 February 1991, wholesalers were notified that the Commission would convene a hearing on 1 May 1991 into the matter of the non-crude cost component of petroleum product prices. This resulted from the Commission receiving requests for non-crude price adjustments in conjunction with other applications.

On 12 April 1991 the Commission issued an official "Notice of Hearing" and advertised this notice in the public press.

As a result of this Notice, Esso Petroleum Canada (Division of Imperial Oil Limited) and Ultramar Canada Inc. filed applications for price increases of 1.6 and 0.9 cents per litre respectively. No applications were received on behalf of Shell Canada Products Limited, Irving Oil Limited or Petro-Canada as a result of this Notice.

The Notice of Hearing resulted in a Notice of Intervention being filed on behalf of the Minister of Energy and Forestry. Mr. Anthony Miller requested that he be permitted to participate in this hearing. A letter of comment was received from Mr. Alex Deans.

The hearing, which was held in the Commission's Board Room, 5th Floor of the National Bank Tower Office Building, commenced as scheduled and continued on 2 May 1991. Two in-camera sessions were held with respect to Imperial and Ultramar following the public portion of this hearing. Imperial's in-camera session did not conclude on that date, and was resumed on 8 May 1991 for the hearing of further evidence.

As a result of the evidence taken at the hearing, the Commission issued Decision and Order No. P.910524, which included, among other things, a proposed process for the handling of present and future applications for price changes based on non-crude costs, and requested comments from affected parties on or before 30 June 1991. No comments were made by wholesalers with respect to this matter.

In addition, a further opportunity was given wholesalers to make application for price changes on the basis of non-crude costs on or before 15 June 1991. Applications were received from Shell Canada Products Limited and Irving Oil Limited. As well, a request to amend its existing application was received from Ultramar Canada Inc. No submission as a result of this Decision was filed by Imperial Oil Limited, and no application was received from Petro-Canada.

Submissions were made by the Minister of Energy and Forestry and Anthony Miller with respect to these issues and the applications before the Commission.

On the subject of appropriate differentials between dealer and posted consumer prices, no comments were received.

As indicated in its Decision & Order No. P.910524, the issue of how non-crude costs must be proven has been debated at length since 1987. Although invited, no comments were received from wholesalers or interveners with respect to proof of non-crude costs as outlined in the above-noted Decision. In this decision, the Commission will set out specific guidelines in this regard.

All companies have stressed the highly-competitive nature of this industry and their reluctance to disclose publicly anything that could provide a competitive advantage to another company. As previously stated, the Commission does accept that the industry is highly competitive, and specific information relating to costs cannot be made available in public. Generally, however, it is not the intention to conduct in-camera hearings as part of non-crude cost reviews except where specifically indicated.

As noted previously, no input was received by the Commission with respect to its proposed process for the handling of the current and future applications regarding non-crude costs with the exception of a suggestion in the submission of the Minister of Energy and Forestry to the effect that the Commission delay its non-crude application cycle until May or June when the financial statements of the roil companies are available to the public. After reviewing this matter, the Commission agreed to extend its proposed filing deadlines by one month. Thus, the following procedure will be followed in these matters until otherwise ordered:

The conclusions reached in Section "A." - Proof of Non-Crude Costs - set the parameters for the process proposed herein.

The information provided with the application, or in place of an application, will be reviewed by the Commission, along with other information at the Commission's disposal relating to market conditions, the economy, and generally-accepted financial indicators, as well as the information filed by members of the public.

The Commission will then decide how much, if any, each company will be allowed to change its price. Each company will have its change determined separately from every other company.

A decision will be issued indicating the individual changes approved for all companies. Where increases are approved, each company will have 48 hours from the issuance of the decision to advise the Commission as to whether or not it chooses to take the full increase allowed. If the Commission is not notified of a change within this 48-hour period, then the full amount approved will be considered to be ordered. In any event, the revised prices will become effective at 12:01 a.m. on the date following the expiration of the 48-hour period.

The Commission has received, since the issuance of its Decision & Order No. P.910524, applications from Shell Canada Products Limited, Irving Oil Limited, and an amendment to the application previously filed by Ultramar Canada Inc. with respect to non-crude cost increases. No application with respect to non-crude costs was filed by Petro-Canada. Copies of the applications received were distributed on 18 June 1991 to the Minister of Energy & Forestry and Anthony Miller, both of whom filed responses on 2 July 1991. These responses were in turn forwarded to other hearing participants on 12 July 1991.

As all companies have now had a just and reasonable opportunity to prove that price changes are required, we are now in a position to make a determination on this matter.

With respect to the submission of the Minister of Energy and Forestry, the Minister again states his objective to be that Islanders pay no greater a price for petroleum products than that considered just and reasonable relative to product costs and to prices paid in other provinces. Exhibits I to IV attached to the Minister's submission were produced from financial information contained in the annual reports of Imperial Oil Limited, Shell Canada, Petro-Canada and Ultramar.

These exhibits appear to relate to total company operations rather than the downstream operations only of these wholesalers. This means that the figures shown for non-crude costs relate to all petroleum products sales rather than return on "clean" product only. As a result, this data is somewhat limited in its usefulness in that it cannot be compared with the cost specific data provided the Commission by certain wholesalers. Further, estimated rather than actual crude costs have been used for purposes of arriving at these derived figures.

The information provided in the Minister's submission relating to prices in regional markets would indicate an increase in the non-crude component for regular unleaded in the larger Montreal market of 1.6 cents per litre for the period 1987 to 1990 and a decrease of 1.2 cents per litre in the smaller Charlottetown market during the same period. The average of the five cities reported would indicate an increase of 0.8 cents per litre from 1987 to 1990. If you exclude the information relating to Halifax and Charlottetown, the change would reflect a 1.3 cent per litre increase for this period.

Mr. Miller's submission cites price differences of product being sold or offered for sale in Canada versus the prices being charged in United States markets. The Commission, however, feels that it is more reasonable to rely on pricing information available relative to various markets in Canada, especially eastern Canada.

A review of recent issues of the "Gasoline and Diesel Pump Price Survey" produced by Canadian Oil Markets and Emergency Planning Division of Energy, Mines and Resources - Canada indicates that ex tax pump prices in this jurisdiction are quite favourable when compared to prices in all cities from Montreal east, with the exception of Saint John, New Brunswick. Regular unleaded product is similarly priced in most other eastern Canadian cities, and mid-grade and premium unleaded gasoline and diesel fuel are priced considerably lower in Charlottetown, Prince Edward Island than all other cities except as noted above. Although prices in this Province would be similar throughout, it is understood that the prices cited for Saint John, New Brunswick relate only to that City, and recent press coverage would indicate that much higher prices are prevalent in other areas of New Brunswick. The same holds true in some other jurisdictions whereby the prices indicated in major cities are lower than those found in outlying areas.

The Commission had for consideration an application dated 23 April 1991 filed by Mr. J. H. Wainwright on behalf of Esso Petroleum Canada, a Division of Imperial Oil Limited, and amended Exhibit "C" to this application which was filed by Mr. G. M. Hogan on 26 April 1991. These items were filed as Exhibits 2 and 3 at the hearing which commenced on 1 May 1991. A brief on behalf of Esso Petroleum Canada was filed as Exhibit 11 in this hearing, which brief covered the issues to be dealt with at this hearing as previously identified by the Commission. Oral testimony was given by both Mr. Wainwright and Mr. Hogan in public as well as later during "in camera" sessions with the Commission, at which time cost specific data was provided in confidence. These witnesses suggested procedures to be followed by the Commission in dealing with future non-crude cost adjustments, which suggestions were commented on in the Commission's Decision No. P.910524.

In considering the application of Imperial Oil Limited for a non-crude cost price increase at this time on all products contained in its dealer and posted consumer tank truck pricing schedules of 1.6 cents per litre, the Commission is satisfied from the detailed information provided that such an increase is warranted. While a 2.5 cent increase since 1987 appears just and reasonable, this wholesaler has previously been granted non-crude price adjustments totalling 0.9 cents per litre.

Prior to the commencement of the above-referenced hearing, no application was on file from the wholesaler, Irving Oil Limited. Counsel on behalf of Irving Oil Limited, however, appeared in response to the Commission's Notice of Hearing dated 12 April 1991. Counsel filed price comparisons in other jurisdictions on behalf of Irving as requested by the Commission, and submitted for consideration five graphs and charts depicting the effect of the Consumer Price Index on published industry-wide refining and marketing data from October, 1987 to January, 1991.

Following release of the Commission's Decision No. P.910524, Mr. Gerry Moore filed an application and accompanying affidavits dated 17 June 1991 to increase the prices of all products contained on Irving's posted consumer and dealer tank truck pricing schedules. This application and affidavits indicated that increases in the Company's refining and marketing costs since 1987 would equate to 9.2 cents per litre on refined product. By letter of 9 July 1991, Mr. John Mee of Irving's Saint John office advised the Commission that the amount of the increase sought was 0.92 cents per litre rather than the 9.2 cents per litre set out in Schedule "D" of the application.

Although the information filed in support of the application of Irving Oil Limited was rather deficient with respect to costs specific to that Company, the Commission feels that the lesser increase requested is warranted. However, as prices contained in its pricing schedules are to the nearest one-tenth of a cent, upward adjustments in the amount of 0.9 cents rather than the 0.92 cents per litre requested will be authorized.

No application having been received from Petro-Canada with regard to this matter, no consideration with respect to its prices is necessary.

The wholesaler Shell Canada Products Limited had previously applied for non-crude cost adjustments which had been declined by the Commission, and Mr. Daniel Pegg and Mr. Douglas Kelsey had met with the Commission in an "in camera" session previously to discuss this matter. Shell did not, however, file an application for non-crude cost adjustments in response to the Commission's Notice of Hearing dated 12 April 1991. Messrs. Pegg and Kelsey appeared as witnesses for the Company at the hearing which commenced on 1 May 1991 to give evidence relating to the specified issues. Following release of the Commission's Order P.910524, Shell Canada Products Limited filed an application on 14 June 1991 requesting an upward revision in prices of all products contained on its posted consumer and dealer tank truck pricing schedules of 1.3 cents per litre. Exhibit "C" appended to this application provides cost specific data of the Company with respect to operations conducted in Quebec and the Maritimes, and supports its application for a 1.3 cent per litre increase.

Ultramar Canada Inc. filed with the Commission on 23 April 1991 an application for increases in product prices amounting to 0.9 cents per litre based on increased non-crude costs. This application was filed as Exhibit No. 4 at the (public hearing which commenced on 1 May 1991, and a letter dated 15 January 1991 addressed to the Commission from Ultramar Canada Inc. referred to in this application was filed as Exhibit No. 5. Mr. Rod Munn appeared on behalf of the Company to give testimony with respect to the issues to be dealt with at this hearing, and met later with the Commission in an "in camera" session to give additional cost specific data in support of the Company's application. Following the issuance of the Commission's Decision and Order No. P.910524, the Commission received on 14 June 1991 an amended application from Ultramar for increases in the amount of 1.5 cents per litre with respect to non-crude costs. This amount is in addition to a 0.5 cent per litre increase granted by the Commission effective 15 May 1990 in respect of increased non-crude costs.

After a review of the information provided by Ultramar, the Commission is satisfied that such an increase in prices of all products contained in its posted consumer and dealer tank truck pricing schedules is warranted.

Information requested of Co-op Atlantic pertaining to the issues to be dealt with at the hearing which commenced on 1 May 1991 was provided in advance of the hearing, although no representative of the Co-op was present at the hearing. On application, Co-op Atlantic will be permitted to increase its prices up to the same amount as is authorized for its supplier.

The Notice of Hearing in this matter asked for submissions on the issue of appropriate differentials between the wholesale dealer and posted consumer pricing schedules, and evidence of witnesses at the hearing indicated that this part of the Notice was not well understood. As a result, companies and interveners were given an opportunity to make submissions on this matter by June 30, 1991. No input was received from wholesalers with respect to this matter, and a Decision is hereby reserved pending further investigation by the Commission.

IT IS HEREBY ORDERED THAT as set out in this Decision and Order, the following wholesalers will be permitted to increase the prices of all products contained in their respective posted consumer and dealer tank truck pricing schedules by the following amounts:

Esso Petroleum Canada (Division of Imperial Oil Limited)	1.6 cents per litre
Irving Oil Limited	0.9 cents per litre
Shell Canada Products Limited	1.3 cents per litre
Ultramar Canada Inc.	1.5 cents per litre

AND IT IS FURTHER ORDERED THAT each wholesaler above-named shall provide the Commission within forty-eight hours of receiving this Decision amended posted consumer and dealer tank truck pricing schedules reflecting the adjustments set out in this Order or such lesser adjustments as determined by the wholesaler concerned.

AND IT IS FURTHER ORDERED THAT the newly authorized prices for the above-named wholesalers will become effective at 12:01 a.m. on Saturday, the 31st day of August, A.D., 1991 and will remain in effect until otherwise ordered by the Commission.

AND IT IS FURTHER ORDERED THAT the procedures dealing with non-crude cost related changes set out in Section B (pages 7 to 10 inclusive) of this Decision will be in effect until otherwise ordered by the Commission.