Order No. P.920423

IN THE MATTER of the Petroleum Products Act, Stats. P.E.I. 1990, Cap 43;

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IN THE MATTER of an application filed under Section 32 of the Petroleum Products Act, supra, by ULTRAMAR CANADA INC. for increases in its prices of mid-grade and premium unleaded gasolines based on increased non-crude oil costs.

Thursday, the 23rd day of April, A.D., 1992

BEFORE

Linda Webber, Chairman
John Blakney, Vice-Chairman

Decision and Order

By an application dated 16 March 1992, Ultramar Canada Inc. applied for upward revisions in the prices of mid-grade and premium unleaded gasolines.

The Applicant as well filed supporting documentary evidence with its application, which evidence was clarified to some extent at the request of the Commission in correspondence dated 14 and 15 April 1992.

In accordance with the Commission's Decision and Order No. P.910818, the application and original supporting documentary evidence was copied to the Department of Energy and Forestry at its request, and the Department made a submission to the Commission in this matter on 31 March 1992.

In its application, Ultramar stated that total non-crude costs for Ultramar Canada, including financing charges, rose 0. 08 cents per litre in 1991, representing an increase of about one per cent, but further indicated that the full costs of operating its retail service station and home heating business segments in the Atlantic Region rose 0. 2 cents per litre in 1991 compared to 1990, and noted that it would be prepared to provide, on a confidential basis, a summary of its actual expenses by category for 1990 and 1991 should the commission require it. However, rather than seeking an across-the-board increase in order to recover these increased costs, it sought a price increase of 1.6 cents per litre on mid-grade gasoline and 3.2 cents per litre on premium gasoline. The approval of these increases would increase the differential between the wholesale dealer price (before taxes) of regular unleaded and mid-grade unleaded to 2.7 cents per litre and the regular/premium differential to 5.4 cents per litre.

Traditionally, changes related to both crude and non-crude oil costs have been allocated across all products contained in the posted consumer and dealer tank truck pricing schedules of wholesalers. With respect to non-crude costs, before overall cost changes can be assigned only to specific products, it must be shown that there is good reason for doing so. The Applicant in this case has cited market conditions as its chief reason for seeking the requested increases in gasoline differentials, and while citing some other reasons (some of which cannot be accepted by the Commission), states that it is not possible to determine exactly the extra costs associated with offering these higher value products.

The Commission has given various opportunities to petroleum wholesalers to justify that the differentials now authorized which result in higher prices for mid-grade and premium gasolines are insufficient to cover the actual costs involved in offering these higher quality grades. This they have not done. The onus remains on the applicant to prove to the Commission that the requested increases are just and reasonable.

The Commission further notes that a reconciliation of volume figures was necessary because products such as asphalt and bunker, as well as product which was not actually sold in this Province, were included in the calculations used to support Ultramar's application. Although some efforts were made by Ultramar to reconcile these figures (once the problems were pointed out), we were not provided with revised calculations to support the application.

Having considered the application and the submissions filed, the Commission finds that the information available and the evidence provided does not support the requested increases as being just and reasonable. The application for increases is denied.

THEREFORE THE COMMISSION ORDERS AS FOLLOWS:

1. THAT the wholesale posted consumer and dealer tank truck prices in effect as of 22 April 1992 for mid-grade and premium unleaded gasolines supplied by Ultramar Canada Inc. are to continue in effect until otherwise ordered.

DATED at CHARLOTTETOWN this 23rd day of APRIL, A.D., 1992.

BY THE COMMISSION:

Chairman
Vice-Chairman