UPDATE: Irving Oil Application For Interim Rate Hikes Denied

An application by Irving Oil for an interim rate hike on petroleum products has been denied by the Energy and Utilities Board (EUB).

The company recently applied to the board to increase wholesale petroleum margins by 3.02 cents for furnace oil and 4.09 cents from motor fuels.

It also asked for an interim increase of three cents for furnace oil and 3.5 cents for motor fuels while it awaits a full hearing in April.

But in an oral decision Wednesday afternoon, the board said Irving Oil did not establish a case to support an interim order.

“The Board concludes that the Applicants have not met the principles to be applied for an interim order,” the board said in its decision.

Irving Oil has said the increases are needed urgently because of “critical challenges” in the petroleum industry, compounded by the COVID-19 pandemic, which jeopardize supply continuity in New Brunswick.

“It is important for the actual wholesale costs to be recovered in the wholesale margins because without cost recovery it will not make economic sense to continue to supply retailers where the wholesale cost increases exceed what can be recovered from retailers,” the company wrote.

“As the costs need to be ultimately recovered, it is necessary to provide for a reasonable opportunity of cost recovery to maintain a reliable supply chain.”

In a statement, Irving Oil said the EUB’s decision to deny the request for an interim and immediate increase in the wholesale price is disappointing.

“The facts presented speak for themselves and we had hoped that the outcome of today’s decision would have been different,” said the statement.

Irving Oil said current market regulations, which were put in place 15 to 20 years ago, do not respond to the fundamentals of supply and demand, do not react to market conditions, and do not respond to the challenges the petroleum industry is facing during COVID-19.

“Our industry has experienced severe impacts as a result of the COVID-19 pandemic. Demand for fuel products has dropped off significantly; to date, more than 20 refineries have announced closures or significant changes. Many more have cancelled major projects and layoffs have been widespread, including, unfortunately, at Irving Oil,” said the statement.

“We know the challenges we face as a result of the COVID-19 pandemic are unfortunately far from over and we are very disappointed that the Board and this process did not understand, recognize or consider the seriousness or urgency of this request.”

In its application to increase wholesale margins, Irving Oil said there have been “substantial increases” in wholesale costs since the margins were last reviewed in 2012 and 2013.

“The wholesale costs which have increased include terminal fees, transportation and port fees, working capital management, overhead and compliance costs,” said the company.

But it is unknown how much those costs have increased as the figures are redacted from the company’s application.

Earlier this month, the EUB sided with Irving Oil and allowed the redacted information to remain confidential — for the most part.

Francois Beaulieu, acting chair of the board, said the board was left to determine whether the information in question was confidential and whether publishing it is necessary in the interest of the public.

The Rules of Procedure for the EUB defines confidential information as “any personal, business, public security or operational information within the knowledge or possession of a person which is accessible only by those authorized to have access, or any other information deemed by the board to be confidential in nature.”

According to Beaulieu, the board found the redacted information was consistent with the definition, with the exception of one line in the company’s application. The board ruled the sentence must be revealed, with the exception of the financial amount within it.

“Certain interveners and members of the public will not have access to the confidential versions of the evidence to which the claim applies,” he said. “The board is satisfied that the roles of the public intervener and board staff are sufficient to ensure that the public interest is served in this proceeding.”

Beaulieu went on to say that if the information was made freely available, participants in future proceedings “would be reluctant to provide certain key evidence that the board requires in order to make well-informed decisions.”