Title: Order P.000215-0 - Petroleum - Price Increases - Furnace & Stove Oil

Order No. P.000215-0

IN THE MATTER of the Petroleum Products Act, R.S.P.E.I. 1988, Cap. P-5.1;

- and -

IN THE MATTER of posted consumer prices of furnace fuel and stove oil currently in effect as a result of various Commission Orders issued under the Petroleum Products Act, supra.

Tuesday, the 15th day of February, A.D., 2000

BEFORE

Wayne D. Cheverie, Q.C., Chair
Ginger Breedon, Vice-Chair
Elizabeth MacDonald, Commissioner

Decision and Order

I. INTRODUCTION

The Petroleum Products Act, R.S.P.E.I. 1988, Cap. P-5.1 requires the Commission to approve the prices of all petroleum products sold in the Province. On 16 May 1997, the Commission issued Decision and Order No. P.970516-1 ordering reductions in the prices of furnace fuel and stove oil supplied by all wholesalers by 2.0 cents and 1.0 cent respectively on the basis that, at that time, these prices were deemed to be excessive and therefore not just and reasonable as required by the Petroleum Products Act.

The Commission had become aware of situations which existed in the marketplace with respect to discounting of posted consumer prices (e.g. homeowners with similar locations, storage and volume requirements paying significantly different prices for their product) which caused considerable concern to some members of the public.

As a result, the Commission conducted an investigation into this matter, and convened a public hearing on 12 June 1995 with all licensed wholesalers being represented. This hearing was for the purpose of obtaining input from all currently-licensed petroleum wholesalers (including those offering propane) with respect to the justness and reasonableness of the posted consumer prices then in effect in the Province, and the practice of discounting those prices to certain individuals, businesses and institutions for various reasons. Following the public segment of this hearing, in camera sessions were held with representatives of most licensed wholesalers on 12 and 13 June 1995 and on 31 August 1995. These sessions were held in an effort to obtain pertinent information without licensees having to expose the confidential aspects of their respective businesses to the competition.

The criteria used in determining discounts was examined, i.e. volume purchasing, customer-owned storage, etc., in an effort to establish whether the method of applying discounts was appropriate, or whether these discounting practices in effect resulted in inequitable pricing and whether a different method should be adopted, such as the fixing of an appropriate "range" of discounts with criteria fixed and determined by the Commission. The Commission also sought input with regard to a suitable method of monitoring and enforcement of discounting practices, either those in effect or those which might be implemented. Evidence at that time indicated that from 60 to 70 per cent of all domestic/commercial/industrial volume was being sold at discounted prices, i.e. below the approved posted consumer prices. The amount of discount varied considerably for numerous reasons, and ranged all the way from a portion of one cent to ten cents per litre, with discounting to individual "home heating" or "domestic" accounts also being prevalent in amounts ranging up to at least five cents per litre.

The Commission then prepared a "Discussion Paper" related to all evidence taken, which paper was released in October of 1996, with a broad opportunity given for written comments. One wholesaler and one member of the public provided written commentary with respect to the paper. The Commission subsequently reopened and concluded the public hearing on 13 December 1996, and issued its Decision and Order in this matter on 16 May 1997.

Other than the price reductions ordered, no limitations or restrictions were imposed relating to the discounting practices in existence with respect to the sale of products under the posted consumer pricing schedules approved for each wholesaler.

Recently, however, it appears that an abnormal situation has arisen with respect to the prices of heating fuels—furnace fuel in particular. As a result, the Commission reviewed information obtained through independent monitoring of prices in other jurisdictions and, in addition, gave preliminary consideration to applications submitted by two wholesalers who were seeking upward adjustments in the price of furnace fuel.

As the objective of the Commission must always be to authorize pricing which is just and reasonable to both the consumer and the supplier, the Commission met on Tuesday, 8 February 2000, and decided to inform the various wholesalers that consideration was being given under Section 33 of the Petroleum Products Act, supra, to ordering increases in the prices of furnace fuel and stove oil in the same magnitude as the reductions previously ordered by its Decision and Order No. P.970516-1, and requested comments in this regard from licensed wholesalers by noon on 14 February 2000, or later, as requested. One wholesaler requested a short extension of time and another sought an extension of time to noon 15 February 2000, which extensions were granted.

Subsequent to informing wholesalers of its proposal, the Commission received responses from Imperial Oil Limited, Shell Canada Products Limited, Petro-Canada, Ultramar Ltd. and Co-Op Atlantic. The Commission met this date to review the additional information and comments received since its earlier meeting, and gave preliminary consideration to further applications which have been received since 8 February 2000. As a result, it was determined that a temporary increase of 2.0 cents per litre in furnace fuel prices and a 1.0 cent per litre increase in stove oil prices is warranted, effective 12:01 a.m. on 17 February 2000, in accordance with the appended Interim Order.

With respect to applications for other pricing adjustments, the Commission intends to deal with applications for crude cost adjustments following the filing deadline of 15 February 2000, and proposes to deal with non-crude applications received on or before the 15 March 2000 deadline after a full opportunity has been given to all interested parties to participate in accordance with the Commission’s Decision and Order No. P.910828.

Interim Order

IT IS THEREFORE HEREBY ORDERED:

1.     THAT the posted prices of furnace oil currently approved for each wholesaler licensed in this jurisdiction be increased by two cents per litre, effective 12:01 a.m. on 17 February 2000;

2.     AND THAT the posted prices of stove oil currently approved for each wholesaler licensed in this jurisdiction be increased by one cent per litre, effective 12:01 a.m. on 17 February 2000.

3.     AND THAT the prices of furnace fuel and stove oil resulting from this Decision and Order shall remain in effect until otherwise ordered by the Commission.

DATED at CHARLOTTETOWN this 15th day of FEBRUARY, A.D., 2000.

BY THE COMMISSION:

Chair

Vice-Chair

Commissioner