Newfoundland – Labrador fuel pricing under scrutiny
April 1, 2003
GRAND FALLS-WINDSOR, Nfld. - The Petroleum Products Pricing Commission (PPPC) is eager to implement an action plan that has evolved from a two-month internal review process.The PPPC is an independent ...
FUELLING THE FIRE: Fuel pricing models have been the topic of discussion in Newfoundland and Labrador with the Petroleum Products Pricing Commission.
GRAND FALLS-WINDSOR, Nfld. – The Petroleum Products Pricing Commission (PPPC) is eager to implement an action plan that has evolved from a two-month internal review process.
The PPPC is an independent entity established by the Government of Newfoundland and Labrador to ensure fairness in marketing petroleum products in the province.
Among other things, the mandate of the commission is to meet, educate and consult with stakeholders, establish and monitor pricing, and enforce the Petroleum Pricing Act.
From Jan. 8 to Mar. 7, the PPPC staff, with the assistance of Myers Consulting of St. John’s, carried out an investigation of several aspects of fuel regulation; the pricing model, zones and the legislation governing the commission in Newfoundland and Labrador.
During the review period, meetings were held with all stakeholders in the industry, which includes government, oil suppliers, resellers, retailers and consumer groups.
Through discussion with these groups, the recurring issues that were brought to the commissioner’s attention were: timing of price increases and decreases, base price review, zonal boundaries and regulations.
George Saunders, PPPC commissioner, says the meetings were very productive and resulted in some good solutions.
“We wanted to make sure that we preserved the themes associated with regulation in the province; they being fairness, transparency and stability,” says Saunders. “We have a serious responsibility to all stakeholders at all levels. We do not want to set prices that interfere with the security and supply in any region of the province, nor do we want pricing to adversely affect the operation of businesses involved in the petroleum industry.”
Saunders says the PPPC also wants to be sure that the petroleum industry functions for the benefit of all Newfoundlanders and Labradorians, even during extremely adverse conditions in the marketplace, like those experienced over the last 90 days.
The review was sparked by the intervention of prices by the PPPC on Jan. 3, says Saunders.
There was a significant reduction in price at the pumps in December, 2002, but at the same time, the PPPC regulated the price down.
In January, 2003, there was a spike in the market that drove prices so high it prompted the PPPC to intervene on the regulatory model.
Had it not intervened, resellers would have to purchase fuel at a daily rack price that would be higher than the maximum selling price set by the PPPC, and would threaten its survival.
This intervention put the commission’s credibility in question because it had established a regulation every 30 days under normal market conditions. However, says Saunders, these were certainly not normal market conditions.
As a result, the commission has just introduced an interruption formula that says when the benchmark price of a particular fuel experiences a sudden and sustained increase or decrease, the commission will automatically adjust prices based on the average difference to the time prices were originally set.
“This doesn’t mean prices will go up or down every week, as the commission will continue its monthly schedule of setting maximum prices,” says Saunders, “but we wanted to come up with an approach so that when intervention is necessary, we have a clearly established set of guidelines to use. This will also ensure the public isn’t shocked like they were with the intervention in January, when we interrupted the model for the first time in history.”
The review was submitted to Government Services and Lands Minister, George Sweeney, and a copy can be viewed at www.gov.nf.ca.