This is a shocking increase in one year, which the BCUC should have considered smoothing out. But worse may be to come – and it’s clear the BC government’s energy affordability objectives don’t apply to gas customers.
Introduction
On December 5, the BC Utilities Commission (BCUC) announced that gas rates for FortisBC Energy Ing. (FEI), BC’s largest natural gas distributor, will rise sharply on January 1, 2025. The average bill for the majority of its residential customers will rise a whopping 17.5 percent.
This is significantly above the BCUC’s ten percent threshold for rate / bill shock, the level at which it usually becomes concerned about affordability, and whether an increase should be smoothed out over more than one year.
In this case, however, the BCUC’s press release says nothing to suggest the 17.5 percent increase is anything out of the ordinary (for comparison, the most recent increase in the consumer price index in BC was 2.3 percent). FEI didn’t request that the increase be smoothed out, and the BCUC didn’t use its discretion to intervene.
What’s going on here? Why did FEI customers’ gas bills go up so much? Should the BCUC have done something about the increase? And what does this tell us about the future of gas bills in BC?
Bill summary
FEI’s residential gas rates consist of a fixed Basic Charge and a series of other charges that vary with usage. The variable charges are the cost of gas, delivery charge and storage and transport charge, but the BCUC has approved some additional adjustments (known as rate riders) that also affect the bill.
Starting January 1, 2025, an average residential customer, who uses 90 gigajoules (GJ) of energy, will face an annual bill of $1,149 before tax, broken down as follows:
Compared to the last time the rates changed, on July 1, 2024, the Basic Charge has stayed the same, and the cost of gas even appears to have fallen slightly, although this is only because an additional one percent of customers’ gas has been replaced with renewable natural gas. The bills will go up primarily because of increases in the delivery charge and the midstream cost reconciliation charge (rate rider 6).
Delivery charge
FEI charges customers for the costs of delivering gas to their premises separately from the cost of the gas itself. Delivery costs include operations and maintenance costs (e.g. staff and supplies), depreciation of assets such as pipelines and meters, and financing costs.
Thanks to the performance-based approach the BCUC uses to set FEI’s rates, the utility’s general operations and maintenance costs only rose by an inflation factor of 3.862 percent. However, the BCUC approved an overall increase of 7.75 percent in FEI’s delivery rate, owing to the additional capital the utility needs to sustain its network, among other things.
There were several delivery cost increases in 2025 that are unlikely to recur in future. One of the most notable was the introduction of FEI’s new automated meter reading system, which increased operations costs by almost $20 million a year. It also added $234.5 million to FEI’s assets in service (rate base) in 2025, which the utility’s increases amortization and financing costs.
Midstream cost reconciliation charge
There was an even larger change in 2025 that is unlikely to recur in the next few years, which affected the midstream cost reconciliation charge.
FEI incurs costs to transport gas by pipeline to its distribution system and to store the gas to meet higher demand in winter. Storage also allows cheaper gas to be purchased in summer and used in the winter when costs are higher. Together, these costs appear on bills as the storage and transport charge.
FEI forecasts its storage and transport cost at the beginning of the year in order to set its rates. At the end of the year, FEI calculates the difference between this forecast and what it actually spent, taking into account any “mitigation revenues” it has earned from selling storage and transport services it had purchased “just in case” for its customers, but finds it didn’t need. This difference is recovered over the following two years through the midstream cost reconciliation charge.
Back in 2023, FEI earned higher-than-forecast mitigation revenues, so the 2024 midstream cost reconciliation charge was an unusually large credit to customers, lowering their bills. What’s happened in 2025 is that the midstream cost reconciliation charge has returned to a more typical value, causing bills to rise. This increase is unlikely to be repeated in future years.
Rate smoothing?
When a utility’s costs increase significantly in a way that is unlikely to be repeated, there is a case for smoothing the increase over several years. This is reflected in one of the Bonbright Principles of good rate design – the principle of rate stability and predictability.
This only works if the cost increase is unusual; if further large increases are anticipated, delaying the pain in the short term only builds up a big problem for later.
FEI even has a rate smoothing account, the “rate stabilization adjustment” which appears as rate rider 5 on the bill. Ironically, this charge increased in 2025, causing bills to increase even further than they would have done without this “stabilization” – it’s doing the opposite of what it is intended to. This account could have been used to smooth out the 2025 increase, assuming rates from 2026 onwards aren’t expected to increase as fast.
It’s not clear from FEI’s application which increases are likely to be recuring, or indeed whether there are other non-recurring increases expected in future years. This is something the BCUC could have investigated, but sadly it doesn’t appear to have done so. The decision approving FEI’s rates provides no reasons, does not suggest that the BCUC asked FEI any questions, and makes no mention of the 17.5 percent increase being of any concern.
This is quite a contrast to how BC Hydro’s electricity rate increases were handled last year, when the BCUC approved BC Hydro’s request to smooth out an anticipated bill increase of 12.1 percent in fiscal year 2026. While I criticized the BCUC for not seeking public input, the decision itself was reasonable because the fiscal 2026 increase could be smoothed over several yeas. BC Hydro’s customers are now expecting bill increases of 2.3 percent for each of the next five years.
Noting FEI’s 17.5 percent increase in gas bills, the BCUC should have delayed the January 1 rate increase and considered whether rate smoothing would have been appropriate. And like last year’s BC Hydro proceeding, the BCUC should have sought public comment – I’m sure a public service intervener such as the Residential Consumer Intervener Association or the BC Old Age Pensioners’ Association would have had something useful to say about the effect of the 17.5 percent gas price rise on affordability.
Affordability is only for electricity customers
Perhaps FEI didn’t seek to smooth out the January 1 rate increase because they know there are further large rate increases still to come. Even if this is true, it doesn’t get the BCUC off the hook for not asking the question. But there are some worrying signs, including the innocuous-looking renewable natural gas rate rider, which I’ll address in a future article.
And don’t forget that the BC carbon tax on natural gas is scheduled to rise by 18.75 percent (from 15.25 to 18.11 cents / cubic metre) on April 1.
When the new BCUC chair was appointed in 2023, the BC premier crowed that he would oversee “the important work being done to protect affordability for ratepayers.” What the premier omitted to say was that this affordability protection didn’t apply to gas customers.