October 15, 2026

By Bill Andrews and Tom Hackney

BCSEA filed its final argument in the BC Utilities Commission’s proceeding on FortisBC Energy Inc.’s application for approval of amendments to its connection policies.

The primary issue is how to allocate the costs of expanding FEI’s natural gas distribution system. BCSEA stressed to the Commission that this issue is increasingly important as B.C. works to reduce its dependence on fossil fuels.

When FEI extends its gas distribution system to serve new customers, FEI uses financial tests to determine whether, and, if so, how much, the proponent (often a developer) will have to contribute upfront so that new and existing customers are impacted more or less equally. The objective is to achieve a reasonable allocation of costs between new and existing customers. FEI argues that the existing policies have favoured existing customers over new customers. It says its proposed changes would improve fairness between existing and new customers. FEI has asked the BCUC for approval to relax the financial tests, so as to reduce the number and size of these financial contributions.

In particular, FEI proposes to reduce the “minimum profitability index” for individual gas mains extensions from 0.8 to 0.6. A profitability index (PI) is the ratio of the present value of expected revenues with the present value of the costs of an extension of the distribution system. A lower minimum PI allows more extensions to proceed without an upfront contribution from the would-be new customers.

BCSEA opposes this change. Lowering the profitability threshold would increase the risk that the costs of new connections will not be recovered, particularly if future gas demand declines due to the energy transition. BCSEA pointed out to the Commission that FEI’s proposed 0.6 threshold is a judgment-based value, rather than one established through a clear quantitative standard for acceptable impacts on existing customers. BCSEA emphasized that the energy transition changes the equation. While FEI uses a 40-year period to evaluate the economics of new gas connections, BCSEA noted that a new gas connection that appears financially justified today may not generate the revenues anticipated over the next 40 years. If projected revenues fail to materialize, existing customers could be left paying for infrastructure built to serve new customers.

This is a stranded asset risk. Future demand for delivery of natural gas becomes increasingly uncertain as heat pumps become more common, buildings become more energy efficient, and climate policies encourage the replacement of fossil fuels with clean electricity. BCSEA said, in its final argument, that the Commission should not relax the economic screening requirements for new gas connections before examining whether the existing 40-year DCF period remains appropriate in the context of the energy transition.

For BCSEA, the key principle is that the costs and risks of expanding the gas distribution system should not be shifted unfairly onto existing customers, particularly as B.C. transitions away from fossil fuels. The BCUC is expected to issue a decision within two months.