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Enbridge Gas New Brunswick Enbridge Gaz Nouveau-Brunswick 440, chemin Wilsey Road Suite/Bureau 101

Fredericton, NB

E3B 7G5

January 18, 2012

Dear Editor ,

Re: A public natural gas system

18, 2012 Dear Editor , Re: A public natural gas system During the past month, the

During the past month, the Government of New Brunswick used its legislative power to pass Bill 18, an Act to Amend the Gas Distribution Act, 1999. This legislation will have serious negative consequences for the public distribution of natural gas in New Brunswick and also for New Brunswick’s reputation as a good place to do business.

Enbridge Gas New Brunswick (EGNB) entered into a franchise agreement with the Government of New Brunswick in 1999. The franchise agreement was the end result of a competitive bidding process in which Enbridge proved to be the only qualified proponent. With the passage of Bill 18, the Government has now decided to unilaterally change the underpinnings of this franchise agreement without EGNB’s consent and in spite of its potentially serious consequences.

When the Government introduced this legislation on December 9, 2011, it stated its concerns that “New Brunswick has the highest natural gas distribution rates in North America”. In context however, when the Government compares natural gas distribution rates in New Brunswick to other jurisdictions in North America, it fails to acknowledge the unique aspects of gas distribution in this Province. Were it not for the performance by EGNB over the past eleven years, there would not be any public natural gas distribution system in New Brunswick at all. Rather, there would merely be direct transmission to those few large customers who are within feasible proximity of the main pipeline system. In short, the comparison to be made is not with other gas distribution systems in North America, but with the savings that EGNB has brought to New Brunswick energy customers versus the prospect of no natural gas at all.

In 1999, in addition to EGNB’s general franchise, the Government also granted single-end-use franchises to several large industrial customers who in aggregate use approximately 80% of all natural gas

distributed in the Province, but contribute nothing towards lowering delivery rates for customers on the

Given that the costs of the public system must be borne by users of only 20%

of the natural gas volumes distributed in the Province, there was no reasonable expectation or possibility that New Brunswick rates could be compared to those of mature gas utilities in other jurisdictions. In fact, it was this realization that led the Government and Enbridge to enter into the current distribution rate

public distribution system.

model, which has targeted the delivery of savings to every customer who has switched to natural gas from alternative sources of energy.

The Government has suggested that Bill 18 will help to bring lower distribution rates and provide a greater incentive for new customers to join the public system. If the Government proceeds to enact regulations consistent with the direction of Bill 18, then operational changes will have to occur within EGNB that are not consistent with the Government’s stated goals. There will be very little growth of the public distribution system and any extensions to additional communities are likely to be uneconomic, given the expected lower distribution rates. Any projects that may appear at first glance to be economic will be unable to attract new capital due to obvious concerns that the Government may again change the rules at some future point in time. With limited future growth prospects for the public natural gas distribution system, it is likely that a significant number of the 400 direct and indirect jobs that have been created by Enbridge’s presence in New Brunswick will be impacted adversely. This is something that EGNB will fight hard to prevent, but the reality of Bill 18 is that it threatens current jobs in the Province and diminishes the potential for expanded availability of natural gas to public consumers in New Brunswick.

The Government also suggests that lower natural gas distribution rates will attract new business to New Brunswick, but based on Enbridge’s experience this notion is without foundation. Enbridge is not aware of

any large industrial project that has chosen not to invest in New Brunswick due to natural gas distribution rates. In fact, our current customers are more competitive than they would otherwise be if natural gas had not been available, due to the savings our rates offer. Additionally, no proponent of any potential new project that EGNB has spoken with directly has ever identified natural gas rates as a concern. We also continue to see a number of mid and large sized commercial businesses establish operations in New Brunswick that are using natural gas as their fuel of choice.

Conversely, the Government’s apparent attempt to foster new economic development - by unilaterally

changing the rules under which Enbridge has in good faith invested nearly $500 million in New Brunswick

- can only be seen as a negative signal to organizations evaluating New Brunswick as a place to invest

and do business. This adverse reputational risk is a far more serious threat to economic development in

the Province than any concerns about natural gas distribution rates.

EGNB has previously acknowledged that its public distribution system has not developed as quickly as originally expected and we have consistently strived to work with Government, the Energy and Utilities Board and others towards improved solutions. As we have also consistently stated, if lowering distribution rates for all customers is truly the objective of the Province, then the participation of all stakeholders, including EGNB, the Government, single-end-use franchise holders and customers will be required to achieve a mutually satisfactory result. The right answer cannot be achieved by the Government’s unilateral and specific targeting of EGNB through its passage of Bill 18.

Our position has not changed since we accepted the responsibility in 1999 to develop a public natural gas distribution system in New Brunswick. At that time we placed our confidence in the sincere belief that our franchise agreement was secure and that the Government of New Brunswick would work closely with us to bring energy savings and natural gas advantages to as many public consumers as possible. We call on the Government of New Brunswick now to reaffirm the basis of that confidence, which its recent legislation has eroded so seriously.

Respectfully,

recent legislation has eroded so seriously. Respectfully, Guy Jarvis President of Enbridge Gas Distribution Chair of

Guy Jarvis President of Enbridge Gas Distribution Chair of the Enbridge Gas New Brunswick Board of Directors