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Gas price-setting decisions lack transparency, says P.E.I. auditor general

Auditor general Jane MacAdam speaks at a media briefing Friday, Jan. 4, 2019. A report prepared by MacAdam found the process used by the Island Regulatory and Appeals Commission to set petroleum prices lacked transparency.
Auditor general Jane MacAdam speaks at a media briefing Friday, Jan. 4, 2019. A report prepared by MacAdam found the process used by the Island Regulatory and Appeals Commission to set petroleum prices lacked transparency. - Stu Neatby

CHARLOTTETOWN, P.E.I. - P.E.I.’s auditor general says the methods used by provincial regulators to set gas, diesel and home heating oil prices lack transparency.

In a report released on Friday, Jane MacAdam found there was no public explanation of the methodology used by the Island Regulatory and Appeals Commission in setting petroleum prices. The audit of IRAC’s methods in relation to petroleum pricing was conducted between April 2016 and March 2018.

"Nowhere could the average Islander find information on IRAC's methodology," MacAdam said during a press briefing on Friday morning.

MacAdam said the prices of gasoline, diesel and heating oil affect all Islanders. As such, IRAC is mandated by law to ensure petroleum prices are fair.

"IRAC has broad powers under the Petroleum Products Act to set prices that are just and reasonable," MacAdam said.

"It is important that Islanders know how it interprets those broad powers and applies them."

MacAdam’s report also found applications from petroleum retailers for reviews of margins were not processed in a timely manner. IRAC sets the margins that wholesalers and retailers can charge for gasoline, diesel, furnace oil and propane. Wholesalers and retailers can apply for an increase in the margin for petroleum products.

"IRAC has broad powers under the Petroleum Products Act to set prices that are just and reasonable. It is important that Islanders know how it interprets those broad powers and applies them."
-Auditor general Jane MacAdam

The report looked at two examples of margin reviews. In one case, a margin application submitted by a group of furnace oil retailers took 23 months before a decision was made. In the second case, no decision had been made by IRAC 21 months after an application from another association representing retail gasoline dealers was submitted.

“IRAC has the authority and obligation to develop and document policies and procedures that are transparent to applicants and provide for the timely review of margin applications,” the report said.

The report also recommended IRAC document the reasoning behind each pricing decision and communicate this information to the public. The report noted that it is the practice of IRAC to simply attribute the reasoning behind gasoline price changes in media statements to “increased demand and restricted supply.”

In a response to the report, IRAC has since posted a description of its methodology on its website. IRAC also stated in its response to the report that it will be conducting a review of its practice of documenting and communicating pricing decisions.

In a media statement, IRAC CEO Scott MacKenzie stated the commission has so far implemented five of the seven recommendations outlined in the report, which was made available to the commission in December.

In an emailed statement, provincial spokesperson Mary Moszynski said the province is currently reviewing the report.

“While IRAC operates at arm’s length from government, it is expected that they take every step possible to be accountable to Islanders,” Moszynski said.

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