Propane merger goes ahead, with conditions

Conditions imposed on the deal are getting a cautious thumbs up from elected officials

A proposed merger between a pair of Canada’s largest propane companies is going ahead, but conditions imposed on the deal by the federal Competition Bureau are getting a cautious thumbs up from local and national elected officials, although some still expressed concern.

In mid-February Superior Plus Corp. signed a $412 million deal to take over Canwest Propane from its parent company Gibson Engery Inc., and the move caused no small stir in the Upper Columbia Valley, since the two companies are the only major, large-scale propane suppliers in the area, and the Valley has no natural gas supply. Business owners and local councillors outlined that, given the total lack of natural gas options, most local businesses have no choice but to make considerable use of the only energy sources available — propane and electricity — and that a lack of competition for one of those sources could have significant consequences.

The issue ended up being investigated by the Competition Bureau. Last week the bureau announced the results of its investigation and, to remedy the situation, ordered Superior to sell propane assets in a dozen markets (including Golden and Castlegar) and ordered Superior to “waive contract terms preventing Canwest customers from switching suppliers” in several regions, including Invermere, Golden, Cranbrook and surrounding areas.

Prior to this order, both Superior and Canwest had tended to offer locked-in contracts for set periods (five years for instance).

“Propane is a necessary energy source to many Canadian households and businesses. Our review of the proposed merger concluded that Superior’s acquisition of Canwest would likely have resulted in consumers paying higher prices for propane in western Canada, northern Ontario and the Northwest Territories. We are pleased that the bureau was able to work together with Superior and Canwest to find a solution that addresses our concerns,” said the bureau’s mergers and monopolistic practices branch senior deputy commissioner Matthew Boswell in a press release.

“It’s positive there was some consideration about this issue, especially around the contracts,” Invermere mayor Gerry Taft told the Pioneer, alluding to the locked-in five year contracts. “If the companies become one and are no longer competing on price, you could have easily gotten stuck in a long-term contract with expensive rates and not been able to switch to a better one, if it became available.”

But Mr. Taft’s disquiet about the deal was not completely allayed.

“It still leaves a question mark about how much choice consumers actually have. It’s still uncertain whether or not other smaller propane companies, such as (Lethbridge-based) Lo-Cost Propane will expand and enter the market in a significant way, so there are still some concerns,” he said.

Lo-Cost, which does provide propane to some smaller-scale residential properties in the south end of the Valley has been touted, by some, a possible balance to an amalgamated Superior-Canwest company.

Mr. Taft, however, relayed to the Pioneer that the District of Invermere had recently sought proposals (quotes) for its municipal propane needs and “we did not receive many submissions. I believe, in fact, it was just Canwest/Superior. Lo-Cost didn’t

submit and there were definitely no other new companies or smaller companies that submitted a proposal.”

The contract was for five years and a considerable volume of propane, said Mr. Taft, all of which made it surprising that there were so few proposals.

“It’s interesting that a larger volume contract that would seems to offer a great chance for Lo-Cost, or another similar supplier, to expand, didn’t seem to attract their interest,” he said.

Kootenay Columbia MP Wayne Steski sent a letter to the Competition Bureau on the matter last winter, and said in a press release, that he’s pleased with the conditions the bureau has placed on the merger deal.

“This is good news for East Kootenay residents and for many rural residents across Western Canada,” Mr. Stetski said. “It will help ensure competitive market prices for propane, which is so critical to many Kootenay-Columbia families for cooking and heating.”

In a Pioneer report on the issue earlier this past winter, Station Pub and Rocky River Grill co-owner Justin Atterbury shed some light on just how big the consequences of the merger could be for local businesses, telling the Pioneer that energy is his businesses biggest expense by a wide margin, to the tune of monthly winter bills totalling $5,300 for propane and an additional $4,100 for hydro.

“And that’s just 30 days. If prices were to creep up 10 per cent or 20 per cent, it could be devastating. It has a huge impact on the bottom line,” Mr. Atterbury had said. “If there’s good competition, prices stay low. In the restaurant industry one of your biggest costs is energy. You need propane or gas to power your equipment. If there was natural gas in the valley, it would be half the cost (compared with propane).”

The Competition Bureau announcement came on Wednesday, September 27th.

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