NL Gas Retailers Win 2.48 cpl Increase in Retail Gas Margin
Following a comprehensive review of the regulated margins on motor and heating fuels in Newfoundland and Labrador, the Board of Governors of Public Utilities made a number of upward adjustments that included a 2.48 cents per litre increase in the retail gas margin. The increase became effective January 15th.
Retail gas margins were last adjusted in July, 2008. With the most recent adjustment, the total allowed retail gas margin is 8.73 cpl, an increase of 40%.
“The ACSA made a retail gas margin increase submission to the PUB back in May, 2012,” said Mike Hammoud, president of the ACSA. “It’s been a long, slow process which was made slower when the PUB decided to review all motor fuel and heating oil related margins. But it’s over and we think the current margin more accurately reflects the cost of doing business retailing gas in the c-store industry.”
Hammoud said that as part of the review process the PUB developed an economic model that can be used to review retail margins in the future.
“It’s been more than six years since the last retail margin increase and the allowable margins never really catch up with our operating costs. We’re hopeful that the model developed by the PUB can be used to do retail margin reviews faster and more often. I would like to thank our Newfoundland and Labrador board members for working with us on this file for the last two years.”
Provincial Governments Waking Up to Contraband Tobacco Issue
Ouch! Nova Scotia released its fall budget update in mid-December, forecasting a shortfall from budget of $16.1-million in tobacco tax revenue. NS will also be losing its share of HST on this anticipated shortfall in tobacco sales.
And while the New Brunswick government hasn’t released any updates, it appears that they too are experiencing a serious shortfall from budget in tobacco tax revenue.
“While some government folks are putting much of the blame on the growth in e-cigarettes, there is growing acknowledgement that contraband tobacco is a major culprit as well,” says Mike Hammoud, president of the Atlantic Convenience Stores Association.
The ACSA has a growing positive dialogue with NS and NB officials about the seriousness of contraband tobacco and there is mutual interest in collaborating on some anti-contraband projects. One of these planned projects will be working with Crime Stoppers in both provinces. The ACSA will also keep advocating for tougher legislation.
Nova Scotia’s provincial government appears to be rethinking a pre-election position that gasoline in the province should be de-regulated.
“We’re not going to go out and attempt to solve a problem that consumers are telling us they don’t have anymore,” said Premier Stephen McNeil.
“There has been a lot of talk about gas regulation or de-regulation,” says Mike Hammoud, president of the Atlantic Convenience Stores Association. “Nova Scotia’s regulated gas system is a balance between the interests of the motoring public and the industry. We’re of the opinion that while the regulation process may need some tweaking, overall the system today is working pretty well for everyone.”
The provincial government says that it is undertaking a thorough review of gas regulation. Hammoud says that given the considerable impact that any changes in the regulations could have on Nova Scotia’s retail gasoline industry, any review must be thorough and evidence-based.
“The last thing we need is a knee-jerk reaction from the government about regulation. If we have to have a review of the regulatory process, then let’s do it right.”
As part of the review process, the provincial government has announced that it will be installing monitors on all gas pumps in the province to capture information on grade, volume and price.
“Right now the provincial government doesn’t have a full understanding of the geographical patterns of gas volumes throughout the province,” says Hammoud, “and that’s important when one of the fundamental goals of regulation was to help preserve the availability and competitiveness of retail gas in rural Nova Scotia communities.”
Nova Scotia Health Targeting Flavoured Tobacco
Tough new legislation introduced by the Nova Scotia provincial government targeting flavoured tobacco products and e-cigarette juice backfired after public backlash. While the government dropped the proposed changes it has initiated public consultations and has made it clear that any regulatory changes will be passed by May.
And while menthol cigarettes were initially exempt under the proposed changes, they are included in the consultations and review.
“From what has been reported in the media the government seems intent on a broad attack on flavoured products because of the supposed influence on underage smoking,” says Mike Hammoud. “We don’t condone smoking by underage youth at all, but we’re concerned that legitimate flavoured products of little or no interest to underage youth are going to be negatively impacted and government decisions will not be evidence-based.
The ACSA will be taking part in the public consultations and making a presentation to Health and Wellness.
ACSA Lobbying NB Government on First Nation Tax Revenue Sharing Agreements
Some New Brunswick First Nations are in violation of their tax revenue sharing agreements with the provincial government because they are using those dollars to undercut non-native retailers on tobacco and gas prices. The former Conservative government announced last August that they were cancelling the agreements and replacing them with new agreements, but the Conservatives lost the provincial election in September.
The new Liberal government has extended the cancellation date for the agreements while they study the issue and the ACSA is lobbying the government to take corrective action. Unfortunately, it still appears that some First Nations retailers in the Fredericton area continue to abuse the agreements to their competitive advantage.
NB Liquor Open to Expanded Private Retail Sales Proposal
NB Liquor is open to the concept of expanded private retail sales and is interested in any business case proposal that the convenience store industry submits.
“NB Liquor is under pressure to generate more profits for the provincial government, so they’re interested in any socially responsible approach that will do that,” says Mike Hammoud. “We had a good meeting with NB Liquor’s president and CEO, Brian Harriman, and he’s basically open to all ideas as long as there’s a good business case supporting them.”
According to Harriman it is unlikely that NB Liquor will expand its private agency store model much beyond the current number of locations because of sales cannibalization from corporate stores. This is similar to what Prince Edward Island has experienced since they recently expanded the number of private agency stores in that province.
“NB Liquor is obviously concerned about cannibalization,” says Hammound, “so we have to be very aware of the impact we will have. We think we can offer the demographics and geographic coverage that generally complement rather than compete with corporate retail stores.”
NB Liquor is in the process of developing a new corporate business plan so any proposals need to be submitted within the next couple of months in order for them to be reviewed and potentially be incorporated into the new business plan.
“We think the Québec retail distribution model can work in New Brunswick,” says Hammoud, “and we’re working on building a proposal around that model.”
Voters in both Prince Edward Island and Newfoundland and Labrador will go to the polls in 2015. Both governing parties – the Liberals in PEI and the Conservatives in NL – will go to the polls with new leaders.
And while nothing in election forecasting these days is certain by any means, the PEI Liberals have been carrying a comfortable lead in the polls for some time while the NL Conservatives “have run out of steam” according to one pollster.
“The ACSA will begin election planning in the next month or so,” says Mike Hammoud. “We’ve learned a lot from working the past Nova Scotia and New Brunswick elections and we know that we can bring issues that our important to our industry to the forefront.”
Convenience Store Day Going Canada-Wide
Back in 2011 the ACSA launched the first Atlantic Convenience Store Day, a special day to recognize the community contribution of c-store owners and operators and to fundraise for community causes. As part of the activities, local politicians and celebrities were invited to spend time behind the counter, with a donation being made to a local charity for each “shift.”
From a couple of test stores in 2011, C-Store Day grew to more than 50 participating retailers throughout Atlantic Canada in 2014 and an estimated 100 politicians and celebrities. And more than $50,000 was fundraised.
The success of Atlantic Convenience Store Day has inspired Canada’s other c-store industry associations to plan for the first Canada-wide C-Store Day on August 26th.
“There’s no question that C-Store Day has raised the profile of our industry among the media and the many politicians involved in issues of importance to us,” says Mike Hammoud. “We’re delighted that the concept has been adopted for a roll-out Canada-wide. We’ll be working closely with the other associations to make C-Store Day as successful nationally as it is across Atlantic Canada.”