NEB Fixes Multi-Year Tolls for TransCanada Mainline - Decision enables the Mainline to Remain Competitive

abarrelfullabarrelfull wrote on 29 Mar 2013 07:01
Tags: canada n-america neb pipeline transcanada


The National Energy Board (NEB or the Board) announced today its decision to fix multi-year tolls on the TransCanada Mainline. The Board’s decision provides TransCanada with the tools to respond to the increased competitive risk facing the Mainline. The Board’s reasons can be found in its Reasons for Decision at www.neb-one.gc.ca.

In its application, TransCanada asked the Board to consider restructured pipeline services and tolling across its pipeline network, which includes the Mainline, the Alberta System and the Foothills System. The Board was also asked to approve final Mainline tolls for 2012 and 2013.

The Board noted that the Mainline is in an unprecedented position. Mainline tolls have increased substantially over a short period of time as a result of throughput declines related to increasing levels of competition in the Mainline’s supply and market areas. The Board found that tolls cannot continue to increase each year in response to throughput declines.

The Board approved multi-year fixed tolls that are competitive and provide TransCanada with a reasonable opportunity to recover its Mainline costs, given the increase in Mainline throughput that is forecast. These fixed tolls also provide toll certainty and stability to shippers and better allow the Mainline to compete.

In its decision, the Board established the Firm Transportation toll from Empress, Alberta to Dawn, Ontario at $1.42/GJ, compared to a 2013 toll of $2.58/GJ that would result from TransCanada’s existing tolling methodology. The Board expects this toll to remain in effect through 2017. Recognizing the increased business risk the Mainline is facing, the Board approved the Mainline’s return on equity at 11.5 per cent on a 40 per cent equity ratio. The Board also approved an incentive mechanism that would further increase the Mainline’s profits if annual net revenues are higher than forecast.

In addition, the Board developed a streamlined regulatory process for the Mainline to address new service and pricing proposals in a timelier manner.

The Board approved all of TransCanada’s proposed changes to the Mainline’s cost allocation and the elimination of both the Risk Alleviation Mechanism and toll zones on the Mainline. The Board also gave greater discretion to TransCanada on how it prices Interruptible Transportation service and Short Term Firm Transportation service on the Mainline.

The Board did not approve other TransCanada proposals, including the Alberta System Extension. Among other things, the Board viewed the Alberta System Extension as inappropriate cost shifting among affiliate companies that is contrary to sound tolling principles. The Board also denied the reallocation of accumulated depreciation and the new proposed treatment of costs related to TransCanada’s agreement for transportation services on Trans Québec and Maritimes Pipeline Inc.’s pipeline system.

The Board denied intervenor proposals to disallow costs from the Mainline’s rate base or revenue requirement.

The Board observed that the future of the Mainline depends on how TransCanada is able to respond to the changes to its business environment. In its decision, the Board also noted that it has provided TransCanada with the tools it requires to achieve positive outcomes for its investors and customers, and that TransCanada must now use those tools to construct a viable future.


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