Distribution companies Thursday won a battle to hold down costs of using TransCanada Corp.'s natural gas mainline when the National Energy Board (NEB) rejected a complex proposal to raise storage charges.
Centra Gas Manitoba, Union Gas (Spectra) in southwestern Ontario, and Enbridge Gas in the Toronto-Ottawa region successfully defended separate service contracts, dating back to 1975, which recognized variable and unpredictable seasonal needs.
TransCanada unsuccessfully sought to replace the traditional arrangements with a uniform, mathematical cost formula for stockpiling and withdrawing gas on demand in a delivery role known as STS, short for Storage Transportation Service.
In denying the application, NEB said, "The geographic location of market relative to storage and local distribution company (LDC)-specific requirements, such as market and load characteristics, were determinative considerations for the non-standard provisions."
The victorious distributors' franchise areas span a wide range of seasonal conditions. Continental climate extremes and prolonged heating seasons in Manitoba earn its capital, Winnipeg, the nickname of Winterpeg. Southwestern and eastern Ontario, although snowy and frosty by U.S. standards, rank as milder on the Canadian weather scale.
NEB rejected attempts by TransCanada to justify a uniform STS cost regime on theoretical grounds of consistency. The ruling said, "Given the geography of individual LDC franchises and variances in weather-driven demand patterns, the service is inherently non-standard."
No forecasts of the total revenue increase that TransCanada hoped to achieve were made during the long and complicated case, which began last April. Added costs for each distributor were hotly debated.
But toll effects of the failed proposal were protested as liable to be steep. Union predicted its costs alone for Mainline STS would jump by 250-300%, up to C$40-52.6 million per year (US$30-39 million) from C$16 million (US$12 million).
NEB also ruled that TransCanada customers "fairly expected a level of toll certainty and stability" under a settlement and associated board ruling on Mainline costs for the period 2014-2020. The STS ruling said TransCanada's "proposed tariff amendments would result in a substantial disruption to the expected toll certainty and stability."
NEB added, "Now is not the time to make significant changes to STS, a fundamental service that the LDCs rely on for seasonal and daily balancing and have relied on for many years in its current form."
TransCanada's next opportunity to try for big Mainline changes will roll around when the 2014-2020 package runs out. NEB said a major overhaul is already foreshadowed by declared intentions to seek differing "segmented" tolls on western and eastern legs of the 3,500-kilometer (2,200-mile) national gas freeway from Alberta to Quebec, which was the world's longest pipeline when it was completed in 1959.