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TransCanada, Alberta Customers Reach Two-Year Settlement

Another two years of stable rates are in store for a mainstay of Canadian natural gas transportation after TransCanada Corp.'s Alberta pipeline grid reached a revenue requirement settlement with shippers.

The two-year deal secured by subsidiary NOVA Gas Transmission Ltd. (NGTL) will neither raise nor cut earnings by the pipeline system that carries about 80% of Canadian production between Alberta gas fields and long-distance pipelines, TransCanada said.

The forecast was made in a brief announcement of the latest in a string of agreements since a landmark 1999 memorandum of understanding with the Canadian Association of Petroleum Producers (CAPP) ended lengthy conflicts.

Details of the new settlement for 2008 and 2009 will be made known in an application for ratification of the agreement and final tolls that TransCanada pledged to file before Tuesday (April 1) with the Alberta Utilities Commission.

An interim order by the provincial agency in December let NGTL raise its 2008 revenue requirement to about C$1.24 billion from C$1.15 billion last year.

The result was a 6.9% rate increase to average tolls of C15 cents/Mcf for injections into the grid at receipt points and C31 cents per Mcf for delivery to exit connections.

Under the 1999 understanding with CAPP, NGTL adopted a complex system of variable, cost-based receipt point charges that effectively enacted distance tolling to replace a traditional Alberta policy of postage-stamp rates.

The old regime, a standard toll kept the same regardless of the mileage traveled by gas within the province, was adopted to encourage development of the province's resources regardless of location. The new approach recognized that postage-stamp rates had served their purpose by enabling producers to expand across fields from the province's 49th-Parallel border with the United States to its 60th-Parallel boundary with the Northwest Territories.

Current spring receipts from Alberta gas fields into the NGTL grid are about 10.8 Bcf/d, according to daily reports posted by the system. Traffic varies depending on seasonal demand movements and changing market conditions. Gas from northern British Columbia also flows across the NGTL system en route to long-distance pipelines.

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