Spare Capacity Opens Up On TransCanada
Vacant capacity on TransCanada PipeLines Ltd. will rise to about
1.7 Bcf/d, or 24% of total capacity, by Nov. 1 as shippers of
Canadian gas production turn to transportation alternatives coming
available to them for the first time in industry history.
TransCanada reported that 1.1 Bcf/d of firm delivery capacity
has been relinquished as of the end of the current contract year.
The loss comes on top of about 580 MMcf/d in firm transportation
contracts that were dropped as of last Nov. 1. The trend is also
spreading to TransCanada's Nova gathering grid in Alberta, which
received notices of non-renewals for 2.7 Bcf/d in receipt capacity
and 257 MMcf in daily space at its delivery points.
In disclosing the non-renewals, TransCanada predicted new
bookings will make up for the lost old contracts on Nova, but was
not so optimistic about its long-distance mainline to central
Canada and the United States. There will be higher tolls on the
mainline for remaining holders of firm-service contracts,
Just how high the tolls will go remains uncertain. TransCanada
has already filed with the National Energy Board for an 11%
increase in its benchmark "eastern zone" rate to C$1.009 (US70
cents) per gigajoule from the 1999 average of C$0.906 (US62 cents).
In evidence laid before the NEB in recent rate cases, TransCanada
has predicted the firm-service toll could jump by more than 50% to
C$1.56 (US$1.08) by 2004.
TransCanada blamed the latest abandonments of firm capacity on
an April NEB decision rejecting its proposals for a competitive
response when its principal new rival, Alliance Pipeline, goes into
service this fall. The Alliance route to Chicago from northern
Alberta and British Columbia bypasses both TransCanada's
long-distance system and Nova. Traffic is also increasing on other
alternatives including Atco Gas Transmission lines within Alberta,
Saskatchewan's TransGas system, a southern bypass being expanded by
Alberta Energy Co. and the expanded Foothills-Northern Border
In the NEB case, TransCanada sought power to vary prices of
spare, "interruptible" capacity in a range of 65%-125% of
firm-service tolls depending on its readings of market conditions.
The NEB, doubting that the excess capacity situation will last for
long and acknowledging concerns over TransCanada's remaining market
power, instead gave the mainline a raise in interruptible tolls to
80% of firm rates from 50% and refused to grant the request for
flexibility. Despite the new pipeline competition, the TransCanada
organization continues to carry 77% of western Canadian gas
production. Senior vice-president Garry Mihaichuk said "in light
of this decision, TransCanada believes there is no real economic
incentive for customers to choose long-term firm contracts over IT
or STFT (similarly-priced short term firm transportation)."
The NEB ruling said TransCanada can apply for further toll
changes "to reflect this changing environment." The board also took
note of evidence that "TransCanada and its stakeholders are engaged
in broader services and pricing negotiations that may lead for
further proposals to short-term pricing methodology to be effective
as early as 1 January 2001."
Gordon Jaremko, Calgary
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