After nine months of negotiations with shippers, Calgary-based TransCanada Corp. on Monday announced an agreement to maintain the services and finances status quo on its Nova natural gas pipeline grid in Alberta and British Columbia (BC).
With only marginal variations, the deal provides for a two-year extension for 2013 and 2014 of a settlement that determined the 24,000-kilometer (15,000-mile) grid's revenue requirement and rates for the three-year period of Jan. 1, 2010, through Dec. 31, 2012.
The Nova system's agreed, allowed rate of return on equity rises slightly to 10.1% from 9.7%. The grid's agreed total annual revenue requirement remains about C$1.4 billion (US$ at par).
The benchmark rate for transporting gas to the inlet of TransCanada's long-distance gas Mainline, at Empress in southeastern Alberta, remains largely unchanged at about C$0.17/gigajoule (US$0.18/MMBtu).
Settlement negotiations were completed after Alberta and BC gas shippers, supported by provincial authorities, successfully resisted an attempt to overhaul the Nova status quo as part of an overall "restructuring" of TransCanada services, business and finances.
The defeated part of the package was forecast to increase annual costs attributed to the Nova system by about C$500 million, causing corresponding increases of about one-third in rates charged shippers.
A landmark spring ruling by the National Energy Board (NEB) shelved much of the complicated restructuring proposal, upheld the Nova status quo, and authorized TransCanada to seek increased rates on the Mainline.
Initial moves to act on the NEB decision are under way. The outcome remains hotly contested in disputes over a new Mainline tariff filing with the board, which Ontario and Quebec shippers are fighting as liable to generate toll increases that they see as excessive and unjustified.
On the Nova grid, TransCanada's application to the NEB for approval of the settlement predicts it "will result in greater rate certainty and greater regulatory efficiency than would be achieved through litigated annual toll applications. It provides for a reasonable apportionment of [financial] risks . . . and enhances incentives for achieving cost efficiencies."