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Final TransCanada Toll Settlement Postponed

A final settlement of the bills for vacant capacity this year on TransCanada Corp.'s natural gas mainline has been postponed until 2012.

In a filing with the National Energy Board (NEB), Canada's top gas transporter agreed to defer calculating the 2011 extra bill until shipping volumes and costs can be tallied rather than forecast. As a result the mainline -- carrying gas from Western to central Canada and export points to the Midwest and northeastern United States -- will charge interim rates for the rest of this year.

The action gives shippers a reprieve from feeling the full effects of vacant capacity, according to TransCanada projections.

In a filing just before last Christmas with the NEB, TransCanada sought a drastic hike in its benchmark "eastern zone toll" to C$2.90/gigajoule (GJ) (US$3.04/MMBtu), up 77% from C$1.64/GJ (US$1.72/MMBtu) in 2010 (see Daily GPI, May 23; May 2). The request predicted that 2011 revenues would fall C$750 million (the U.S. dollar and Canadian loonie are at about parity) below the line's authorized requirement unless the increase was granted.

A storm of shipper protest prompted the NEB to send TransCanada back to the drawing board and devise less drastic interim rates. Under the resulting temporary package for 2011 the benchmark eastern zone toll has gone up by 36 per cent to C$2.24/GJ (US$2.35/MMBtu).

The decision to defer final collection of any shortfall until actual 2011 shipping volumes and revenues are known follows a request for clarification from the NEB earlier this month.

TransCanada also agreed to an NEB request to file its 2012 toll application by Sept. 1, or two months earlier than the company's original target date of Oct. 31. Shippers requested an even earlier filing in order to start reviewing a promised complete overhaul of mainline rates.

The NEB filing said, "While that application cannot be complete at that time [Sept. 1], TransCanada will endeavor to include as much information as possible. The recent expectation is that the comprehensive suite of business model, toll design and service charges will be put forward, including certain expert evidence to support the restructuring proposal, such that review of the application may commence."

TransCanada's vacant capacity toll headache is blamed on naturally declining western conventional gas supplies, increased consumption by Alberta thermal oilsands projects and growing use of U.S. shale production by markets that formerly relied on the mainline, including central Canada.

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