NOVA, Shippers Reach Two-Year Rate Settlement
While long-distance tolls continue to be hotly contested,
TransCanada PipeLines Ltd. succeeded in reaching a settlement on
key basics that will let it set 2001-02 rates without a fight for
its Nova grid in Alberta.
The deal covers the deciding factor in determining tolls within
the jurisdiction responsible for about 80% of Canadian production
--- an agreed revenue requirement for the Alberta grid --- plus two
new services and a commitment by all concerned to address
additional issues over the next two years.
Participants in the settlement include the Canadian Association
of Petroleum Producers, Industrial Gas Consumers Association of
Alberta, and the Small Explorers and Producers Association of
Canada, as well as consumer groups, marketers, exporters and others
with interests in the pipeline system. The settlement is expected
to generate savings or at least hold rates steady for shippers by
dropping a formula approach to establishing the Alberta grid's
revenue requirement and agreeing on a fixed amount. The figure goes
down this year to C$1.39 billion (US$960 million) from C$1.42
billion (US$979 million) in 2000, then drops again in 2002 to
C$1.347 billion (US$930 million).
TransCanada is also being given added incentive to pare costs of
the system. All savings from efficiency improvements go to the
pipeline during the next two years, compared to 50% during 1999 and
2000. For shippers with special needs or locations on the grid,
the pipeline will introduce a point-to-point firm transportation
services contract. There will also be a new one-year,
non-renewable firm service arrangement will be made available and
priced at a 10% premium. Under distance-based tolling adopted on
the Nova system last year, the rates will depend on conditions in
each deal. In the case of one-year contracts, shippers agreed to
pay premiums over rates for traditional three-year agreements.
All parties also intend to resolve several rate design and
service issues over the next two years, including those leading to
operational and contractual flexibility, a tolling structure that
is fair for intra-Alberta and ex-Alberta shippers and a structure
that will provide NGTL with the incentive and opportunity to
compete in the longer term.
TransCanada and the Nova shippers alike described the deal as an
encouraging sign for all sides. TransCanada president Doug Baldwin
described the agreement on the Nova grid as "another step toward
achieving our common goal to enhance the competitiveness of the
Western Canada Sedimentary Basin, and it is an excellent example of
the benefits in working collaboratively with industry
stakeholders." By competitiveness, he means the efficiency of
Alberta production as a whole when compared with rival supply
regions in the United States.
CAPP represents 160 member companies that produce 95% of
Canada's oil and natural gas. The IGCAA represents nine large gas
consumers that consume about 60% of the gas used in the industrial
gas market in Alberta.
Gordon Jaremko, Calgary
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