While long-distance tolls continue to be hotly contested,TransCanada PipeLines Ltd. succeeded in reaching a settlement onkey basics that will let it set 2001-02 rates without a fight forits Nova grid in Alberta.
The deal covers the deciding factor in determining tolls withinthe jurisdiction responsible for about 80% of Canadian production— an agreed revenue requirement for the Alberta grid — plus twonew services and a commitment by all concerned to addressadditional issues over the next two years.
Participants in the settlement include the Canadian Associationof Petroleum Producers, Industrial Gas Consumers Association ofAlberta, and the Small Explorers and Producers Association ofCanada, as well as consumer groups, marketers, exporters and otherswith interests in the pipeline system.The settlement is expectedto generate savings or at least hold rates steady for shippers bydropping a formula approach to establishing the Alberta grid’srevenue requirement and agreeing on a fixed amount. The figure goesdown this year to C$1.39 billion (US$960 million) from C$1.42billion (US$979 million) in 2000, then drops again in 2002 toC$1.347 billion (US$930 million).
TransCanada is also being given added incentive to pare costs ofthe system. All savings from efficiency improvements go to thepipeline during the next two years, compared to 50% during 1999 and2000. For shippers with special needs or locations on the grid,the pipeline will introduce a point-to-point firm transportationservices contract. There will also be a new one-year,non-renewable firm service arrangement will be made available andpriced at a 10% premium. Under distance-based tolling adopted onthe Nova system last year, the rates will depend on conditions ineach deal. In the case of one-year contracts, shippers agreed topay premiums over rates for traditional three-year agreements.
All parties also intend to resolve several rate design andservice issues over the next two years, including those leading tooperational and contractual flexibility, a tolling structure thatis fair for intra-Alberta and ex-Alberta shippers and a structurethat will provide NGTL with the incentive and opportunity tocompete in the longer term.
TransCanada and the Nova shippers alike described the deal as anencouraging sign for all sides. TransCanada president Doug Baldwindescribed the agreement on the Nova grid as “another step towardachieving our common goal to enhance the competitiveness of theWestern Canada Sedimentary Basin, and it is an excellent example ofthe benefits in working collaboratively with industrystakeholders.” By competitiveness, he means the efficiency ofAlberta production as a whole when compared with rival supplyregions in the United States.
CAPP represents 160 member companies that produce 95% ofCanada’s oil and natural gas. The IGCAA represents nine large gasconsumers that consume about 60% of the gas used in the industrialgas market in Alberta.
Gordon Jaremko, Calgary
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