Vacant capacity on TransCanada PipeLines Ltd. will rise to about1.7 Bcf/d or 24% as of Nov. 1 as shippers of Canadian natural-gasproduction turn to transportation alternatives coming available tothem for the first time in industry history.

TransCanada reported that 1.1 Bcf/d of firm delivery capacityhas been relinquished as of the end of the current contract year.The loss comes on top of about 580 MMcf/d in firm transportationcontracts that were dropped as of last Nov. 1. The trend is alsospreading to TransCanada’s Nova gathering grid in Alberta, whichreceived notices of non-renewals for 2.7 Bcf/d in receipt capacityand 257 MMcf in daily space at its delivery points.

In disclosing the non-renewals, TransCanada predicted newbookings will make up for the lost old contracts on Nova, but therewill be higher tolls on the mainline for remaining holders offirm-service contracts, TransCanada said.

Just how high the tolls will go remains uncertain. TransCanadahas already filed with the National Energy Board for an 11%increase in its benchmark “eastern zone” rate to C$1.009 (US70cents) per gigajoule from the 1999 average of C$0.906 (US62 cents).In evidence laid before the NEB in recent rate cases, TransCanadahas predicted the firm-service toll could jump by more than 50% toC$1.56 (US$1.08) by 2004.

TransCanada blamed the latest abandonments of firm capacity onan April NEB decision rejecting its proposals for a competitiveresponse when its principal new rival, Alliance Pipeline, goes intoservice this fall. Traffic is also increasing on other alternativesincluding Atco Gas Transmission lines within Alberta,Saskatchewan’s TransGas system, a southern bypass being expanded byAlberta Energy Co. and Foothills-Northern Border.

In the NEB case, TransCanada sought power to vary prices ofspare, “interruptible” capacity in a range of 65-125% offirm-service tolls depending on its readings of market conditions.The NEB, doubting that the excess capacity situation will last forlong and acknowledging concerns over TransCanada’s remaining marketpower, instead gave the mainline a raise in interruptible tolls to80% of firm rates from 50% and refused to grant the request forflexibility. Despite the new pipeline competition, the TransCanadaorganization continues to carry 77% of western Canadian gasproduction. Senior vice-president Garry Mihaichuk said “in lightof this decision, TransCanada believes there is no real economicincentive for customers to choose long-term firm contracts over ITor STFT (similarly-priced short term firm transportation).”

The NEB ruling said TransCanada can apply for further tollchanges “to reflect this changing environment.” The board also tooknote of evidence that “TransCanada and its stakeholders are engagedin broader services and pricing negotiations that may lead forfurther proposals to short-term pricing methodology to be effectiveas early as 1 January 2001.”

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