TransCanada Corp. said Friday that “changes in the competitive landscape” have resulted in significantly lower revenues for Gas Transmission Northwest Corp. (GTN), its wholly-owned interstate pipeline that serves markets in the U.S. Pacific Northwest and California. As a result, TransCanada has filed a rate case with the Federal Energy Regulatory Commission (FERC).
The company said the comprehensive filing requests a number of tariff changes, including an increase in rates for certain services. GTN’s current rates are based on its last rate case, filed in 1994.
“Since GTN’s current rates were established, North America’s natural gas transmission network has become significantly more integrated and competitive,” said TransCanada CEO Hal Kvisle. “Fundamental changes to the markets served by GTN include an increase in pipeline capacity into GTN’s major market in California as well as an increase in pipeline capacity out of GTN’s major supply area in the Western Canada Sedimentary Basin.”
The changes in the competitive landscape have caused a number of long-term firm transportation customers to not renew their contracts, TransCanada said Friday. These contract nonrenewals, combined with shipper defaults, have resulted in a significant amount of unsubscribed capacity. As a result, the company stated that GTN’s revenues no longer allow it to recover its costs and earn a fair return on invested capital.
In its filing, GTN is asking FERC for authority to share the costs of unsubscribed capacity with its long-term firm shippers through a number of changes to its rates. They include:
The proposed rates include a rate of return on common equity of 14.5%, a common equity ratio of 62.99% and a depreciation rate for transmission plant of 2.76%. The filing also proposes a number of tariff changes related to credit provisions as well as the rationalization of existing capacity when an expansion of the system is being considered.
TransCanada’s GTN System is a dual pipeline that begins at an interconnect with TransCanada’s BC System near Kingsgate on the Idaho-British Columbia border and traverses the states of Idaho, Washington, and Oregon before ending at interconnects with Tuscarora Gas Transmission Co. and Pacific Gas & Electric Co. at the Oregon-California border.
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