Tolls will stay the same on TransCanada Corp.’s troubled natural gas Mainline linking Alberta to Ontario, Quebec and border crossings into the United States until a prolonged rate case sorts out its future.

Over protests by Canadian and U.S. gas buyers, the National Energy Board (NEB) allowed the pipeline to enter 2012 with its transportation charges fixed at 2011 levels as an “interim” measure. The freeze will remain in effect while a scheduled regulatory marathon reviews a TransCanada proposal for overhauling a business and financial structure that has about doubled Mainline tolls over the past five years.

Preliminary exchanges of documents, questions and requests have been under way since early last fall (see NGI, Dec. 12, 2011). So far, the NEB has scheduled a dozen weeks of public hearings in Calgary, Toronto and Montreal to begin in June and run into September after a summer recess. No target date has been set yet for finishing the case, with the board saying only that additional sessions will be held as required. A resolution of the hotly contested case could take until 2013, say TransCanada’s critics.

The interim decision lets the Mainline firm transportation (FT) rate stay at C$1.89/gigajoule (GJ) (US$1.98/MMBtu) until a decision is made on the proposed restructuring. The FT charge translates into an overall Mainline benchmark Eastern Zone Toll (EZT) of C$2.24/GJ (US$2.35/MMBtu) for deliveries into the big central Canadian markets of the Toronto-Montreal region.

In an additional ruling, the NEB turned down a demand by the Association of Power Producers of Ontario (APPrO) for “further and better reasons” for the rate freeze. A 27% cut in the EZT, back down to its 2010 level of C$1.64/GJ (US$1.72/MMBtu), was sought by the owners of Ontario gas-fired power plants, New York City gas importer Brooklyn Navy Yard Cogeneration Partners and a Canadian counterpart, the York Energy Centre and Goreway Power Station near Toronto.

The NEB ruled that the gas users failed to make a compelling case for departing from Canadian regulatory custom of setting interim rates “in a manner that aligns with the most recent decision related to a company’s final tolls.” The rate freeze approval also emphasized that “a decision to approve interim tolls is, in no way, a ruling by the board as to the merits of any case presented by an applicant or by interested parties to set final tolls.”

The protesting gas users have predicted that keeping the Mainline’s tolls at 2011 levels will worsen its plagues of excess capacity and rising tolls, and as a result increase pressure for yet more increases. TransCanada has dismissed all such predictions as “rank speculation unsupported by fact.”

The NEB pointed out, “Interim tolls…are subject to a subsequent determination on final tolls. Any difference between interim and final toll levels is typically recovered or refunded in future periods. Further, it is not unusual for interim tolls to be in place for an extended period of time while final tolls are being determined.”

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