Expect additional staff reductions, office closures andregulated rate changes in the near future at TransCanada PipeLines,Gary Mihaichuk, president of transmission, said in an interviewwith NGI last week.

“I don’t think that we’re there as far as getting completeintegration, and that means people and systems and strategy…,” hesaid referring to the merged operations of Nova Corp. andTransCanada. “I think there are still costs that can be taken outof the entire system because there are still redundancies.”

Mihaichuk said there probably will be an increase in projectedsavings from the merger consolidation beyond the $70 million thecompany already promised to return to ratepayers in the form oflower tolls. “We haven’t finished our look at it yet,” but expectto do so by the end of October.

“We have reduced our vice president level in transmission by33%. We’ve reduced our director level by 30%. So as we go on thereorganization, we’re trying to take out structure as far as seniormanagement as well as get down to individuals across the entiresystem.

“As a whole TransCanada has reduced its staff so far by about900, including 300 contract employees, and by the end of Octoberwe’ll have a better sense of total numbers across the company. It’sgoing to be bigger [than 900 employees] by definition.”

“The first round was putting it together in transmission and inenergy operations, now we’re kind of trying to work through theduplication in dual systems. That’s where we’re getting the secondround of efficiency.”

TransCanada completed the sale of Angus Chemical to The DowChemical Co. last month so its offices in Illinois and Louisianaare expected to be closed. TransCanada also is in the midst ofselling its Louisiana petroleum and products businesses, which haveoffices in Louisiana and Houston. Mihaichuk said he expects theHouston office to remain open but it will be trimmed downsignificantly.

Regarding changes on the regulatory front, Mihaichuk said thepipeline has to find a way to be more competitive. It’s currentlyexpecting 580 MMcf/d of firm transportation capacity (8% of itstotal) to be turned back by shippers on Nov. 1. About 300 MMcf/dwill be available to eastern Canada. About 180 MMcf/d is toEmerson, and 100 MMcf/d is available to Saskatchewan. An openseason that ends Oct. 12 should unload some of that space, mostlikely under short-term contracts, but competition is not going toget any lighter once Alliance Pipeline comes on line, addinganother 1.3 Bcf/d of export capacity to the market in Fall of 2000.

“We’ve got to come forward with very specific plans that put usin an excellent competitive position….. That may requireregulatory change, it may require a change in the way we structureour tolls. That’s part of what you’ve seen already in [the springfiling on] products and pricing in Alberta. But we’re also tryingto change the way we formulate the tolls and reformulate the costsof our business allocated to the various places, so that we’remaking the entire system more competitive for people who are usingit.”

He referred to proposed rate changes on the mainline thatinclude raising the floor price for interruptible service to 100%of firm rates from 50% of firm rates and raising the floor pricefor short-term firm to 135% of firm from 100%. “We’re thinking ofpricing it the way you would price real estate: If I rent anapartment for a year, I pay X; if I rent it for a month, I pay Xplus some amount of money; and if I rent it by the day, I paymore.”

He also mentioned that TransCanada plans to file aterm-differentiated rate proposal with the National Energy Board.”A lot of people are not wanting to have capacity [under contract]for a full year because they really only need it at certain timesof the year, and even certain times of the month. We’re looking atterm-differentiated rates, whether it’s short-term firm rates orinterruptible. We’re still negotiating with our customers. We thinkit’s better if we can understand what they want and what kind offormulation it might look like. I would expect [to file byNovember], but it depends on the current rounds of discussions.” Headded that the IT and short-term firm rates probably would be filedbefore a term-differentiated rate proposal.

Lastly, TransCanada’s future pipeline expansions are somewhat upin the air at this time, other than the proposed extension to servethe Fort Liard area in the southern part of the NorthwestTerritories. In August, the pipeline signed an agreement with theGovernment of the Northwest Territories to work together toencourage a cost effective, competitive gas transmissioninfrastructure in the Fort Liard area and five to 10 years from nowin the distant Mackenzie Delta area about 800 miles north as well.

As far as U.S. export expansions are concerned, Mihaichuk said alot depends on how the multiple downstream projects shake out andhow the market grows in the U.S.

Rocco Canonica

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