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TransCanada Seeks Rate Increase
TransCanada PipeLines Ltd. has opened a second front in itsfight to stop, before it starts, a revenue hemorrhage seen on thehorizon as a result of new competition in natural gastransportation.
TransCanada has filed with the National Energy Board for an 11%toll increase effective Jan. 1. The action comes on top of ahotly-contested request for discretion to set “reserve bids” orprice floors for daily auctions of spare, “interruptible” capacityin a range of 65% of firm-service tolls in summer to 125% inwinter.
The new hike would raise TransCanada’s benchmark “eastern zone”rate, for deliveries from western to central Canada, to C$1.009(US$70 cents) per gigajoule from the 1999 average of C$0.906(US$0.62).
About one-fifth of the proposed general increase is attributedto potential for further non-renewals in 2000 of long-term, firmtransportation contracts. More than half of the requested hike isblamed on actual contract changes that have already occurred,thanks largely to expansions of the established Canadian pipelinegrid plus forthcoming completion of yet more added capacity by theAlliance and Vector projects.
As of last Nov. 1, shippers dropped 580 MMcf/d or about 8% oflong firm capacity on the system. TransCanada has told the NEB thatabout 1.8 Bcf/d capacity could be relinquished in November of 2000.
The pipeline has also told the board that its system stands tolose C$170 million (US$117 million) by December of 2000 just fromthe initial round of firm-service contract reductions.
TransCanada’s warnings also say that without strongcounter-measures, firm-service tolls could rise by more than 50% toC$1.56 (US$1.07) per gigajoule by 2004. By 2007, the fearedstampede away from firm service is projected to have potential todrive tolls for its few remaining users to C$3.25 (US$2.24).
The NEB has scheduled hearings to start Jan. 18 on TransCanada’sfloor-price proposal. No date has been set yet for proceedings onthe general rate application. As the first tolls application sincethe expiry Dec. 31 of a five-year incentive rate-making settlementwith shippers, the new proposal is expected to generate lengthynegotiations, or hearings, or both.
The documents before the board record the pipeline’s perceptionof the new era of excess delivery capacity and competition. TheCanadian gas transportation market no longer reliably belongs toits biggest, oldest mainstay.
The new rate filing says, “In previous tolls applications, ifthere was no evidence that shippers would not renew firmtransportation contracts, TransCanada assumed that the contractswould be renewed. Due to the approval of a new pipeline project(Vector) into Ontario, TransCanada has not made the same assumptionin this application.”
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