September 2011
On September 1, 2011 TransCanada PipeLines filed an application with the National Energy Board requesting approval of a business and services restructuring proposal and Mainline tolls for 2012 and 2013.
TransCanada has developed what it feels is a comprehensive response to the new market reality where changes in the business environment of natural gas supply, demand and transportation in North America have raised significant issues that impact the long-term economic viability of existing pipeline infrastructure and supply basins.
There are four basic components to TransCanada's restructuring proposal:
Depreciation
TransCanada proposes to reallocate accumulated depreciation from the Prairies and Eastern Triangle to its Northern Ontario Line. A consequence of this reallocation is that the overall Mainline depreciation rate will be approximately 1% lower than the rate that would be applicable without the change.
Alberta System Extension
TransCanada proposes to extend the Alberta System service to the Saskatchewan/Manitoba border (SMB) on the Mainline, to Kingsgate, B.C. on the Foothills System Zone 8 and to Monchy, Saskatchewan on the Foothills System Zone 9.
To accomplish the extension, Nova Gas Transmission will contract for standard annual firm service on the Mainline and on the Foothill System. TransCanada believes this will enhance the economic viability of the Mainline and the Western Canadian Sedimentary Basin (WCSB) by reducing the transportation costs between WCSB and downstream markets.
Shippers who currently contract for long haul transportation service from Empress will now be able to contract for long haul service from NIT (AECO), Empress or SMB to downstream Mainline markets.
Toll Design
Proposed changes to TransCanada's toll design include:
Services and Pricing
TransCanada is proposing a number of services and pricing changes. Those include:
Other Changes
TransCanada believes that changes in business risk, developments in financial markets, and changes in the regulatory approach all warrant an increase in return for the Mainline for 2012 and 2013, and determination of a fair return using the After Tax Weighted Average Cost of Capital (ATWACC) methodology. TransCanada is seeking approval of an ATWACC of 7%.
As part of the package of proposals in the filing, TransCanada proposes to make a voluntary contribution of $25 million to reduce the Mainline revenue requirement for each of 2012 and 2013. The contribution is contingent on approval of the restructuring proposal.
Impact on Tolls
Due to the timing of the availability of detailed cost and budget information, TransCanada's application presently includes only representative information and illustrative tolls for 2012. The September filing is to be supplemented by the end of October 2011, with an overview of major costs included in the Mainline cost of service for 2012 and 2013 and the proposed tolls for both years.
The following table shows some of the illustrative tolls from NIT to various eastern delivery areas for 2012.
Path |
Restructuring Proposal |
---|---|
NIT to Union SWDA | 1.41 |
NIT to Enbridge CDA | 1.55 |
NIT to Union CDA | 1.52 |
NIT to Union EDA | 1.64 |
NIT to Enbridge EDA | 1.60 |
Dawn to Enbridge CDA | 0.23 |
Dawn to Union CDA | 0.19 |
Dawn to Union EDA | 0.36 |
The National Energy Board has announced that it will hold a pre-hearing planning conference on October 12-13. The purpose of the meeting is to receive input from shippers and other interested parties on procedural matters for a hearing in 2012 and on the issues list for the proceeding.
TransCanada's Proposed Business and Services Restructuring and Mainline Tolls - Executive Summary Read more »