Gas Transportation – Temporary Service Protocol
In this decision, the CER considered NGTL’s Application (the “Application”) for approval of amendments to the NGTL Gas Transportation Tariff for the Temporary Service Protocol (“Protocol”). The CER approved the Application as filed, effective September 30, 2019.
Background
On 26 August 2019, NGTL filed the Application pursuant to section 60(1)(b) of the National Energy Board Act (“NEB Act”) for amendments. NGTL submitted in the Application that:
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the effect of the Protocol would be to provide NGTL with flexibility to prioritize interruptible delivery and storage injection over receipt services (interruptible or firm) to manage system constraints during planned outage/maintenance periods at and upstream of Clearwater Compressor Station and Woodenhouse Compressor Station; and
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the Protocol would be utilized only in the summer periods of 2019 (from the date of CER approval through October) and 2020 (April through October).
NGTL requested an effective date for the Protocol of September 3, 2019, or as soon as possible thereafter.
Regulatory Framework
On 28 August 2019, the Canadian Energy Regulator Act (“CER Act”) came into force. Section 36 of the transitional provisions state that applications pending before the National Energy Board (“NEB”) immediately before the commencement day are to be taken up before the CER and continued in accordance with the NEB Act. Therefore, the CER assessed the Application in accordance with the NEB Act.
Sections 62 and 67 of the NEB Act state:
62. All tolls shall be just and reasonable and shall always, under substantially similar circumstances and conditions with respect to all traffic of the same description carried over the same route, be charged equally to all persons at the same rate.
67. A company shall not make any unjust discrimination in tolls, service or facilities against any person or locality.
The CER noted that in previous decisions, the NEB articulated tolling principles that assist in the interpretation and application of these statutory provisions. These include cost-based/user-pay, no acquired rights, and economic efficiency. The CER considered the Application and evidence on the record having regard to these legislated requirements and fundamental tolling principles.
CER Findings
No Unjust Discrimination
The CER found that the Protocol did not result in any unjust discrimination. In making this determination, the CER considered whether shippers that share substantially similar circumstances were being treated equally. The CER was satisfied that, based on the evidence tendered by NGTL, users under substantially similar circumstances would be treated equally. The CER noted that receipt shippers that share geographic and operational circumstances, such as receipt shippers upstream of constraints, will be treated similarly under the conditions of the Protocol.
The CER found that, in this case, it was reasonable to distinguish between receipt and delivery services during curtailments as receipt and delivery services are predominantly situated in different locations of the NGTL system and are impacted differently by constraints on the system.
The CER indicated its findings apply equally to the argument that some storage operators would be favoured over others. The CER was not persuaded that storage operators upstream of the constraints identified in the Protocol operate under similar circumstances as those that exist at East Gate storage locations.
Moreover, the CER noted that the parties supporting the Application represented diverse interests, including producers who could be negatively impacted by curtailments, delivery customers, and an end user.
Economic Efficiency
The CER found that the Protocol was consistent with established tolling principles, particularly the principle of economic efficiency. The CER indicated it views economic efficiency to include the optimization of system use and delivery choices to system users. The CER accepted, in this case, that enhancing access to storage in the summer during planned maintenance events is key to achieving the efficient use of the NGTL system.
The CER found that the existing tariff, without amendment, had the effect of curtailing services in parts of the system not in proximity to the physical constraints and contributed to periods of supply and demand distortions. The CER, therefore, found that efficient system use and services to customers have not been achieved using the current system of curtailments.
The CER found that the Protocol, by enhancing access to storage, would promote economic efficiency and be consistent with the goal that Canadians benefit from efficient energy infrastructure and markets.
The CER noted that it was unnecessary for the CER to make any findings as to the likely impacts of the Protocol on natural gas prices or the broader relevance of price stability within an adjudication of tariff terms. There was no expert evidence tendered in respect of the commodity price issues associated with the Protocol. However, there was ample evidence that economic efficiency would likely be enhanced by the Protocol, even without considering potential commodity price impacts.
The CER further noted that while NGTL is endeavouring to expand its system to address current system constraints, major capital expansions cannot address inefficiencies quickly and in the short-term. In this case, the CER was persuaded that the Protocol was a reasonable short-term solution to enhance storage access during planned summer maintenance events, prior to proposed capacity additions in 2021.
Conclusion
The CER approved the Application on September 26, 2019, with an effective date of September 30, 2019.
