Natural Gas – TransCanada Mainline – Tolls and Tariff
On 4 January 2017, TransCanada Pipelines Limited (“TCPL”) filed, under Parts I and IV of the National Energy Board Act (the “NEB Act”), an application for approval of a new long-term fixed price (“LTFP”) service from Empress to Herbert, Saskatchewan (the “Application”). TransCanada negotiated the Herbert LTFP service with TransGas Limited (“TransGas”) to serve a gas-fired power plant to be constructed near Swift Current, Saskatchewan (the “Power Plant”).
In the Application, TCPL requested an order of the Board:
(a) approving the proposed Herbert LTFP service and the related toll methodology; and
(b) approving the Herbert LTFP Contract, Herbert LTFP Toll Schedule and other consequential amendments to the Canadian Mainline Gas Transportation Tariff (Tariff).
The NEB summarized the key terms and conditions of the Herbert LTFP service as follows:
• contract quantity of 58 terajoules (TJ) per day;
• a receipt point of Empress and a delivery point of Herbert, with no diversion or alternate receipt point rights;
• a negotiated fixed daily demand toll of $0.12 per gigajoule (GJ) per day;
• an abandonment surcharge based on the applicable methodology for Firm Transportation (FT) service that reflects the distance between Empress and Herbert;
• a 10-year term with rights to convert to FT service at the end of the term;
• a conditional commitment for TransGas to maintain 80 TJ/day of FT service from Empress to the TransGas Saskatchewan Southern Delivery Area (SSDA) during the term, which is the current TransGas FT contract quantity; and
• termination and conversion conditions if the Power Plant did not operate or the 80 TJ/day of FT service was not maintained.
The NEB provided the following map showing the relevant facilities in Saskatchewan:
Legislative Scheme
The NEB explained that:
• Part IV of the NEB Act sets out the Board’s mandate in respect of traffic, tolls and tariff matters;
• Section 62 of the NEB Act provides that 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;
• Section 67 of the NEB prohibits a company from making any unjust discrimination in tolls, service or facilities against any person or locality; and
• Under section 63 of the NEB Act, the Board may determine as questions of fact whether or not traffic is or has been carried under substantially similar circumstances and conditions as referred to in section 62 or whether there is unjust discrimination within the meaning of section 67.
NEB Findings
For the reasons summarized below, the Board found that:
(a) the Herbert LTFP service and toll were not unjustly discriminatory; and
(b) the Herbert LTFP toll was just and reasonable.
No Unjust Discrimination
The Board found that the Herbert LTFP toll and service was not unjustly discriminatory. This determination was premised on the following NEB findings:
• Herbert LTFP service was designed to respond to a unique competitive alternative available to TransGas for serving the Power Plant, which involved significantly lower overall costs for TransGas compared to the option involving Mainline FT to the TransGas SSDA,
• providing the service was physically feasible, with the necessary infrastructure largely in place;
• if Herbert LTFP were not approved as proposed in the Application, TransGas would reasonably be expected to pursue a non-Mainline alternative for the entire 58 TJ/d required for the Power Plant;
• the Herbert LTFP service would not transport gas under substantially similar circumstances and conditions as other services offered on the Mainline, including FT service; and
• the Herbert LTFP service represented a different kind of traffic than that of FT service, including attributes such as the 10-year contract term and the lack of alternate receipt point and diversion rights.
Toll is Just and Reasonable
The NEB found that the Herbert LTFP toll was just and reasonable. The NEB supported this finding, noting that:
(a) the toll was set at a market-negotiated level required to attract the incremental load associated with the Power Plant;
(b) the toll had been negotiated between two non-affiliated companies; and
(c) in the NEB’s view, this represented a fair market value of the service in this circumstance.
Decision
The NEB approved the Application as filed.
