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TransCanada PipeLines Limited – North Bay Junction Long Term Fixed Price Service, (NEB RH-002-2018 Reasons for Decision)

Link to decision summarized

Just and Reasonable Tolls – No Unjust Discrimination


The National Energy Board (“NEB”) previously approved TransCanada Pipelines (“TransCanada”)’s North Bay Junction Long Term Fixed Price (“NBJ LTFP”) service application.

The NEB issued its reasons for the approval in this decision.

Need for the NBJ LTFP Service

The NEB found there was a need to offer the NBJ LTFP service in order to retain and attract long term, long-haul contracts on the Mainline. The NEB agreed with TransCanada that long-haul contracts at Empress decreased from over 5 petajoules per day (“PJ/d”) in 2005 to a forecast of just over 1 PJ/d in 2020. At the same time, short-haul contracting in the Dawn area increased from approximately 1 PJ/d in 2005 to a forecast of approximately 4 PJ/d by 2020. Primarily driving these contracting changes on the Mainline was the dramatic growth of production from the Marcellus and Utica basins, which are closer to eastern Canadian and northeastern U.S. markets compared to Western Canada Sedimentary Basin (“WCSB”) supply.

Benefits and Impacts of the NBJ LTFP Service

The NEB found that the NBJ LTFP service would provide significant benefits to the Mainline and its shippers. Through the offering of the service, net Mainline revenues would increase relative to what they would otherwise be and Mainline tolls would be lowered overall.

On a general basis, the NEB expressed its support for toll initiatives that promote the use of existing infrastructure. The NEB also considered that the NBJ LTFP service may significantly reduce the need for incremental facilities that would otherwise be required to provide additional short-haul service from other Eastern Triangle receipt points. TransCanada’s uncontroverted evidence estimate these capital cost savings to be approximately $2.2 billion, resulting in cost of service reductions of approximately $5.1 billion over the contract terms.

The NEB also considered other benefits of the NBJ LTFP service, including increasing market access for WCSB producers, enhancing diversity of supply sources and transportation paths for eastern market participants, and reducing the level of abandonment surcharge revenue to be recovered from other Mainline services.

Requirements of the National Energy Board Act

The NEB’s mandate regarding traffic, tolls, and tariff matters is set out in Part IV of the National Energy Board Act (“NEB Act”). Section 62 of the NEB Act states 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 Act prohibits a company from making any unjust discrimination in tolls, service, or facilities against any person or locality. The NEB has broad discretion to determine whether tolls and tariffs comply with these provisions of the NEB Act.

Just and Reasonable Tolls

The NEB found the proposed toll was a market-driven, negotiated solution developed to retain and attract long term, long-haul contracting on the Mainline that otherwise would not occur. The NEB found that the NBJ LTFP service would promote economic efficiency through increased system utilization and the net lowering of Mainline tolls.

No Unjust Discrimination

The NEB found the service was developed to respond to unique competitive circumstances that exist in eastern markets and which warrant a different toll and service to attract incremental volumes and revenues to the Mainline. The service attributes of the NBJ LTFP were also more restrictive than firm transportation service. Accordingly, the NEB found that the NBJ LTFP service can be charged at a different toll than other services.

Summary

The NEB approved TransCanada’s NBJ LTFP service application as filed.

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