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TransCanada PipeLines Limited Application for Approval of the Mainline 2021-2026 Settlement, CER Letter Decision April 17, 2020

Link to Decision Summarized

Settlement – Tolls

PipeLines Limited (“TCPL”) dated December 20, 2019, requesting approval of the Mainline 2021-2026 Settlement (the “Application”). The Settlement was for tolling and services matters for the 1 January 2021 to 31 December 2026 period (the “Settlement”). TCPL filed its Application for approval pursuant to the tolls and tariff and public interest provisions under Parts 1 and 3 of the Canadian Energy Regulator Act (“CER Act”) and the Revised Guidelines for Negotiated Settlements of Traffic, Tolls and Tariffs (“Settlement Guidelines”).

As described in the Settlement, tolls for the 2021-2026 period would be determined on a cost of service basis, by segment, with an agreed-upon level of cost and revenue variance sharing between TCPL and shippers. Tolls would be fixed for the term, subject to a one-time Long Term Adjustment Account (“LTAA”) adjustment in 2020, although tolls would be subject to rate riders should the Short Term Adjustment Accounts (“STAAs”) exceed or be expected to exceed an agreed-upon threshold. While the Application addressed tolls for the 2021-2026 period, it also included proposals for service matters that would commence prior to 2021, including the implementation of the proposed new complaint-based Market Driven Service (“MDS”) and changes to renewal provisions.

TCPL submitted that the Settlement represents a balance of interests resulting from compromises of the diverse interests and positions of parties. As such, TCPL presented the components of the Settlement to the CER for approval as a package without modification.

TCPL also submitted that discussions with members of the Tolls Task Force (“TTF”) were initiated in late 2018 and confirmed that TCPL hosted formal meetings over 40 individual dates in various locations. A TTF vote was held on 16 December 2019, with the result being a unanimous decision, meaning that all parties who took a position voted in support of the Settlement.

Views of the CER

The CER found that the Settlement will result in tolls that are just and reasonable, and tolls and services that are not unjustly discriminatory. Having determined that the Settlement complies with the requirements of sections 230 and 235 of the CER Act, the CER approved the Application as filed.

In reaching this determination, the CER gave significant weight to the unanimous TTF support for the Settlement and the absence of submissions opposing or raising concerns about the Settlement. The CER reviewed all aspects of the Application and identified no material concerns extending beyond the immediate concerns of the negotiating parties. The CER also found that the Settlement met the requirements of the Settlement Guidelines.

Having reviewed the information filed on the record to support the Settlement, the CER found that the Settlement will provide shippers with a degree of certainty on tolls and service attributes over the next six years. In the CER’s view, this is beneficial as it allows shippers to make more informed contracting and investment decisions. At the same time, measures have been developed to allow TCPL a reasonable opportunity to recover its costs, including the potential for rate riders to be charged.

Additionally, the Settlement provides TCPL with the ability to quickly meet market demands with market solutions through the new complaint-based MDS. As structured under the Settlement, the MDS will provide benefits to both shippers and TCPL. Through the Incentive Sharing Mechanism, TCPL and its shippers also agreed to share variances in costs and revenues during the Settlement’s term. Both shippers and TCPL will benefit from initiatives to attract incremental revenues to the Mainline and to reduce costs. Overall, the CER found that the Settlement struck an appropriate balance between the respective interests of the negotiating parties, which was demonstrated by the unanimous support.

For these reasons, the CER approved the Application as filed.

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