TransCanada says contract nonrenewals to prompt rate rise

TransCanada PipeLines Ltd. said the nonrenewal of certain firm service contracts would force it to raise transportation tolls for its firm service customers. The total loss to the company's transportation base is about 4.1 bcf/d. Reasons for the lack of renewal include increased competition and customer demand for flexibility and choice.


TransCanada PipeLines Ltd., Calgary, said the nonrenewal of certain firm service contracts would force it to raise transportation tolls for its firm service customers. The total loss to the company's transportation base is about 4.1 bcf/d. Reasons for the lack of renewal include increased competition and customer demand for flexibility and choice.

TransCanada says Canadian Mainline system customers informed TransCanada by May 1 that they wouldn't renew 1.1 bcf/d of firm transportation contracts expiring Nov. 1, 2000. On the Alberta system, additional firm transportation-receipt contracts not renewed for Nov. 1 totaled about 2.7 bcf/d, while about 257 MMcfd of firm transportation delivery contracts on Alberta also weren't renewed.

TransCanada does expect more firm receipt service to be contracted on the Alberta system, pending the results of the winter drilling season and final decisions by customers still considering other transportation options.

The fact that customers will be impacted adversely by the higher tolls "underscores the need to change the current transportation and pricing regulatory framework for the benefit of both customers and shareholders," the company said.

It anticipated a reduction of firm service contracts as a result of increased competition and customers' demands for greater flexibility and choice, said Garry Mihaichuk, TransCanada's senior vice-president of operations and engineering. A contributing factor was the National Energy Board's (NEB) recent decision to deny TransCanada discretion to vary the floor prices for interruptible transportation (IT) and short-term firm transportation (STFT) services in response to changing market conditions. NEB also left the floor level for IT bids below the applicable firm transportation poll.

The decision gives "no real economic incentive" for customers to choose long-term firm contracts over IT or STFT, Mihaichuck said. To combat the effects of the contract attrition, TransCanada plans to continue its efforts to become more efficient in order to help lessen the impact that nonrenewals and associated toll increases have on customers.

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