ALBERTA ENERGY AND UTILITIES BOARD Calgary, Alberta

Transcription

1 ALBERTA ENERGY AND UTILITIES BOARD Calgary, Alberta NOVA GAS TRANSMISSION LTD. TARIFF COMPLIANCE FILING Order U96113 File 8630-N INTRODUCTION NOVA Gas Transmission Ltd. (NGTL) filed a general rate application with the Alberta Energy and Utilities Board (the Board) on 12 January The Phase I matters concerning total revenue requirement were dealt with in Decision U96001, dated 4 January 1996, as amended by Order U The Phase II or tariff matters arising from NGTL=s application were dealt with in Decision U96055, dated 12 June Decision U96055, at page 112, directed NGTL to incorporate the Board=s findings in its tariff and terms and conditions of service and to file the resultant changes with the Board for approval within 60 days of the Decision, with copies to all interested parties.. On 8 August 1996, NGTL submitted its Compliance Tariff Filing (the Filing) to the Board and distributed copies to all parties registered in NGTL=s 1995 general rate application. The Filing consisted of a complete copy of Binder 1 of the NGTL Gas Transportation Tariff, replacement pages for Binder 2, a summary of changes directed by Decision U96055 and a complete list of strike-outs and additions to the existing tariff. By letter dated 28 August 1996, the Board requested comments from parties on the Filing. The Board received comments from Progas Limited (Progas), TransCanada Gas Services Limited (TCGS) and the Canadian Association of Petroleum Producers (CAPP) and reply comments from NGTL. The following issues were identified by interested parties with respect to the wording of the tariff: 2. ISSUE 1: RECEIPT POINT FIRM SERVICE TERM SWAPS NGTL proposed the following wording with respect to term swaps in Rate Schedule FS, paragraph 11 of the Filing: 11. TERM SWAP OF FIRM SERVICE BETWEEN RECEIPT POINTS If Customer desires to Term Swap all or any portion of any Service under Rate Schedule FS from one Receipt Point to another Receipt Point, Customer shall notify Company of its request for such Term Swap specifying the particular Receipt Points and Receipt Point Contract

2 2 Order U96113 TCGS Demand Quantity that Customer wishes to Term Swap. Company is under no obligation to permit the Term Swap requested, but may permit such Term Swap if Company determines that sufficient capacity for Service under Rate Schedule FS exists within the Facilities required to provide the Service requested. Provided however, for Schedules of Service entered into on or after June 12, 1996, the Company shall not be required to permit a Term Swap if such Term Swap would occur during the Primary Term. TCGS interpreted NGTL=s Rate Schedule FS Section 11 to mean that NGTL was under no obligation to provide a term swap, but might permit a swap under the circumstances that sufficient capacity for FS service existed within the facilities required to make the swap. TCGS considered that, since the only effect of a term swap was to replace an equivalent volume contract, capacity could not be an issue. TCGS suggested the following wording for Section 11: CAPP If customer [sic] desires to Term Swap all or any portion of any Service under Rate Schedule FS from one Receipt Point to another Receipt Point, Customer shall notify Company of its request for such Term Swap, specifying the particular Receipt Points and Receipt Point Contract Demand Quantity that Customer wishes to Term Swap. Company will permit such Term Swap. Provided however, that for Schedules of Service entered into on or after June 12, 1996, such Term Swap would not occur during the Primary Term. CAPP considered that NGTL=s obligation to permit swaps and transfers was stronger than NGTL=s proposed wording, Αmay permit, implied. Under the conditions of no new substantive facilities, CAPP suggested the following wording for Section 11: NGTL Company shall permit the Term Swap requested if sufficient capacity required to provide the service requested under Rate Schedule FS without the construction of any new Facilities NGTL noted that it would not permit Term Swaps during the primary term of a receipt point obligation and in the following situations:

3 Order U ! When the Term Swap is with a pending schedule of service i.e. a schedule in which the Service Termination Date has not been declared;! When the Term Swap is with a schedule of service containing a surcharge;! When the Term Swap is with a schedule of service containing additional conditions that cannot be amended e.g., conditions pertaining to third party transportation;! When the Term Swap is at a receipt point where sufficient notice to renew the service, as prescribed in the Tariff, was not provided and a customer queue for service exists at that receipt point. NGTL submitted that the last situation had capacity implications as its policy was to offer the firm service to customers in the queue upon expiration of the contract. If the capacity were taken up, NGTL would not permit further contracting at the receipt point without the customer authorizing the construction of receipt facilities. Board Findings The purpose of NGTL=s Filing is to ensure that the findings and directions of the Board in Decision U96055 have been properly incorporated in NGTL=s tariff. This is particularly important in the circumstances of these proceedings given that draft wording for various proposed tariff changes were not submitted for the consideration of the Board and parties during the course of the hearing. However, this compliance filing is not an opportunity to visit issues that were canvassed in the hearing a second time nor is it an opportunity to raise new issues. The Board notes the submissions of CAPP and TCGS recommending limitations on NGTL=s discretion to allow term swaps in addition to those incorporated by NGTL in its filing. The Board also notes NGTL=s response further delineating the circumstances in which it would not allow term swaps. However, given that these matters are not specifically addressed in the Board=s findings, the relief sought by CAPP and TCGS is, in the Board view, outside the scope of the Filing. Therefore, the Board will not provide further direction to NGTL in this regard. It remains open to all parties to seek the Board=s direction in the event of a dispute arising from the exercise of NGTL=s current discretion or to seek changes to the tariff in an appropriate proceeding in which all interested parties may be provided with notice and in which the issue may be fully canvassed.

4 4 Order U96113 With respect to the Board=s specific findings regarding term swaps, the Board is satisfied that they have been appropriately reflected in NGTL=s tariff and, therefore, approves the proposed wording as originally filed. 3. ISSUE 2: RECEIPT POINT FIRM SERVICE TRANSFERS. NGTL proposed the following wording with respect to term swaps in Rate Schedule FS, paragraph 10 of the Filing: 10. TRANSFER OF FIRM SERVICE BETWEEN RECEIPT POINTS If Customer desires to transfer all or any portion of any Service Under Rate Schedule FS from one Receipt Point to another Receipt Point, Customer shall notify Company of its request for such transfer specifying the particular Receipt Points and the Service that Customer wishes to transfer. Company is under no obligation to permit the transfer requested, but may permit such transfer if Company determines that sufficient capacity for Service under Rate Schedule FS exists within the Facilities required to provide the Service requested. Company shall not be required to permit the transfer requested if: i) Company is required to install or construct new Facilities at the Receipt Point to provide the Service requested; and ii) for Schedules of Service entered into on or after June 12, 1996, if the transfer would occur during the Primary Term. CAPP CAPP suggested the following wording for Section 10 when new facilities were not required: NGTL Company shall permit the transfer requested if sufficient capacity required to provide the service requested under Rate Schedule FS exists without construction of any new Facilities. NGTL stated that the availability of firm service capacity was not the only constraint on receipt firm service transfers. NGTL would not allow the transfer:

5 Order U When the transfer is with a schedule of service containing a Surcharge. 2. When the transfer is to a receipt point where a customer queue for service exists. NGTL considered CAPP=s proposed wording did not contemplate these situations and proposed the following revised wording for receipt point transfers, Section 10: 10. TRANSFER OF FIRM SERVICE BETWEEN RECEIPT POINTS If Customer desires to transfer all or any portion of any Service under Rate Schedule FS from one Receipt Point to another Receipt Point, Customer shall notify Company of its request for such transfer specifying the particular Receipt Points and the Service that Customer wishes to transfer. Company may permit such transfer if Company determines that sufficient capacity for Service under Rate Schedule FS exists within the Facilities required to provide the Service requested. Company shall not be required to permit the transfer requested if one or more of the following conditions apply: i) Company is required to install or construct new Facilities at the Receipt Point to provide the Service requested; ii) iii) iv) Transfer request is with a Schedule of Service containing a Surcharge; Transfer request is to a Receipt Point where a queue for Service exists; and for Schedules of Service entered into on or after June 12, 1996, if the transfer would occur during the Primary Term. NGTL regarded term swaps as bi-directional transfer requests. At page 94 of Decision U96055, the Board stated that its findings with respect to contract transfers applied equally to contract term swaps. NGTL submitted that this implied that the identical terms and conditions wording should be used in each case. Therefore, in the opinion of NGTL, its proposed wording for contract transfers met the intent of Decision U96055.

6 6 Order U96113 Board Findings The Board is satisfied that the wording originally proposed by NGTL in the Filing appropriately reflects the findings and directions of the Board regarding the transfer of firm service between receipt points. The Board notes that neither the matter of allowing receipt contract transfers in circumstances in which the transfer is with a schedule of service containing a surcharge nor the matter of allowing a transfer request to a receipt point where a queue for service exists was fully canvassed in the hearing or addressed in the Board=s findings. However, the Board notes that NGTL retains the discretion to address these circumstances in the wording of the tariff approved by the Board. As indicated previously, it remains open to all parties to seek the Board=s direction in the event of a dispute arising from the exercise of NGTL=s discretion or to seek changes to the tariff in an appropriate proceeding in which all interested parties may be provided with notice and in which the issue may be fully canvassed. 4. ISSUE 3: RECEIPT POINT TERM OBLIGATION In paragraph 5.2(i) of Rate Schedule FS of the Filing, NGTL proposed the following wording: 5.2 The Receipt Point Obligation for Service at any Receipt Point for Customers seeking new or additional Service shall be a period equal to: (i) Where no new Facilities are required to be constructed at any Receipt Point to provide the Service requested: Progas the sum of a Primary Term being a minimum of one (1) year and a Secondary Term being three (3) years;.... With respect to Issue 3, Progas considered that Decision U96055 did not explicitly address the situation of the appropriate receipt point obligation when no new facilities were required. NGTL>s proposed wording of section 5.2(i) would require a contract term of four years to utilize existing capacity. Progas submitted that a four year term was inconsistent with the Board=s intent of increasing contractual accountability and to better reflect cost causation and was inconsistent with good industry practice. Progas noted that the Board had, at page 66 of Decision U96055, retained the one year term for new firm delivery service. The effect of NGTL=s wording was to reduce shippers= ability to transfer receipt capacity during the first year of a contract due to the definition of the first year as the primary term of the contract. As a result, Progas considered that the longer term would encourage shippers to use interruptible service, even if it was priced at a premium. Progas concluded that NGTL had misconstrued the

7 Order U Board=s decision and that the Board did not intend to increase the minimum term of receipt contracts. Progas proposed resolving Issue 3 by retaining the present 1 year receipt point obligation where no new facilities are required. CAPP CAPP considered that NGTL had misinterpreted the Board=s findings at page 66 of Decision U96055, that:...a three year extension in the contract term for new receipt service should lead to greater contractual accountability and better reflect the cost of all required facilities. CAPP reasoned that, where no new facilities are required, the primary obligation was zero (0) years as there were no new facilities required. The one year primary term proposed by NGTL was not cost-based and was contrary to the Board=s intent of increasing contractual responsibility. CAPP proposed amending the tariff to read at Section 5.2 as follows: (i) Where no new Facilities are required to be constructed at any Receipt Point to provide the Service requested: NGTL the term is the Secondary Term being three (3) years;.... NGTL rejected Progas and CAPP=s reasoning on Issue 3 that the minimum term for new firm service should be one year, in the case of Progas, or three years, in the case of CAPP. NGTL explained that, as traditionally the minimum term for new firm service was one year, it had interpreted the Board=s findings as an additional three years to current practice for a total of four years. As CAPP >s interpretation differed from NGTL=s by one year, NGTL requested further clarification from the Board as to its intentions. Board Findings NGTL has not correctly reflected the Board=s finding regarding the appropriate receipt contract term in the proposed wording of its tariff. The Board acknowledges that its use of the term Αextension in discussing the Αsecondary term of a receipt contract in the sentence preceding its finding on page 66 of Decision U96055 may regrettably have been confusing. Given the various interpretations of the Board=s findings submitted by parties, some clarification is required.

8 8 Order U96113 As noted, the Board=s finding appears at page 66, wherein the Board stated: Therefore, the Board finds that the term of new firm receipt contracts should be the period determined by the Economic Criteria for Determining Contractual Obligation plus three years effective upon receipt of the decision. This term will apply to all new firm receipt service contracts because all service may, either directly or indirectly, affect mainline service expansion. (emphasis added) Because the Αprimary term, which is the result obtained from the application of the Economic Criteria for Determining Contractual Obligation, could conceivably be zero in some circumstances, the Αsecondary term, which is three years, is effectively the minimum term of a contract for receipt services. In addition, the Board intended that all new receipt contracts be subject to this minimum term to reflect the Board=s view that shippers contracting for receipt service should make an appropriate contribution to the recovery of the costs of mainline facilities. Therefore, NGTL is directed to incorporate the following wording in paragraph 5.2(i) of Rate Schedule FS of the Tariff: 5.2 The Receipt Point Obligation for Service at any Receipt Point for Customers seeking new or additional Service shall be a period equal to: (i) Where no new Facilities ae required to be constructed at any Receipt Point to provide the Service requested: the term is a Secondary Term, being three (3) years; ISSUE 4: DEFINITION OF FACILITIES NGTL included the following definition of Facilities under Tab 7, General Terms and Conditions, Article 1: The term ΑFacilities shall mean Company=s pipelines and other facilities or any part or parts thereof for the gathering, treating, transporting, storing, distributing, exchanging, handling or delivery of any gas.

9 Order U CAPP CAPP proposed that NGTL should more clearly define the term Facilities in order that only material changes and not minor items, such as metering modifications, were included in Facilities. NGTL NGTL provided its response to information request CWNG/NULR.N-2(d) which detailed its capital expenditure guidelines. NGTL submitted that, in these guidelines, any expenditure which enhanced service potential by significantly increasing the operating efficiency, changing the function, extending the service life, lowering operating costs or improving the quality of output and which exceeded $5,000 would be included in Gas Plant in Service. NGTL=s experience was that few instances of metering modifications had cost less than $5,000. NGTL considered its Capital Expenditure Policy to be satisfactory and to sufficiently define the term ΑFacilities. Board Findings The Board notes that NGTL did not propose changing the definition of ΑFacilities in its tariff in its Filing. The definition of ΑFacilities was not a matter of dispute in the proceeding. Consequently, no direction was given by the Board on this matter. In the Board=s view, CAPP=s pursuit of this issue is outside the scope of this compliance proceeding. 6. ORDER Therefore, it is ordered that the Tariff Compliance Filing, as amended, shall be in effect for all transportation service rendered on or after July 12, 1996.

10 10 Order U96113 Dated in Calgary, Alberta C. Bélanger Chair F. J. Mink, P. Eng. Member B. T. McManus, Q. C. Member