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News at TransGas News Archive December 11, 2002

 

2003 Rate Announcement - Transportation and Storage Service Rates

On December 05, 2002, TransGas Limited (TransGas) announced that it had finalized the rates for its transportation and storage services that will be in effect starting January 01, 2003. Following a three- year rate freeze, the TransGas service rates and charges will increase by an average of two percent (2%).

 

TransGas also announced that it has finalized the determination of the transportation gas-in-kind requirement (for fuel gas and unaccounted-for gas) assessed on receipt transportation. This will be reduced by fifteen percent (15%) from the present assessment of 1.00 percent to an assessment of 0.85 percent. This reduction will also take effect on January 01, 2003.

 

TransGas last adjusted its rate levels on January 01, 1999. While TransGas customers have enjoyed frozen rates over the last three years, the Canadian economy has seen inflation of approximately ten percent (10%). Over the same period, the flows on the system have shown a modest three percent (3%) decline. TransGas has been able to limit the requirement for increased revenues such that only an inflationary two percent (2%) increase is required. TransGas has reduced operating costs in a number of areas and has actively pursued new revenue opportunities and ways to increase the level of utilization of its system to help offset this upward pressure on rates over the past four years.

 

There will also be a number of other policy, rate and service changes that take effect on either January 01, 2003 or May 01, 2003. Since the fall of 2001, TransGas has been discussing these changes with its customers, primarily through the Customer Dialogue Process. The result is a package of revenue- neutral changes that will improve the quality and fairness of the services provided by TransGas. After considerable discussion, there was general acceptance by Customer Dialogue participants of the package of changes. The following is a summary of the changes that makes up this package:

 

Premium for Service with Short-Term Contracts

Some customers are permitted to hold short-term contracts that allow them to manage the risk of holding more space on the pipeline than they require. Effective January 01, 2003, a premium of ten percent (10%) will be charged for such short-term contracts of less than one year to enhance the fairness of the system.

 

Premium for Transfers of Intra-Delivery to Export Delivery

Intra-Saskatchewan delivery transport customers are permitted to transfer contract rights to the export market that allow them to manage the risk of holding more space on the pipeline than they require. Effective January 01, 2003, a premium of ten percent (10%) will be charged for such transfers to enhance the fairness of the system.

 

Commodity Component of Storage Rate

A new commodity charge is being introduced to incorporate a value of service component to the storage service tolls. Some customers move their gas into and out of storage, or cycle the gas, a number of times during the year, while others may not move all of their gas into and out of storage in a given year. An injection commodity charge will be implemented at the beginning of the next storage year, May 01, 2003. This charge of 5.07/GJ will be paid as gas is injected into storage.

 

Commercial Movement of Storage to the TransGas Energy Pool (TEP)

When storage service was first introduced, TEP did not exist. Storage was, therefore, commercially considered a receipt point and customers had to pay to move the gas from storage to delivery point markets. When TEP was introduced, storage remained commercially considered a receipt point. At the beginning of the next storage year, May 01, 2003, TransGas will be making a change to commercially consider storage as being located at TEP (received from receipt points in the production fields but not yet delivered to markets). This will eliminate all transport between storage and TEP.

 

The general consensus among the TransGas customers is that this is desirable because it:

  • is fairer to customers as it better reflects the physical characteristics of the system;
  • provides shipper flexibility and facilitates a more liquid marketplace;
  • provides ability to structure gas deals more creatively;
  • facilitates daily balancing on the system; and
  • reduces revenue uncertainty.

To provide an overall revenue-neutral storage to TEP commercial change, as well as the elimination of the transport services between storage and TEP, the following rate changes will occur on May 01, 2003:

  • there will be a 12.9 percent increase to all transportation service rates;
  • there will be an 18.9 percent increase to storage service rates;
  • there will be a further temporary storage and transportation rate adjustment (Rate Rider) for the period May 01, 2003 to April 30, 2004 to phase in the impact on customers:
    • a 3.8 percent reduction to all transportation service rates, and
    • a 15.6 percent increase to storage service rates; and
  • there will be a one-time charge of 11.42/GJ applied to gas in storage inventory and in R-17 imbalance accounts at the end of April 30, 2003 as the gas is commercially moved to TEP.

Non-Rate Related Policy Changes Effective November 01, 2002

As well as the preceding changes that have rate implications, there were several other policy changes that were part of the package of changes and became effective November 01, 2002.

  • Contracts of one-year and greater now have automatic renewal rights where operationally feasible, while contracts of less than one year have no renewal rights.
  • The Tariff was changed to recognize the practice of permitting one-month minimum contract term for receipt and export transportation service, while intra-Saskatchewan delivery contracts continue to have a one-year minimum term.
  • Queue requests of less than five years are now ranked based on Net Present Value rather than date of request.
  • To improve system construction accountability, TransGas now has the discretion to treat certain system costs as customer specific costs.

The specific rates, which reflect these changes, are contained in the Transportation and Storage Rate Summary. There are five columns in this document, as follows:

  • Existing Rates: These are the rates presently in effect for the various services.
  • Rates - January 01, 2003: These are the rates which will go into effect on that date. They include the 2 percent average rate level increase, as well as the 10 percent premium for short-term transportation service and for delivery transportation service transferred from the intra-Saskatchewan market to the export market.
  • Base Rates - May 01, 2003: These are the base rates which would have been effective May 01, 2003 to reflect the commercial movement of storage to TEP and the storage commodity charge, if it were not for the Rate Riders introduced for a one-year period to transition the customer impacts of the change.
  • Rate Rider: This is the amount that will be added to (or subtracted from) the base rates otherwise in effect for the one-year period May 01, 2003 to  April 30, 2004. Should there be any subsequent change to the base rates before April 30, 2004, the Rate Riders will still apply.
  • Effective Rates - May 01, 2003: These are the rates which will be charged beginning May 01, 2003.

Customer Workshop

The commercial movement of storage to TEP involves structural, policy, procedural and rate changes. TransGas will be holding customer workshops, which will review these changes in detail and will highlight how these changes will affect various customers. The dates for these workshops are now scheduled as:

  • Regina: March 06, 2003
  • Calgary: March 11, 2003

Additional details regarding these workshops will be distributed when available. If you have any questions with respect to how these rate, service and policy  changes will affect you, please contact your Key Account Manager, Debbie Brown at (306) 777-9687 or Chris Uhren at (306) 777-9501.

 

If you have more general questions regarding the changes, please contact our Policies, Rates and Regulations Department: Gary Johannsson, Manager, at (306) 777-9560 or Vern Gorr, Director, at (306) 777-9556.

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