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November 6, 2003

Tariff Changes for Operational Flow Orders

To: All TransGas Customers

TransGas Limited (TransGas) wishes to announce a change to its Daily Balancing Policy. When TransGas implemented daily balancing in November 2001, the customer became responsible to ensure their daily imbalances were within the specified tolerance levels indicated by TransGas. It was decided that if a customer were outside the tolerance band, TransGas would work with the customer to ensure that they got back into balance as quickly as possible. However, since that time, TransGas has experienced a number of situations where the pipeline system was in a serious supply/demand imbalance. In these situations, TransGas found that some customers were not reacting quickly enough to bring their imbalance accounts back within tolerance and TransGas then had to take other measures to protect the integrity of the pipeline. These other measures came at a cost to TransGas and other customers that were not responsible for the situation. A new policy is required that will allow TransGas to transfer these mitigation costs to those customers whose imbalances are responsible for the system integrity problem. As such, effective November 1, 2003, TransGas will reserve the right to issue an Operational Flow Order (OFO) in such situations.

An OFO is a mechanism that TransGas may activate to protect the operational integrity of the pipeline. TransGas may issue and implement a system-wide OFO in those instances where critically high or low pipeline inventory (line pack) occur. The OFO will be issued to all shippers. Shippers with a daily imbalance outside the tolerance window will have a minimum of 20 hours to comply with the OFO and adjust their daily imbalance to within the tolerance levels specified. If customers fail to adjust their daily imbalances and TransGas does incur costs to ensure system integrity, then those costs incurred will be allocated and billed to those customers that remain outside the specified tolerance ranges after the OFO compliance deadline. The Shipper will still be responsible to get their account into balance in compliance with the OFO.

TransGas expects that there will be a very limited number of times during the year when it will be necessary to issue an OFO, but during these occurrences, more diligence will be required by Shippers to keep their accounts within tolerance and by Common Stream Operators to ensure the daily allocation of gas goes to the right Shipper.

TransGas regrets the need to implement such a new policy but believes that it will result in a more fair and equitable solution to such system balancing crises.

If you have any questions or concerns with respect to how this new policy will be implemented or how it might affect you, please contact your Key Account Manager, Debbie Brown at (306) 777-9687 or Chris Uhren at (306) 777-9501.

Yours truly,

TRANSGAS LIMITED
Phil Sandham
Executive Director
TransGas Customer Services

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