News & Updates

Kitchener Utilities Rate Analysis

Oct 29, 2013

Is your Kitchener based business paying too much for its Natural Gas Usage?  According to this article, if you are a customer of Kitchener Utilities - it is!

KW Record article:

http://www.therecord.com/news-story/4157363-kitchener-utility-s-prices-higher-on-fees-as-well-as-on-natural-gas-supply/

“Kitchener's supply rate is 72 per cent higher than Union Gas. This reflects different pricing strategies — the public utility purchases gas in advance to provide stability while Union Gas charges customers the market rate which has plunged”

The article goes into depth about how the utility re-invests their profits into the city however, many business owners would not see any of the benefits of these projects. 

Our clients are never locked into long term pricing contracts like the ones used by Kitchener Utilities. Our knowledge and experience enable CESi to anticipate market movements, manage your gas portfolios prudently and provide cost saving opportunities for you.

To find out how you can benefit from our consistently lower pricing, please contact us and we will be happy to review your current contract or burning profile and provide you with an expert analysis. 

National Energy Board Rejects TransCanada's Appeal

Jun 19, 2013

National Energy Board Rejects TransCanada’s Appeal

On June 11th, the National Energy Board issued a letter stating they have dismissed the application for review filed by TransCanada on May 1st in its entirety.  The board did not provide specific reasoning for the denial of the application but will do so at a later date.  As a result, TransCanada will be required to implement an Empress to Dawn toll of $1.42 per gigajoule beginning July 1st, 2013.  This fixed toll is significantly less than what has been charged since 2011 and will be in effect through 2017.[i]

 

Review of Tariff Proposal Granted

The board did however deem that part of TransCanada’s application regarding changes to the tariff proposal will be treated as a separate application and has granted a review to take place.  The tariff proposal looks to modify terminology and aspects of certain tariffs that TransCanada believes are not appropriate under the new model that the Board has established.  The review process will consist of a variety of stakeholders providing and replying to evidence throughout the summer and will culminate in an oral hearing that will commence September 3rd, 2013.[ii]



[i] http://business.financialpost.com/2013/06/12/transcanada-toll-proposals-to-ship-natural-gas-again-rejected-by-neb/?__lsa=84e4-1564

 

[ii] A3I3T0 - 1 May 2013 Application for Review and Variance

TransCanada Tolls and Regulations Update

Jun 6, 2013

TransCanada Corp. Appeals Decision to Restructure Tolls on Pipeline

On March 27th, the National Energy Board rejected some changes put forward by TransCanada to adjust their fee structure with tolls to move natural gas in Canada.[i] Although the board approved all of TransCanada’s 2012/2013 costs and some of their proposed changes, the decision the Board made had created a new model that strayed away from what TransCanada applied for. On May 1st 2013, TransCanada filed an appeal for review and variance of the decision made by the board.

Who is TransCanada?

TransCanada Corporation is one of the largest providers of gas storage within North America.  Through a network of pipelines, they can tap into virtually all major natural gas supply basins in North America.  These pipelines are used to transport natural gas from western to eastern Canada, including the industrial core of Ontario and Quebec.   With more than 60 years of experience, TransCanada operates over 68,500km of gas pipelines![ii] 

TransCanada’s Original Restructuring Proposal

TransCanada has been facing declining volumes due to increased competition from emerging shale and tight gas pipelines in the United States.  The Mainline has the capacity to move 5.5 billion cubic feet of gas per day but due to this increase in competition it has operated as low as one-third full in recent years. This decline has caused tolls to increase substantially over a short period of time.  A number of items that the board rejected in TransCanada’s proposal were looking to address this issue by recovering costs and increasing their competitive position.  Among the changes proposed by TransCanada was raising the toll to move gas from Alberta to Ontario to $2.58 per gigajoule. [iii]

National Energy Board Decision

The Board has acknowledged that the Mainline is operating in a changing business environment.  But, with any free market, competition and the potential to suffer losses arise.  The Board believes TransCanada should not look to regulation to shield them from their fundamental business risk and instead should focus on the competitive reality in which they operate.[iv] The board decided to set a fixed multi-year toll at $1.42 per gigajoule, as compared to the proposed $2.58 by TransCanada.  This rate is expected to stay in effect through 2017.  At this price, the board feels TransCanada are in a competitive position that will also give them an opportunity to recover costs.  Furthermore, by setting a multi-year fixed rate, shippers are provided with stability and toll certainty that should increase TransCanada’s competitive advantage. The Board feels that TransCanada has been provided with the tools necessary to build a successful future for the pipeline.[v]

TransCanada Appeal for Review and Variance

On May 1st 2013, TransCanada filed an application of review and variance with the Board in regards to their previous decision.  The areas TransCanada are seeking to get changed are:

 

1.      Adjusting the five-year Empress to Dawn toll from $1.42/GJ to $1.52/GJ as well as the other tolls that are derived from the long-haul toll

TransCanada believes increasing the toll to $1.52 per gigajoule will help avoid large cost collection delays beyond the fixed toll period as well as still being within a competitive range of tolls.  These tolls are also significantly less than what has been charged since March 2011.[vi]  

 

For more information regarding how this toll change will impact your gas contract contact us and we'll be happy to review your current contract or burning profile and provide expert analysis.

 

2.      Approve tariff revisions required for implementation of the decision model 

A number of tariffs that were relevant under their historical model are not appropriate under the new model that has been established by the Board.  These tariff revisions will ensure they do not hinder TransCanada from pursuing market opportunities that will help alleviate the additional risk they bear by implementing a multi-year fixed toll.[vii]

 

3.      Establish a surcharge methodology for recovery of future new costs that may be imposed during the five-year fixed toll period

These provisions would help to mitigate the risk that TransCanada is facing by locking into a multi-year fixed toll.  Risks such as new laws, changes in tax and other mandated costs could arise and impact TransCanada if a methodology does not exist to offset these new costs.[viii]

 

4.      Change the implementation date of the decision from July 1, 2013 to November 1, 2013

The request to change the implementation date to November 1st 2013, would allow the new pricing to go into effect at the same time the gas year starts. 

 

5.      Price certain services consistent with previous Board decisions

Certain services are currently operating under tolling methodologies previously approved by the Board.  TransCanada did not anticipate the Board to change a prior approval and convert these to the multi-year fixed tolls as well.  TransCanada believes that consistency with the multi-year fixed toll rates is not enough justification for such a change to occur and in order to be most effective these services should be changed back to their previous methodologies. [ix]

 

TransCanada Awaits Board Decision

On May 31st 2013, TransCanada released a document to the Board containing their rationale and justification for review and variance of their prior decision.  TransCanada points out various reasons why a review is warranted.  For example, TransCanada was never given the opportunity to provide evidence against the viability of the Decision model imposed by the Board because it was never discussed specifically in its totality.[x] TransCanada is now waiting to hear back from the National Energy Board to see if their claims are valid and to see if a review will be granted or not.

 



[i] http://www.calgaryherald.com/business/Pipeline+giant+TransCanada+proposal+rejected/8163165/story.html

[ii] http://www.transcanada.com/about-us.html

[iii] http://www.calgaryherald.com/business/Pipeline+giant+TransCanada+proposal+rejected/8163165/story.html

[iv] A3G4A3 - TransCanada PipeLines Limited, NOVA Gas Transmission Ltd. and Foothills Pipe Lines Ltd. Hearing Order RH-003-2011 Reasons for Decision

[v] http://www.neb-one.gc.ca/clf-nsi/rthnb/nws/nwsrls/2013/nwsrls09-eng.html

[vi] A3H4E8 - Application for Review and Variance of RH-003-2011 Decision [Page 6]

[vii] A3H4E8 - Application for Review and Variance of RH-003-2011 Decision [Page 26]

[viii] A3H4E8 - Application for Review and Variance of RH-003-2011 Decision [Page 8]

[ix] A3H4E8 - Application for Review and Variance of RH-003-2011 Decision [Page 7]

[x] A3I1Z0 - RH-003-2011 R-V Application - Reply Comments of TransCanada