NERA Economists' Role in NEB Docket RH-001-2013: TransCanada's Proposal to Change Tariff Terms and Conditions

The Situation

On 17 June 2013, TransCanada filed an application with Canada's National Energy Board (NEB) seeking major revisions to the terms and conditions of its tariff for firm transportation of natural gas. TransCanada claimed that such revisions were needed to align its tariff with the new realities of the natural gas market and the recent decision in TransCanada's Restructuring case. On 10 October 2013, the NEB released a decision rejecting most elements proposed by TransCanada and making limited changes to the tariff for the benefit of both shippers and the pipeline. Three major gas distributors grouped together to oppose TransCanada's proposal, this time being joined by a consumer group.

NERA's Role

NERA was retained by the shipper group to evaluate TransCanada's proposal to modify the terms under which firm shippers could renew their contracts. Gaz Métro (serving Québec), Union Gas Ltd. and Enbridge Gas Distribution (serving Ontario), and the Canadian Industrial Gas Users Association retained NERA Senior Vice President Dr. Jeff D. Makholm and Vice President Kurt G. Strunk as witnesses to represent them on issues concerning the contract renewal provisions contained in TransCanada's proposed tariff.

NERA found that TransCanada's proposal unfairly disadvantaged shippers by eliminating the assurance of continued service on reasonable terms and failed to promote a competitive gas market. NERA also benchmarked TransCanada's tariff proposal to precedents for renewal terms in other jurisdictions, finding that the proposal was wholly without precedent and that TransCanada’s proposed changes were inconsistent with the reasonable regulation of pipelines that serve a competitive gas market.

The Result

The NEB flatly rejected TransCanada's proposed renewal provisions, instead opting for minor changes to the current provisions -- changes NERA’s clients agreed were reasonable during the hearing. As NERA's analysis showed, approving TransCanada's proposed contract renewal terms would have had strongly negative effects on virtually all stakeholders aside from TransCanada itself.