UPDATE 2-Canadian regulator slashes tolls for TransCanada mainline

Wed Mar 27, 2013 6:41pm EDT
 
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* Regulator sets new, lower, tolls on mainline

* Says new regime allows system to be competitive

* New tolls come as volumes on mainline system falling

CALGARY, Alberta, March 27 (Reuters) - Canada's National Energy Board on Thursday agreed to cut fixed tolls on TransCanada Corp's mainline, a cross-country natural gas pipeline network, which the regulator says will help keep the system competitive and profitable despite increasing supplies from U.S. shale gas producers.

Canada's National Energy Board on Thursday agreed to cut fixed tolls on TransCanada Corp's mainline, a cross-country natural gas pipeline network, which the regulator says will help keep the system profitable amid increasing competition from U.S. shale gas supplies.

The board approved new rates that will see the cost of moving gas from Empress, Alberta, to Dawn, Ontario, fall to C$1.42 per gigajoule from C$2.58 per gigajoule under TransCanada's current tolling structure.

The decision comes more than 18 months after TransCanada, the country's largest pipeline operator, first asked the board to approve sharply lower tolls for long-haul shippers on the mainline while increasing the amount charged to short-haul customers.

The 14,101-kilometer (8,762-mile) pipeline system once carried as much as 6 billion cubic feet of gas per day. However, as customers in Central Canada and the U.S. Northeast increasingly switched to gas from closer supplies like the Marcellus shale field centered on Pennsylvania, volumes on the system fell by half and tolls rose as a smaller pool of shippers were required to shoulder the regulated system's full costs.

"Mainline tolls have increased substantially over a short period of time as a result of throughput declines related to increasing levels of competition in the Mainline's supply and market areas," the board said in a statement. "The board found that tolls cannot continue to increase each year in response to throughput declines."   Continued...