Canada: Toll Bridge? NEB Approves TransCanada Mainline 2015-2030 Tolls And Tariff

Last Updated: February 18 2015
Article by Alan Ross and Andrew Pozzobon

Most Read Contributor in Canada, September 2016

On December 18, 2014 the National Energy Board ("NEB" or "Board") approved a toll design for the TransCanada PipeLine ("TransCanada") Mainline for 2015 to 2020 and for toll-setting methodology parameters until 2030.  The decision also approves tariff changes that introduce new services and contract options.

Highlights of the approved application include:

  • increased pipeline capacity potentially resulting in Eastern market access to Dawn and Niagara area supply;
  • renewal provisions respecting capacity requirements;
  • continuing  the concept of multi-year fixed tolls and pricing discretion, as established in a previous decision (RH-003-2011);
  • approval of TransCanada's applied-for toll design for Mainline tolls for 2015 to 2020;
  • a segmented tolling structure; and
  • parameters for a toll-setting methodology up to 2030. 


TransCanada owns and operates the Mainline, which is a high-pressure natural gas transmission system that extends form Alberta to Quebec. The Mainline connects to various downstream Canadian and international pipelines. In September 2011, TransCanada made an application to the Board. It faced rapidly declining throughput and substantial increases in tolls.  The Board released the RH-003-2011 Decision in March 2013 which fixed Mainline firm transportation tolls from July 1, 2013 to December 2017.  TransCanada was granted significant discretion to set bid floors for discretionary services with the intention that it would help maximize Mainline revenues. In the RH-003-2011 Decision the Board set out circumstances (off-ramps) that it expected would justify a new tolls application for the Mainline before December 2017.

In the period following the RH-003-2011 Decision, TransCanada submitted that there was a need to evolve from the RH003-2011 decision model due to ongoing changes in the natural gas market. Further, TransCanada faced a number of litigious proceedings by the three largest Mainline customers and largest local distribution companies – Enbridge Gas Distribution Inc., Union Gas Limited and Gaz Metro Limited Partnership (Market Area Shippers or MAS). Potentially faced with years of dispute resolution before the Ontario Energy Board, the NEB and the Ontario Superior Court, in September 2013 TransCanada and MAS reached a settlement.

On December 20, 2013, TransCanada filed an application for approval of a settlement agreement for its Mainline (the Application).  The Application requested that the Board: (i) approve the negotiated settlement; (ii) set the Mainline tolls in accordance with the TransCanada's proposed methodology; and (iii) revise the tariff. After review, the Board determined that it could not approve the Settlement under the National Energy Board Guidelines for Negotiated Settlements of Traffic, Tolls and Tariffs. As the Board did not approve the settlement, an oral hearing took place in September 2014.

(i) New Services

TransCanada made a number of proposals with respect to new services including a minimum contract term for expansion facilities, diversion and alternate receipt point rights, modified delivery areas and new delivery locations, summer storage service, and enhanced market balancing. In respect of these issues the Board:  

  • approved a minimum contract term of no more than 15 years for expansion facilities;
  • approved a number of new services including modified delivery areas and new delivery locations, summer storage service and enhanced market balancing; and
  • accepted the long-haul to short-conversion as applied by TransCanada. The Board did not find that the proposed 20 % annual transition (proposed by Alberta NorthEast Gas, Limited) to be a workable or fair model for the conversion of long-haul to short-haul transportation on the Mainline.

(ii) Contract Renewal

TransCanada proposed that:

  • if it determined expansion facilities were required, it would provide notice to all shippers with existing contracts who, within 60 days, would have the option to extend the term for all or a portion of their applicable contract quantity for an additional period; and
  • if a shipper did not elect to extend its contract term within 60 days, the contract would expire at the end of existing term.

The Board found that the transition to access new gas supplies caused uncertainty and resulted in new facilities having to be built.  The Board further found that the demand for capacity in the Eastern Triangle exceeded capacity and therefore it was economically efficient for capacity to be awarded to those who value it most.  The Board recognised that TransCanada was likely to issue term-up notices for Mainline projects soon after the requisite term-up provision came into effect. Accordingly, the NEB approved TransCanada's proposed term-up provision, which will come into effect on March 30, 2015.

(iii) Pricing of Discretionary Services

TransCanada applied for the continuation of pricing discretion established in the RH-003-2011 Decision. It argued that the factors that led the Board to implement pricing discretion continue to apply and maintaining pricing discretion remained a necessity.  Absent pricing discretion, shippers would return to the contracting behaviour observed before the implementation of the RH-003-2001 Decision. 

The Board agreed with TransCanada that capped levels of pricing discretion, particularly with bid floors, will increase the likelihood that bid floor prices will impact commodity prices. It stated that the exercise of pricing discretion will evolve with the market for Mainline capacity.  The Board therefore decided to maintain pricing discretion as was established in the RH-003-2011 Decision. The Board will review the continued appropriateness of the existing pricing discretion for the 2018 to 2020 time period in a future Mainline tolls application. It further directed TransCanada to provide remedies on how TransCanada will prevent access to, and use of, non-public, shipper-specific information in setting bid floors for discretionary services.

(iv) Revenue Requirement

TransCanada applied for a revenue requirement for each year between January 1, 2015 and December 31, 2020.  The proposed revenue requirements were used to establish tolls for each respective year.  The Board found that the proposed revenue requirements for 2015 to 2020 were reasonable and therefore approved the proposed revenue requirements and rate bases for the 2015 to 2020 period.

Level of the balance in the Toll Stabilization Account (TSA) was a key revenue requirement issue.  TransCanada's stated that the TSA was established to capture the cumulative annual differences between actual total revenues and actual total costs in order to maintain multi-year fixed tolls. TransCanada proposed to transfer the TSA balance to the Long Term Adjustment Account (LTAA), thus eliminating the TSA at the end of 2014.

The Board considered the proposed treatment of the LTAA as an adjustment account to eliminate any variances between the actual and forecast revenue requirements and actual and forecast revenues during the 2015 to 2020 period, net of incentive mechanism adjustments, to be reasonable. The Board approved the transfer of the TSA balance as of December 31, 2014 to the LTAA and the subsequent elimination of the TSA.

(v) Toll Design

The Board determined that a material change in the financial position of the Mainline and to market circumstances since the implementation of compliance tolls had occurred. The Board noted that TransCanada's forecasts were reasonable and found that the proposed allocation of costs among the three Mainline segments to be reasonable. The Board therefore:

  • approved TransCanada's proposed toll designs and required TransCanada to file a compliance filing for 2015 to 2020 tolls by March 31, 2015; and
  • approved rolled-in tolling into the Eastern Triangle rate base of the Eastern Triangle capital expansions between 2015 and 2020, and proved in principle the practice of rolling-in Mainline facilities costs in the future, such that the costs of facilities additions in the Eastern Triangle will be rolled-in to Eastern Triangle tolls until 2030.

TransCanada requested Board approval of a tolling parameter in which all costs associated with the Eastern Triangle will be separated from the other lines. The Board noted that evolving contracting practices indicated a greater preference for intra-segment transportation in the future.  Accordingly it approved the segmentation tolling parameter in principle and indicated it would continue to monitor the appropriateness of the segmentation tolling parameter prior to implementation.

(vi) Risks and Rewards

TransCanada proposed that the Mainline's Return on Equity (ROE) be set at 10.1% from 2015 until the end of 2020.  Additionally, TransCanada proposed to maintain the 40% equity ratio previously approved by the Board. The Board found that the 10.1% ROE and 40% deemed equity ratio is a fair return for the Mainline, commensurate with its risk under the proposal, and in accordance with the fair return standard and approved the cost of debt as proposed by TransCanada and 60% deemed debt ratio.

(vii) 2018 to 2020 Toll Review

TransCanada proposed a review of tolls prior to 2018 for the 2018 to 2020 period. Depending on the outcome of a review, TransCanada submitted that the tolls would be adjusted on a prospective basis and that TransCanada would consult with Mainline stakeholders before any filing to the Board for approval of a toll change.

The Board held that it expected that the tolls established for 2015 to 2020 be substantially aligned with the underlying costs and revenues in each of those years. The Board directed TransCanada to file an application prior to December 31, 2017 for approval of tolls for the 2018 to 2020 period.


Under NEB Decision RH-001-2014, Mainline tolls are established 2015 to 2020.  The Decision therefore reflects a "toll bridge" to methodology parameters applicable from 2020 until 2030, rather than a final destination on toll design.  Significant monitoring of TransCanada will also occur in the meantime, specifically on discretionary service pricing, toll segmentation and a 2018 toll review. Mainline customers, among other parties, will of course also need to monitor these developments closely and reach their own conclusions on whether they are ultimately a "bridge too far".

The elephant in the room on rate design issues may be rolled-in tolling. Traditionally the NEB's default position, in RH-001-2014, the Board was clear that it would consider in future applications "the reasonableness of continuing the practice of rolled in tolling".   The Board did precisely that in its denial of NOVA Gas Transmission's Northwest Mainline North Extension Project on the basis that rolled-in tolls were not an appropriate toll methodology for the project.  The message to applicants from both RH-001-2014 and the Komie North Extension decision is that rolled-in tolling will be subject to increased scrutiny and consideration of alternate toll treatments is well advised.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.