PIPELINES / NOVA Gas Transmission proposes New Service Levels
CALGARY, April 6 /CNW/ - NOVA Gas Transmission Ltd. (NGT) today filed
with the Alberta Energy Utilities Board (EUB) a more flexible portfolio of
transportation services for customers to select from, and a new pricing design
that better reflects the cost of transportation on its Alberta natural gas
pipeline system. The new pricing model will replace the current postage-stamp
pricing regime.
Today's filing follows consultation with a multi-party industry task
force, which began in early 1997 and wrapped up in January 1998. Based on
these discussions, NGT refined its approach throughout February and March, and
filed its application today. NGT and the Canadian Association of Petroleum
Producers have agreed to reconvene the industry task force in April to
continue the consultation process, with a view to resolving industry issues.
''Our customer base is very diverse -- including large producers, small
producers, marketers, aggregators and end-users -- and these groups have
varying, sometimes conflicting, transportation needs,'' said NGT president
Bruce Simpson. ''In the coming months, in addition to working with industry
to build understanding for the proposal, we'll be working with individual
customers to enable them to customize gas transportation portfolios that best
meet their specific needs.''
The proposal will require regulatory approval by the EUB. It marks the
introduction of service-level differentiation by NGT, and of related distance-
and pipeline-diameter-sensitive prices. These differentials recognize the
relative costs of short- versus long-haul transportation, and the economies of
transporting gas in larger-diameter pipe versus smaller-diameter pipe.
Transportation pricing for gas delivered inside Alberta (under the Basic
Service option), will range from $0.04 to $0.27 per thousand cubic feet (Mcf)
-- compared with the current single price of about $0.13 per Mcf. For gas
delivered outside Alberta, pricing under the Basic Service option will range
from about $0.17 to $0.40 per Mcf -- versus the current single price of about
$0.26 per Mcf. The new approach will neither enhance nor reduce NGT's
EUB-approved revenues as specified under the existing incentive agreement with
customers.
The new pricing design is a departure from nearly two decades of the
postage-stamp tolling method. Introduced by the Government of Alberta in
1980, the postage-stamp tolling method dictates the same unit price for
natural gas transmission, regardless of how far the gas is transported.
''NOVA has developed a new suite of service options to provide customers
more choice based on their individual needs. And we've revised our pricing to
reflect these services, the location of the gas, and the facilities used to
ship the gas,'' said Simpson.
''Customers are looking for pricing that includes greater accountability
for costs created on the NOVA system, and our new approach sends the right
economic signals about the value of transportation. This is a natural step in
the right direction.''
Among the changes recommended by NOVA:
- Four new firm receipt-service options have been created for customers
to choose from. These services are differentiated by how much
upstream and downstream flexibility they offer, and are priced
accordingly. This gives customers flexibility as to the level of
service they require and the related transportation price for that
service.
- To increase cost-accountability, NGT will employ incremental tolling on
new receipt and delivery lateral expansions. This will also enable
open competition on the laterals, with pricing signals that will
encourage prudent investment decisions.
- The minimum contract length for renewable receipt and delivery firm
service rises from one year to five years, with lower prices offered at
some receipt locations for longer-term commitments. In a more
competitive environment, this change will enable NOVA to continue to
ensure appropriate capital spending.
A wholly owned subsidiary of NOVA Corporation, NGT is the largest-volume
carrier of natural gas in North America, moving 4.5 trillion cubic feet of gas
in 1997. NGT's 22,200-kilometre system transports natural gas for use within
Alberta and to provincial boundary points for connection with pipelines
serving markets elsewhere in Canada and the United States. The system moves
approximately 18 per cent of the natural gas produced annually in North
America.
NOVA Corporation is a worldwide natural gas services and petrochemical
company. Its trading symbol on the Alberta, Toronto, Montreal and New York
exchanges is ''NVA''.
Note to Editors: Additional background information on today's
announcement - including a summary sheet and graph showing the transportation
pricing impact of the proposed changes - can be obtained from Canada
NewsWire. To receive these documents, please call Canada NewsWire at (403)
269-7605.
New services and pricing Internet site at:
www.nova.ca/newservicesandpricing |
