The National Energy Board (NEB) has approved an application from Trans Mountain Pipeline ULC to implement a surcharge on Westridge dock premiums to allow it to recover a portion of the $35-million cost of upgrades to optimize pipeline capacity in the short term.
The board also approved Trans Mountain’s proposal to offset the surcharge by refunding a portion of the premiums, noting that no shipper had raised concerns about that aspect of the application. An estimated $2.8 million of the 2018 premiums would be refunded this year.
In its decision, the NEB said it agreed with Trans Mountain that no shipper had suggested the system optimization costs are not reasonable and that no one questioned the need for the increased capacity which the company estimated would be up to 2.5 per cent.
“In light of this, it appears reasonable for Trans Mountain to recover a portion of the system optimization project costs through the surcharge,” said the regulator.
The NEB also noted the company’s submission that there is a high level of certainty that the project will be completed as scheduled. Trans Mountain also has recent experience with installing a variable frequency drive at the Kamloops pump station and has confirmed significant power efficiency improvements there.
Suncor Energy Marketing Inc., PetroChina International Trading Ltd. and Parkland Refining (B.C.) Ltd. supported the application as filed. The Canadian Association of Petroleum Producers (CAPP) also submitted a letter of support due in part to Trans Mountain’s commitment to report data that is expected to demonstrate increased capacity and power efficiencies.
Phillips 66 Canada Ltd. in a letter of comment said it was not necessarily opposed to the optimization initiative and agreed incremental pipeline capacity would be useful but said the surcharge would have a negative effect on it in the event the resulting incremental capacity is significantly less than estimated by Trans Mountain.
As proposed, implementation of the surcharge would fund 40 per cent ($14 million) of the total cost of the system optimization while a rate base addition and associated capital cost recovery under the 2019-2021 Incentive Toll Settlement would fund the remaining 60 per cent ($21 million). The total cost recoverable from the surcharge is capped at $14 million and the total addition to the rate base is capped at $21 million.
Trans Mountain proposed to begin collecting the surcharge on July 1, 2019 and continue to collect it until the earlier of Dec. 31, 2021 or the $14 million cap is reached. The company estimated it will collect approximately $470,000 per month via the surcharge over the 30-month collection period.