Backgrounder

New Upstream Contracting Requirements for Some Enbridge Customers

On July 14, 2009, the Ontario Energy Board (OEB) released its decision on an Enbridge proposal to specify requirements for the contracting of upstream transportation by agent-type Ontario T-service customers using Agency Billing and Collection (ABC) service

Enbridge's Proposal

Enbridge was of the view that although no delivery failure has occurred to date, what it saw as a decline in firm transportation arrangements to its franchise area increased the likelihood of a failure, particularly on the coldest days of the winter. Enbridge said its proposal would increase firm transport to its franchise by about 200,000 GJ per day for the 2009/10 winter.

Enbridge attributed the decline in firm transportation to Ontario T-service customers turning back their TransCanada PipeLines Firm Transportation as the capacity became available for turnback and then using "non firm upstream services" to meet their firm delivery obligations. The non firm services identified by Enbridge were discretionary services on the TransCanada system; namely, interruptible transportation and diversions. Enbridge was also initially of the view that Short Term Firm Transportation did not provide adequate assurance that firm delivery obligations would be met by Ontario T-service customers under peak demand or constrained pipeline operating conditions.

Enbridge proposed to require agents using Ontario T-service and ABC service to demonstrate that on any given day, their firm delivery obligations are being met by firm upstream transportation for at least 90% of their Mean Daily Volume. Proof of the firm transportation arrangements would be provided by November 1 of each year beginning with November 1, 2009.

In March 2009, Enbridge advised direct purchase customers that it was not offering turnback of TransCanada Firm Transportation capacity for the 2009/10 year because its proposal regarding upstream transportation was before the OEB. This suspension of turnback for the upcoming year for all Ontario T-service customers (not just those who were the subject of the proposal) could mean increased costs for these customers if the cost of transportation on TransCanada is at a premium to the basis to the Enbridge delivery area.

The majority of intervenors, who participated in the proceeding and represented direct shippers and consumer groups, argued that Enbridge had not demonstrated that a risk to system reliability exists. There were also objections to Enbridge's actions regarding turnback. It was argued that Enbridge cannot unilaterally suspend turnback; rather, it needs OEB approval.

OEB Decision

Although the OEB found that Enbridge should have provided more thorough evidence and demonstrated a better understanding of the impact of its proposal on stakeholders, it concluded that any issue of system reliability is a serious matter and must be addressed.

The OEB directed interim requirements be put in place for the 2009/10 winter for the targeted subset of direct purchase customers, and remain in place until a permanent resolution of the system reliability matter is brought forward and approved.

In arriving at the interim requirements, the OEB noted it considered the excess capacity available on the TransCanada system and concluded there is likely to be extra capacity in the 2009/10 winter to support any additional firm transportation required by the affected direct purchase customers.

The OEB also directed Enbridge to consult with stakeholders to develop long-term requirements and to submit an application that sets out various options for the OEB to consider. It is the OEB's intention that the outcome of the application be implemented in time for the 2010/11 winter.

The regulator agreed with those who argued against Enbridge's suspension of turnback entitlements for the upcoming winter. The utility was directed to accommodate turnback requests as set out in the Enbridge Rate Handbook. (It should be noted that the opportunity for turnback for 2009/10 had passed by the time the decision was released.) The OEB said that in the future, if Enbridge is of the view that compliance with a term or condition of service will compromise system reliability, it is to file a request seeking an order from the OEB to amend or remove the term or condition from the Rate Handbook.