NOVA Gas Transmission reaches agreement regarding costs of NGTL Operation

TransCanada Corporation owned-NOVA Gas Transmission Ltd. has reached an agreement with customers and other interested parties on the annual costs, including equity return and depreciation, required to operate the NGTL System for 2016 and 2017, as announced earlier this week.

“The NGTL System is a core asset in TransCanada’s portfolio that continues to provide critical transportation services for the majority of natural gas produced in the Western Canada Sedimentary Basin,” said TransCanada’s president and chief executive officer Russ Girling.

The agreement covers all elements of the NGTL System operating costs, including return on equity, equity thickness and depreciation, and includes a mechanism that incents NGTL to remain strongly focused on cost control as well as continuous operating efficiencies.

For the term, the agreement:

• fixes the equity return at 10.1 per cent on 40 per cent deemed common equity;
• establishes depreciation at a forecast composite rate of 3.16 per cent, which reflects continuation of 2015 parameters;
• fixes operating, maintenance and administration (OM&A) costs at $222.5 million annually with an incentive mechanism for variances that enables NGTL to capture savings from improved performance; and
• provides for flow-through of all other costs, including for example pipeline integrity expenses and emissions costs.

NGTL filed an application with the National Energy Board for approval of the agreement yesterday.