Enbridge Inc. plans to explore several alternatives, including the extension of its previous commercial agreement, for its Mainline pipeline network after Canada’s top energy regulator rejected the company’s proposal to use long-term contracts.
The Calgary-based company will explore with stakeholders a modified version of Competitive Tolling Settlement, as the most recent commercial framework that expired in June is known, according to a statement Sunday. It also will explore a new incentive rate-making agreement, or a cost of service rate-making structure.
The Canada Energy Regulator, or CER, ruled Nov. 26 that “the package of tolls, terms and conditions in the service offering would result in a distribution of benefits and negative impacts that is uneven and disproportionate.” The decision dealt a blow to North America’s largest pipeline company as it upgrades a vast system that ships more than 3 million barrels of crude a day from Alberta to the U.S. Midwest and Gulf Coast, as well as Ontario and Quebec. The network includes the Line 3 and Line 5 conduits that have faced opposition in the U.S.
“The CER denied the application on the basis that, among other things, contracting as proposed would result in a significant change to access the Canadian Mainline and potentially inequitable outcomes,” Enbridge said. “It was also evident from extensive industry input that there was no consensus on what a new commercial structure should look like – some favoured contracting, while others opposed it altogether, preferring to maintain the status-quo, a monthly nominations process and a fixed toll.”
In parallel with negotiations of a potential negotiated settlement, Enbridge said it will prepare a cost of service application for the Canadian Mainline, which will be filed with the energy regulator, if an agreement to continue with incentive rate-making isn’t achievable. The negotiations may take through 2022, with the subsequent regulator’s review and decision process to conclude in 2023.
“The range of financial outcomes associated with an alternative commercial model will be manageable and is not expected to materially impact Enbridge’s financial results,” company said in the statement.
