TransCanada Reaches Three Year Settlement with Alberta System Customers
CALGARY, Alberta – March 10, 2005 – (TSX: TRP) (NYSE: TRP) – TransCanada Corporation’s wholly-owned subsidiary NOVA Gas Transmission Ltd. (NGTL) has reached a settlement with shippers and other interested parties regarding the annual revenue requirements of its Alberta System natural gas transmission system for the years 2005, 2006 and 2007. The settlement encompasses all elements of the Alberta System revenue requirement, including operating, maintenance and administration (OM&A) costs, return on equity, depreciation and income and municipal taxes.
“TransCanada has reached two major settlements with our stakeholders in the past month – a tolls settlement on the Canadian Mainline for 2005 and this multi-year revenue requirement settlement on our Alberta System,” said Hal Kvisle, TransCanada’s chief executive officer. “TransCanada is pleased to have again achieved an alignment of interests with our shippers and we remain committed to providing value to our customers and to exploring and developing pipeline services that benefit all stakeholders.”
In the Alberta System settlement, OM&A costs are fixed at $193 million for 2005, $201 million for 2006, and $207 million for 2007. Any variance between actual OM&A and other fixed costs and those agreed to in the settlement in each year will accrue to TransCanada. The majority of other cost elements of the 2005, 2006 and 2007 revenue requirements will be treated on a flow through basis.
The negotiating parties agreed the return on equity capital will be calculated annually during the term of the settlement using the Alberta Energy and Utilities Board (EUB) formula for the purpose of establishing the annual generic rate of return for Alberta utilities on deemed common equity of 35 per cent. For 2005, the rate of return on common equity under the EUB formula is 9.50 per cent. Depreciation costs will be determined using the depreciation rates and methodology that NGTL proposed to the EUB in its 2004 General Rate Application. They are expected to be approximately $304 million in 2005, $285 million in 2006 and $282 million in 2007.
TransCanada will apply to the EUB for approval of the Alberta System settlement. Upon EUB approval of this settlement, TransCanada will withdraw its motion to the Alberta Court of Appeal filed in September 2004 for leave to appeal EUB Decision 2004-69 (Phase 1 of the 2004 General Rate Application), with respect to the disallowance of applied-for incentive compensation costs.
TransCanada will continue to charge interim tolls for 2005 for transportation service on the Alberta System. The interim tolls, approved by the EUB in December 2004, will remain in effect until final tolls are established through the Phase 2 proceeding of the Alberta System’s 2005 General Rate Application. This proceeding will address the allocation of costs among transportation services and rate design. TransCanada will file this application with the EUB on or before April 1.
TransCanada is a leading North American energy company. TransCanada is focused on natural gas transmission and power services with employees who are expert in these businesses. TransCanada’s network of approximately 41,000 kilometres (25,600 miles) of pipeline transports the majority of Western Canada’s natural gas production to the fastest growing markets in Canada and the United States. TransCanada owns, controls or is constructing more than 5,100 megawatts of power generation – enough to meet the electricity needs of about 5.1 million average households. The Company’s common shares trade under the symbol TRP on the Toronto and New York stock exchanges.
Note: All financial figures are in Canadian dollars unless otherwise noted.
Certain information in this news release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in this information may differ from actual results or events. Factors which could cause actual results or events to differ materially from current expectations include, among other things, the ability of TransCanada to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the availability and price of energy commodities, regulatory decisions, competitive factors in the pipeline and power industry sectors, and the current economic conditions in North America. For additional information on these and other factors, see the reports filed by TransCanada with Canadian securities regulators and with the United States Securities and Exchange Commission. TransCanada disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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