National Energy Board Ministerial Briefing Binder – NEB & Pipeline Tolls and Tariffs

BACKGROUNDER
6.2

FOR INFORMATION

Security: Protected B
Date: 4 November 2015

  • Pursuant to Part IV of the NEB Act, the NEB oversees and approves the tolls and tariffsFootnote 1 of pipelines to ensure that they are “just and reasonable”, and not unjustly discriminatory.
  • The NEB has considerable latitude in setting tolls. For companies that operate larger, more extensive systems and typically have many customers (known as Group 1 companies), tolls are mainly set by:
    • Adjudication by the Board in a manner which allows the pipeline to recover all of its prudently-incurred costs including a reasonable return on investment (return on equity and return on debt); or
    • Approval by the Board of settlements that the companies have negotiated with their shippers and other stakeholders independently of the NEB.
  • The NEB adjudication process requires a detailed tolls application to be filed by a company, which usually leads to a formal public hearing before a panel of the Board. After hearing the evidence and arguments of all parties, the panel will issue its Reasons for Decision on all matters examined during the hearing.
  • If the company and its shippers are able to achieve a negotiated settlement outside of the hearing process, the pipeline company will file a document that details the terms of the settlement and request Board approval. The Board will assess the settlement against its Guidelines for Negotiated Settlements to ensure that the settlement yields just and reasonable tolls and that no terms are contrary to the Settlement Guidelines. The Board will also solicit comments from the company’s shippers and stakeholders to ensure that all parties support the settlement. The Board will then issue a decision approving or rejecting the settlement.
  • The majority of Group 1 companies are currently operating under settlements that they have negotiated with their customers.
  • For companies that operate smaller, less complex pipelines (known as Group 2 companies), tolls are regulated on a complaint basis. The tolls are set by the company and filed with the NEB. The company must provide its customers with financial information and copies of the tariff. If a complaint is received, a panel of the Board will then review the matter. Otherwise, the Board may presume the tolls to be just and reasonable.
  • The Board does not oversee the tolls or rates on the international power lines that it regulates. That function falls under provincial jurisdiction.
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