LETTER DECISION

File OF-Tolls-Group2-C1017-2020-01 7 April 2021 Mr. Jeremy R. Baines Ms. Robyn Derech

President and Chief Executive Officer Director, Marketing & Transportation Campus Energy Partners LP Campus Energy 2400, 411-1 Street SE 2400, 411-1 Street SE Calgary, AB T3G 4Y5 Calgary, AB T3G 4Y5 Email Jeremy.Baines@campusenergy.ca Email Robyn.Derech@campusenergy.ca Mr. Lewis L. Manning Mr. Alastair MacKinnon Lawson Lundell LLP Lawson Lundell LLP Suite 1100, 225-6 Avenue SW Suite 1100, 225-6 Avenue SW Calgary, AB T2P 1N2 Calgary, AB T2P 1N2 Email lmanning@lawsonlundell.com Email amackinnon@lawsonlundell.com

Dear Mr. Baines, Ms. Derech, Mr. Manning and Mr. MacKinnon:

Campus Energy Partners Suffield LP by its general partner Campus Energy Partners Operations Inc. (Campus) Application for Tolls and Terms and Conditions of Service for the Suffield North Pipeline (Application) and Rockpoint Gas Storage Canada Ltd., Pine Cliff Energy Ltd., and Torxen Energy Ltd. complaints regarding Suffield Processing Limited Partnership and its general partner 2133151 Alberta Ltd.1 (the Complaint) RH-002-2020

1. Disposition and Background

1.1 Disposition

The Commission of the Canada Energy Regulator (Commission) has considered the Application of Campus regarding tolls and terms and conditions of service for its North Suffield Pipeline (the Pipeline). Having considered the evidence and submissions of all parties and for the reasons that follow, the Commission has decided the following2, with the Conditions set out in Order TG-003-2021 (Appendix II):

…/2

1 Now Campus. 2 This summarizes the decision and direction of the Commission with additional details provided below.

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1. Campus may exercise its discretion and establish term-differentiated firm tolls that do not exceed $0.22/gigajoule (GJ);

2. Firm Transportation (FT) tolls to be filed by Campus are approved as final, effective as of the date of this decision and retroactive to the date they were made interim;

3. Campus is granted the discretion to set its Interruptible Transportation (IT) toll at market-responsive tolls of $0.32/GJ or lower;

4. Interruptible preferred service (ITp) is approved at a toll of the shipper’s corresponding FT service plus $0.02;

5. Interim IT tolls are made final for the period of 1 July 2019 to 30 April 2021;

6. Regarding the transportation service agreement (TSA or TSAs), the Commission approves modifying the existing notice period to three months but does not approve the proposed changes to the wording in Articles 5.4 and 5.5 of the TSA. The Commission instructs Campus to revert to the previous TSA provisions; and

7. The Commission does not approve the proposal for shippers to pay for all costs of testing at this time nor does the Commission approve the change from testing every three months to testing every 90 days, as requested by Campus.

Background

In June 2019, Rockpoint Gas Storage Canada Ltd. (Rockpoint), Pine Cliff Energy Ltd. (Pine Cliff), and Torxen Energy Ltd. (Torxen) (collectively, the Complainants) filed complaints with the National Energy Board (NEB) concerning the level of tolls charged by Suffield Processing Limited Partnership (SPLP) on the Pipeline. Following an exchange of comments, on 27 June 2019, the NEB issued Order TGI-003-2019 making the tolls specified in that order interim effective 1 July 2019. The NEB also directed Campus to provide the Complainants with continued service on the Pipeline under terms and conditions that are not unjustly discriminatory.

On 28 August 2019, the Canadian Energy Regulator Act (CER Act) came into force, replacing the National Energy Board Act (NEB Act). The NEB was succeeded by the Canada Energy Regulator (CER).

In a letter dated 21 February 2020, after a pause to allow for a potential negotiated resolution, the Commission found that the Complainants raised relevant concerns as to the appropriateness of the proposed tolls and terms and conditions of service. The Commission indicated that the record before it, including Campus’ limited filings in response to the Complaints, was insufficient to establish that the proposed tolls and terms and conditions of service were just and reasonable and ordered Campus to file an application for tolls and terms and conditions of service for the Pipeline.

Campus filed its application on 8 April 2020 and additional information on 26 June 2020, after direction from the Commission to refile the application with additional information (see Appendix I – Ruling No. 1).

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Regulatory History of the South and North Suffield Pipelines

Campus is the current owner of the South Suffield and North Suffield Pipelines (the Suffield System), which were approved by the NEB in 1998 (GH-2-98) and 2000 (GH-2-2000), respectively.

The Pipeline is a 97.2 kilometre (km), 16-inch sales gas transmission line which transports gas from Alberta along the northern edge of the Suffield Canadian Forces Base, ending 2.6 km into Saskatchewan where it delivers into the TransCanada PipeLines Limited (TCPL) Mainline. It has a contractible capacity of 190 million cubic feet/day (approximately 200,460 GJ/day). There are seven receipt points (and six others on third-party feeder lines) and one delivery point along the Pipeline.

In the applications for both the North and South Suffield pipelines, the original owner described its system as a commercially at-risk pipeline and proposed market-based tolls, offering firm service terms of five to 20 years at fixed tolls. The firm service tolls incorporated a long-term incentive approach offering lower tolls for a longer-term commitment. The stated objective was to ensure the viability of the project while providing an acceptable return on investment, and to provide shippers with long-term certainty. The applicant submitted that the pipelines would provide shippers with an alternative to NOVA Gas Transmission Ltd. (NGTL).

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One shipper subscribed for a large portion of the capacity on both the South and North Suffield pipelines for 20 year terms, which are nearing expiry.3 Other shippers also entered into contracts for smaller volumes.

The NEB approved the South and North Suffield Pipeline applications finding that the pipelines will be required by the present and future public convenience and necessity. In GH-2-98, on the topic of toll methodology, the NEB said4:

The differing points of view of shippers and pipeline owners are taken into account in considering whether a tolling methodology would result in just and reasonable tolls. Shippers will be concerned with the relative risk due to uncertainty about future toll levels. A pipeline company would be concerned about whether the tolling methodology would allow it to attract sufficient volumes to recover costs and provide an appropriate return on its investment;

Fixed tolls would not vary over their term in contrast to traditional cost of service tolls, where tolls are higher in the early years and lower for longer contract terms.5 Fixed tolls involve a different sharing of risks and rewards between the pipeline company and its shippers than would the sharing under cost of service regulation. Shippers would be relieved from the risk of asset under-utilization and would benefit from toll certainty. The pipeline company would be responsible for potential stranded assets and would assume any risk related to possible increases in costs due to inflation or rising financial costs6; and

As parties have a better understanding of their own circumstances, the solution agreed to may be superior to the solution the regulator could make through cost of service based tolls.

The NEB determined that the Group 2 method of regulation would be acceptable for the pipelines and, in GH-2-2000 concluded that it was unnecessary to issue an order approving the proposed tolls and tariffs.7

1.2 Transfer of Ownership

On 28 September 2018, a transfer application was filed with the NEB resulting in the eventual transfer of Suffield System ownership from AltaGas Holdings Inc. for and on behalf of AltaGas Pipeline Partnership (AltaGas) to Campus.8 The transfer application contained a statement that the purchaser “has no immediate plans to alter or implement any changes to the tolls and tariffs on the Pipelines”.9

3 NEB Reasons for Decision – AEC Suffield Gas Pipeline Inc., GH-2-98, July 1998, 135.0 MMcdf, at 11; see

also NEB, Reasons for Decision - AEC Suffield Gas Pipeline Inc., GH-2-2000, August 2000 - North Suffield Pipeline, 45 MMcfd, at 15.

4 NEB Reasons for Decision – AEC Suffield Gas Pipeline Inc., GH-2-98, July 1998, at 13-14. 5 Ibid at 14. 6 Ibid at 13. 7 NEB Reasons for Decision - AEC Suffield Gas Pipeline Inc., GH-2-2000, August 2000, at 12. It was clear

in Chapter 4 of the Reasons for Decision that the pipeline at issue was described as being commercially at-risk and the NEB stated that the application “was not contested in this regard”.

8 On 1 October 2019, Suffield Processing Limited Partnership and its general partner 2133151 Alberta Ltd. formally changed names to become Campus Energy Partners Suffield LP and Campus Energy Partners Operations Inc., respectively (collectively referred to as Campus).

9 AltaGas Holdings Inc., for and on behalf of AltaGas Pipeline Partnership and 2133151 Alberta ltd. transfer

application, at 8.

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At the time of the transfer application, AltaGas and Rockpoint were engaged in negotiations on terms of service on the Pipeline that became effective on 1 January 2019. The TSAs with each of the Complainants provided that tolls could only be changed once per year, with a 15 month notice period for all toll changes. The TSAs also contained a clause allowing either party to terminate the TSAs on 30 days’ notice.

On 1 February 2019, the transfer was completed. Rockpoint said it entered into a tie-in agreement with AltaGas based on terms of its existing TSA and in reliance on representations made in the transfer application. This agreement allowed Rockpoint to construct a pipeline lateral associated with one of Rockpoint’s gas storage facilities into an AltaGas pipeline associated with the Pipeline.

On 11 March 2019, Campus sent notification to Rockpoint and Torxen, both shippers on the Pipeline, giving notice of a toll change to firm and interruptible service and the TSA. On 22 March 2019, Rockpoint and Campus met to discuss the new offering. On the same date, Torxen, by way of letter to Campus, pointed out the significant increase in the firm and interruptible tolls. In June 2019, Campus advised Pine Cliff, Rockpoint and Torxen that the TSAs were terminated effective 30 June 2019.

The issue raised by the Complainants regarding the representation made in the transfer application and subsequent conduct by the parties, as well as Campus’ response to these issues, is considered further below.

1.3 Procedural Matter – Objection by the Complainants

In final argument, the Complainants objected to a portion10 of the Campus written final argument where Campus compared in detail its proposal for an accelerated depreciation rate to the proposal put forward by TCPL in RH-003-2011.11 The Complainants said that it is procedurally unfair to put forward a detailed comparison to facts in another hearing for the first time in argument. Similarly, the Complainants also objected to several paragraphs of the Campus written argument where Campus made comparisons between its IT toll design and the IT toll design in RH-003-2011, which it said were different operating contexts.12 The Complainants argued it is procedurally unfair that Campus make a comparison to facts in final argument when it did not file a complete factual record in its evidence about RH-003-2011. The Complainants did not seek to strike any written argument filed by Campus, but argued these submissions should be given little or no weight.

Regarding its references to RH-003-2011, Campus stated there is nothing inappropriate about filing evidence in one proceeding and then arguing that the filed evidence is analogous to facts or a related principle or outcome in a previous decision by the same tribunal. In any event, Campus said that RH-003-2011 was referred to in its Application as well as in a Commission Information Request (IR), so there was no basis for the Complainants to claim prejudice.

10 The specific paragraph of the Campus written argument objected to was paragraph 100. 11 NEB Reasons for Decision, - TransCanada PipeLines Limited, NOVA Gas Transmission Ltd., and

Foothills Pipe Lines Ltd., RH-003-2011, March 2013. 12 The specific paragraphs of the Campus written argument objected to were paragraphs 75, 76 and 126.

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Views of the Commission

Overall, the Commission is not persuaded that the argument filed by Campus gives rise to any procedural unfairness. Once the facts about a current application are filed as evidence, as they were here, there is nothing generally unfair about comparing those facts or the position being put forward in a current application to the facts or principles from a past decision of the Commission, other tribunal decision or court case. Moreover, Campus referenced the context of RH-003-2011 in its application and the Commission also asked about potential comparisons to RH-003-2011 in an IR. Taking all this into consideration, there is no valid basis for claiming from a procedural fairness standpoint that the Complainants were unaware of the case being made or did not have opportunity to respond to it. That alone is not a basis for ascribing little or no weight to these precedents. Generally, the analogy to RH-003-2011 with respect to the Pipeline being underutilized and IT shippers receiving close to guaranteed access, was useful. The weight given to the comparison is discussed in Chapter 4.

2. Regulatory Framework

The Application is subject to the CER Act.13 Section 230 requires:

“All tolls must be just and reasonable, and must always, under substantially similar circumstances and conditions with respect to all traffic of the same description carried over the same route, be charged equally to all persons at the same rate.”

Courts have previously emphasized the broad authority and discretion of the NEB to decide whether a proposed toll is just and reasonable. The same is true of tariff provisions. In considering Part IV of the NEB Act, the Federal Court of Appeal stated that the NEB was given “authority in the broadest possible terms to make orders with respect to all matters relating to [tolls and tariffs].”14 The Court went on to state that the power of the NEB was “not trammelled or fettered by statutory rules or discretion” with respect to the just and reasonableness of tolls.15 In the same case, the Court concluded that when the NEB was considering tolls there was no requirement for the NEB to adopt “any particular accounting approach or device”.16 The Court said this includes no requirement to determine tolls using “cost of service and a rate based and fixing a fair return thereon”. In other words, the NEB or the Commission as it is now, may consider cost of service information but there is no requirement to consider the just and reasonableness of tolls using this methodology.

The above direction of the Federal Court of Appeal was followed by the NEB in Alliance

Pipeline Ltd. where the NEB stated:17

13 The Application was filed after the CER Act was in force. As a result it was considered under the CER Act.

In any event, the CER Act toll and tariff provisions at issue for this hearing did not change substantively compared to the NEB Act.

14 British Columbia Hydro and Power Authority v Westcoast Transmission Limited, [1981] 2 F.C. 646 (Fed. Court of Canada – Appeal Division) (BC Hydro), at para 17. See also Trans Mountain Pipeline Company Ltd. v National Energy Board, [1979] 2 F.C. 118 (Fed. Court of Canada – Appeal Division); and TransCanada Pipelines Limited v National Energy Board, 2004 FCA 149 (TransCanada).

15 BC Hydro, supra note 14 at para 17. 16 Ibid. See also TransCanada, supra note 11 at para 31. 17 NEB Reasons for Decision - Alliance Pipeline Ltd. as General Partner of Alliance Pipeline Limited

Partnership, (Alliance), RH-002-2014, July 2015, at 43.

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[T]here may be several approaches to tolling that yield just and reasonable results. Each

approach should be considered on its own merits and in respect of the many diverse

factors that compromise its circumstances.

Other than a small change to modernize language, section 230 of the CER Act is the same as the previous section 62 of the NEB Act considered by the Courts. There continue to be no statutory rules which restrict the Commission’s authority to set just and reasonable tolls. For these reasons, the Commission is of the view that previous direction from the Courts regarding the toll and tariff provisions of the NEB Act continue to have direct application to the CER Act and to the Commission. Past NEB cases such as Alliance are also informative. The overarching requirement is that tolls must always be just and reasonable. The Commission has wide discretion regarding the factors to consider in assessing the justness and reasonableness of tolls.

In the Milk River decision the NEB discussed the role of economic regulation, and stated that,18

[E]conomic regulation is designed to prevent the potential abuse of market power by a company operating in a monopolistic environment or in one with limited competition. Regulation ensures that such a company charges rates which are fair to customers and provides the company with a reasonable opportunity to earn a fair return on its capital investment. The [NEB] agrees with Murphy that effective competition exists when customers of a service have the ability to obtain comparable services at reasonable prices from alternative suppliers and market participants are not in a position to exercise market power.

The role of the Commission to prevent the potential abuse of market power remains important.

In previous decisions19, a number of tolling principles have been adopted by the NEB and the Commission when assessing whether a toll is just and reasonable. These tolling principles include cost-based/user-pay, economic efficiency, and no acquired rights.

The regulation of tolls and tariffs of Group 2 companies is normally carried out on a complaint basis, which does not eliminate the need for appropriate sharing of information by these companies. A Group 2 company must file tolls and tariffs with the CER before charging tolls to any shippers20, and it is the responsibility of a Group 2 company to provide its shippers and interested parties with sufficient information to enable them to determine whether a complaint is warranted21. In the event of a complaint, the CER may request additional information including some or all of the information required of Group 1 companies as specified in sections P.1 through P.5 in Guide P of the CER’s Filing Manual.

18 NEB Letter Decision - Murphy Oil Company Ltd., Concerning Tolls for the Milk River Pipeline (Milk River),

August 2001, at 4. 19 NEB Reasons for Decision - TransCanada PipeLines Limited, RH-1-2007, July 2007, Chapter 3, at 21-23,

A16008-1. 20 Subsection 229(1) of the CER Act. 21 CER Filing Manual, Guide P, P.6 Regulation of the Traffic, Tolls and Tariffs of Group 2 Companies.

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There are several other requirements [Link22] for Group 2 companies regarding accounting and financial reporting, abandonment funding, change in ownership and financial regulatory audits. Notably, a Group 2 company is also required to:

Maintain separate books of account and to file annual audited financial statements with the CER within 120 days of the end of the fiscal year;

File an abandonment cost estimate and set-aside mechanism with the CER for Commission approval, and apply to the CER for any changes to an abandonment cost estimate;

File an annual abandonment funding reporting form;

Maintain financial resources to cover the costs of an unintended or uncontrolled release from a pipeline; and

Make the company’s books, accounts, and records readily accessible by CER staff during a financial regulatory audit.

The Commission may set interim tolls and may make subsequent orders regarding refunds

or recoveries as outlined in section 232 of the CER Act which states:

If the Commission has made an interim order authorizing a company to charge tolls until a specified time or the happening of a specified event, the Commission may, in any subsequent order, direct the company

(a) to refund, in the manner that the Commission considers appropriate, the part of the tolls charged under the interim order that is in excess of the tolls determined by the Commission to be just and reasonable, together with interest on the amount to be refunded; or

(b) to recover in its tolls, in the manner that the Commission considers appropriate, the amount by which the tolls determined by the Commission to be just and reasonable exceed the tolls charged under the interim order, together with interest on the amount to be recovered.

3. Tolls for firm service

The Commission considered all the parties’ submissions, including their evidence and views regarding market-based tolls and cost of service tolls and the overall question of just and reasonable tolls for the Pipeline.

Views of Campus

Campus’ key submissions regarding market-based tolls focused on the history and earlier regulatory approvals of the Suffield System and the ongoing appropriateness of a market-based methodology. Campus emphasized that the Suffield System was approved by the NEB as commercially at-risk. Campus highlighted that the Pipeline took on greater risks

22 “Financial Regulation of Group 2 Pipeline Companies” (10 July 2020), online: CER <https://www.cer-

rec.gc.ca/en/about/acts-regulations/cer-act-regulations-guidance-notes-related-documents/tolls-tariffs-accounting/financial-regulation-group-2-pipeline-companies.html>.

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under the original long term contracts in place in 2000 than it would otherwise have had to under cost of service regulation and that market-based tolls provided needed flexibility to attract FT revenue.

Campus proposed to continue its operations as a Group 2 pipeline charging market-based tolls. Campus submitted that current market and Pipeline circumstances would result in cost of service tolls that Campus could not charge in the market. Relevant circumstances noted by Campus included: depressed gas markets, declining volumes, very small shipper base, the potential end of the long-term contracts and associated volumes, declining credit quality of potential shippers, and an aging pipeline that will require further integrity management and incremental operating, maintenance and capital expenditures as it gets closer to the end of its service.

Campus indicated that there was shipper support for the proposed tolls as it held discussions with several interested shippers, and a contract was executed with GEX Resources subscribing for a five-year term of firm-service. Campus proposed to competitively price the Pipeline’s service options, as was done under the long-term contracts when the pipelines were initially approved. Shippers, and prospective shippers, could alternatively choose to seek transportation service from NGTL, which is a cost of service based transportation service provider.

Campus submitted that the NGTL system remains a readily available alternative for Suffield System shippers. Campus noted that though they have the capability, none of the Complainants are currently shipping on the Pipeline. Campus indicated that the Complainants confirmed that they have the ability to divert volume between the Pipeline and NGTL based on price, with the exception of a small proportion of Torxen production, which potentially could be connected to NGTL.

In response to concerns raised about the process it followed with respect to the applied-for tolls, Campus conceded the process was not perfect but noted that there had been shipper consultation over multiple months. Campus also introduced a new two-year firm and new IT service to address the producer desire for shorter and more flexible options. In any event, Campus submitted that the concerns raised about its process do not resolve the substantive question about whether its applied for toll is just and reasonable. Campus said that while previous AltaGas TSAs were terminated, this was all based on the freely agreed to 30-day termination clause that was a lawful exercise of a free-granted contractual right.

Factors cited by Campus as relevant in deciding whether to depart from market-based tolling principles are as follows:

Whether the competitive relationship between the Pipeline and NGTL is materially different than when it came into service;

Whether current and prospective shippers can find alternatives;

The extent to which current and prospective shippers have used alternatives in the past; and

Whether the Pipeline has been shown to have market power. If so, whether it has been shown to have abused market power and whether any of the shippers have ever had their volumes interrupted or curtailed for the Pipeline.

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Campus submitted these are all relevant factors in favour of maintaining market-based tolling for the Pipeline. Campus went on to argue that its tolls compare favourably with NGTL tolls. It said it has been established in this hearing that it is in a low load factor environment and shippers under the previous interruptible service tolls were not incentivized to subscribe to firm service. Campus said it was not necessary to consider cost of service information with respect to its tolls since each tolling method must be considered on its own merit. Campus submitted that cost of service regulation at this stage in the life of the Suffield System would be inappropriate. It would undo the sharing of commercial risk that the NEB found appropriate in GH-2-98 and GH-2-2000 and potentially result in a transfer of the risk of asset underutilization and stranded costs to shippers in the current market.

In response to the issue of cost of service methodology, Campus went on to note that the Pipeline has never operated as a cost of service pipeline. As such, there was never an approved rate base, capital structure, or return on rate base for the pipeline; and cost of service information was never tracked for the Pipeline because it was never necessary. Campus did not track the book value or net book value of the Pipeline separately from the total value of the Property, Plant and Equipment recorded in Campus’ financial statements. Campus therefore had to estimate certain information used in the Illustrative Cost of service Toll Model.

Campus submitted that changing the toll structure on the Pipeline to a cost of service regime would shorten the economic life of the pipeline. Campus said that cost of service tolls would be uncompetitive in the market and it would therefore not be able to attract new volumes to the system. If the pipeline transitioned to a cost of service basis it would have to charge very high tolls on declining throughput, which would shorten the pipeline’s estimated remaining economic life to match the ten years of reserves left of its remaining firm shipper.

Campus calculated a unit cost of service estimate of $0.392/GJ (which includes an abandonment surcharge of $0.082/GJ) for 2020 based on the estimates and assumptions that it provided. Campus put forward several parameters and assumptions in its Application that the Complainants agreed with, or did not directly dispute. These include the following:

As the Suffield System is operated on an integrated basis, it is necessary to allocate the costs of the integrated system between the North and South Suffield pipelines;

It is appropriate to use different allocation ratios for capital components of costs and operating components of costs;

The methodology and relevant inputs to determine the capital cost allocation ratio;

The operating and maintenance costs, with the exception of the costs associated with the surety bond premium;

Campus’ estimate of Gross Plant in Service;

The gross amount of taxes other than income taxes;

The methodology used to estimate current income taxes, as well as the Capital Cost Allowance amounts and Undepreciated Capital Cost pools;

Regulatory costs;

Working capital;

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General agreement with the industry risk factors as they are laid out in the Application; and

Interest rates.

Regarding contested factors, Campus submitted the following:

Up until 2019, it assumed that the estimated capital cost of the Pipeline was depreciated at a rate of 2.5 per cent per year, based on the original forecast of a 40 year asset life. In its cost of service toll calculation, Campus applied a depreciation rate of ten per cent per year starting in 2019.

The Suffield System is operated on an integrated basis and records costs on an aggregate basis. For purposes of this Application, Campus allocated operating and maintenance, general and administrative, and property tax expenses based on the Pipeline’s volumetric capacity (52.055 per cent) relative to the system as a whole, and capital cost allowances, gross plant in service, and abandonment costs based upon the estimated capital investment in the Pipeline (49.446 per cent) relative to the system as a whole.

Campus used its actual capital structure (36 per cent debt and 64 per cent equity), its actual cost of debt (4.00 per cent in 2019 and 3.80 per cent for 2020), and a return on equity (ROE) of 15.0 per cent to estimate its cost of capital. Campus asserted that its actual capital structure was selected because it is the closest comparable transaction for the amount of leverage that either a prudent owner would place on the assets, or that a bank would be willing to lend on the assets. Campus provided a comparison to other gas transportation and distribution utilities, indicating that the risk profiles of the comparable pipelines were substantially lower than Campus’ and would support higher leverage ratios. Campus submitted the Complainants’ deemed 60-40 debt-to-equity ratio should be given no weight, given the lack of similarity in risk profiles to the Complainants’ comparators in relation to risk, credit ratings, size and other factors.

Campus estimated the actual ROE realized on the Suffield System for the last five years as quite volatile, ranging from -14.1 per cent to 17.3 per cent. For 2019, Campus’ actual return was 7.5 per cent. Based on its risk profile, the comparative company analysis, and the capital asset pricing model analysis, Campus stated that a 15 per cent ROE would be required to attract capital to its business.

Campus submitted that the current underutilization of the Pipeline presents several challenges. Interruptible service is effectively just as reliable as firm service, because of the Pipeline’s excess unused capacity. Thus, there is little incentive for shippers to subscribe for firm service, and make any long-term financial commitment to the Pipeline, especially when interruptible tolls are only marginally higher than firm tolls. Campus stated that changing from market-based tolls to cost of service tolls is also not economically viable. Under cost of service tolling, low throughput results in a high unit cost of service that would not be competitive with NGTL’s tolls. Campus’ Illustrative Cost of Service Toll Model illustrates this difficulty. Campus believes cost of service tolls could lead to a death spiral for the Pipeline.

Campus stated that its proposed tolls align with and continue to achieve the original mission and vision of the Pipeline which is to provide a lower-cost alternative to the NGTL system for transporting gas from the Suffield area to the TransCanada Mainline. Campus’ proposed tolls

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were established in consultation with its shippers, and are intended to strike a careful balance between producer economics, market requirements, competition alternatives, and the pipeline economics of the North Suffield pipeline. Campus maintains that the balance struck is just and reasonable to both Campus and its shippers. Campus requested that if the proposed tolls cannot be approved, the Commission should set market-based tolls consistent with the tolling principles used to originally approve the Suffield System.

Views of the Complainants

In the absence of negotiated market-based tolls, the Complainants argued in favour of a cost of service tolling method being imposed on Campus. The Complainants argued in the alternative that the most appropriate market-based tolls the Commission could impose would be those in the Complainants' TSAs with AltaGas, which had commercial support and were not challenged by any shippers or prospective shippers on the Pipeline. The Complainants say the proposed tolls are too high and not competitive with the tolls and services offered on the NGTL system. As a result, the Complainants left the Pipeline.

A portion of Torxen’s volumes are captive to the Pipeline and cannot move to NGTL. Torxen stated that the circumstances of each individual case must be considered for market support and while shipper support is vital to tolls being just and reasonable, it is not fatal.

The Complainants asserted that the original proponent of the Pipeline was to be regulated on a complaint basis as a Group 2 company. Prior acceptance by the NEB of a "market-based" toll methodology for a pipeline at a point in time does not insulate new tolls, or the tolling methodology, on the Pipeline from the Commission’s review or the statutory requirement that such tolls be just and reasonable. If the Commission were not able to review new tolls, or the tolling methodology on a pipeline, this would undermine the complaint-based regulation of Group 2 companies and enable pipeline companies to routinely earn amounts well in excess of a fair rate of return, without oversight from the Commission.

The Complainants said that having cost of service information was essential to complaint based regulation. The Complainants said both the NEB and Commission have long required costs of service information listed in Guide P of the Filing Manual to be provided when there is a complaint against a Group 2 Company. In the view of the Complainants, without this requirement, a regulator could not satisfy itself that the primary toll principal of cost causation was satisfied. Past precedents such as Milk River support the view that, in a complaint proceeding, costs of service justification is required and should guide the review.

The Complainants stated that Campus cancelled their TSAs in order to dramatically increase tolls and impose more onerous shipper terms and conditions. This was done despite the fact that the former TSAs have a 15 month notice clause for any toll changes and the representation in the transfer application that there were no immediate plans to alter the tolls or conditions of service. The Complainants submitted that Campus exerted its market power to force them off the Pipeline unless and until they agreed to higher tolls and more onerous terms than had existed in the contracts executed with the prior owner, AltaGas. If the proposed tolls are accepted it is likely that Rockpoint and Pine Cliff would continue not to utilize the Pipeline, and Torxen would look to remove or reduce its volumes transported on the Pipeline. The Complainants argued that Campus took the view that as long as NGTL was potentially a competitive option, it could impose the tolls and terms that it wanted. The Complainants further asserted that Campus’ “take it or leave it” attitude does not result in just and reasonable tolls. The Complainants said that the above conduct of Campus amounted to duress and/or oppression.

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Based on their estimates and assumptions, the Complainants calculated a unit cost of service estimate of $0.12/GJ (which includes an abandonment surcharge of $0.005/GJ). The Complainants challenged a number of inputs used by Campus to calculate its unit cost of service, including the following:

The reduction in Campus’ estimated economic life of the Pipeline from 40 years to 26 years from construction. This reduction is not reasonable or consistent with other Campus representations regarding depreciation. For example, Campus’ own GAAP23-based financial reporting, reviewed by senior management and Campus' auditors, extended the economic life further to 2049. The Complainants stated that consistency was needed between the selected historical depreciation life used to calculate the opening net book value on acquisition and the assumed remaining economic life and that the same depreciation methodology needed to be applied consistently throughout. The Complainants submitted that the form of regulation should not dictate the used and useful life of an asset, and Campus should not be permitted to change a key economic term in the face of a complaint from its shippers.

The Complainants disagreed with Campus’ proposal to allocate operating costs based on the ratio of the capacity of the North and South Suffield pipelines. The Complainants indicated that as the Pipeline has a greater available capacity than the South Suffield pipeline, but the South line has a greater proportion of volume shipped, Campus’ methodology results in the subsidization of costs of the South Suffield pipeline by the Pipeline. The Complainants submitted that allocating these costs based on relative actual use results in a fairer allocation of costs than based on capacity between the North and South Suffield pipelines. In response to the Commission’s IR, the Complainants acknowledged that the operating costs, and general and administrative costs, are relatively fixed and would likely not vary substantially with volumes of gas transported.

The Complainants proposed a deemed capital structure of 40 per cent equity and 60 per cent debt and an ROE of ten per cent for cost of service tolls, based on an examination of the regulatory capital structures of other regulated assets. The Complainants suggested these as good comparators to the Pipeline because of a similar regulatory framework, substantially similar types of users, and a similar geographic location resulting in similar economic supply and demand factors as the Pipeline. The Complainants noted inherent volatility and exposure to commodity risk associated with pure gas transmission differs from oil and natural gas liquids midstream investments. The Complainants stated that the current level of underutilization was the result of the choices made by the new management and do not reflect the basic risks of the Pipeline.

The Complainants explained that their analysis of cost of capital comparators was similar to Campus' approach which evaluated the entities at a high level.

The Complainants also raised a concern that using Campus’ actual capital structure and its business ROE is an internally inconsistent assumption if the denominator used in determining the per unit tolls is based on average annual volumes on the Pipeline. The Complainants noted that the Pipeline has averaged approximately 35 per cent annual utilization from 1 January 2018 to 31 July 2020. The Complainants’ concern is that as Campus’ total cost of service is relatively fixed,

23 Generally Accepted Accounting Principles.

Letter Decision Page 14 of 32

incremental volumes would add exponentially to the return earned by Campus if Campus' proposed capital structure and ROE were used.

Views of the Commission

Just and Reasonable Tolls

The parties in this case tendered lengthy submissions regarding market-based and cost of service methodologies. The Commission will always consider the specific circumstances of and the evidence provided by the parties when exercising its broad discretion to assess whether tolls are just and reasonable. In this case, the Commission is of the view that both methodologies, if applied strictly, would be potentially problematic for the Pipeline and its shippers. The Commission is persuaded that Campus requires a degree of flexibility to achieve efficient outcomes for the Pipeline, but also finds that a firm service toll range that is more cost reflective than the range applied for by Campus is just and reasonable. Accordingly, the Commission has determined that Campus may exercise its discretion and establish term-differentiated firm tolls, provided that such firm service tolls do not exceed $0.22/GJ, as further detailed below.

The Commission considered the precedent cases argued by the parties. Many of the precedent toll decisions cited in this proceeding are distinguishable from the current case. In Alliance, a precedent that Campus referenced, while the NEB said it did not rely on the cost information filed, that was a situation where a large majority of shippers signed agreements with the pipeline company and took no issue with the tolling methodology.24 That is a different circumstance than the current situation in this Application. Additionally, as the Complainants correctly point out, in Express, the NEB placed reliance on the business judgment of shippers making contractual commitments. In Express, 85% of the pipeline capacity had been contracted.25 Again, that can be distinguished from the current Application.

With respect to the NEB’s approval of the Pipeline and reasons in GH-2-2000, the Commission is of the view that the original toll methodology is not determinative as to whether current tolls are just and reasonable. The Complainants are not barred from arguing that cost of service information is relevant to the current Application and challenging whether the applied-for tolls are just and reasonable. There is no bar to Campus arguing that tolls should be approved using a methodology similar to the submissions of the applicant in GH-2-2000 and the Commission notes that regulatory predictability is a relevant consideration. In this decision, the Commission does not intend to re-allocate the balance of risks and rewards on the Pipeline. Campus has operated and continues to operate bearing utilization risk and the ability to structure tolls to be market responsive and incent utilization. The Commission notes that Campus aspires to grow throughput and attract volumes to the Pipeline. The Commission is of the view that Campus should retain the flexibility to work together with its shippers to find market solutions in the future.

Nonetheless, the Commission is of the view that Campus did not establish the appropriateness of a purely market-based toll. By its nature, a market-based toll involves limited inquiry into the cost drivers of the pipeline and the returns earned by the pipeline. To establish such a toll is just and reasonable, the NEB has previously expected a company to demonstrate a high degree of market acceptance of the toll, an absence of market power

24 Alliance, supra note 17 at 34 and 42. 25 NEB Reasons for Decision, Express Pipeline Ltd., OH-1-95, June 1996, at 23.

Letter Decision Page 15 of 32

that could result in abuse, and fair and transparent engagement between the pipeline and its shippers and interested parties. The Commission expects that, in general, an appropriate sharing of risks and benefits has likely been allocated between the pipeline and its shippers if these indicators are well established. While these indicators are relevant in the current case the overall test remains that tolls must be just and reasonable.

With respect to Campus’ applied-for market-based tolls, the Commission has concerns regarding the following:

Instead of a high degree of market acceptance, the Commission finds that there is little evidence of market support such as new or renewed contracts under Campus’ proposed tolling structure and broad opposition to the tolls, as applied for. While unanimous support is not necessarily an essential requirement, in the Application, the opposition and limited evidence of other shipper support or contracting indicates that the allocation of risk and benefits may not be reasonable.

The Commission finds, owing to the presence of NGTL, Campus generally would experience some competitive checks on its opportunity to exert market power. However, one shipper, Torxen, has a portion of its production effectively captive to Campus’ services. Further, the existence of one competitor does not necessarily mean that a fully competitive market is operating. Though shippers on the Pipeline can use NGTL as an alternative, and in most cases the Complainants have done so26, this does not necessarily mean that the tolls on the Pipeline should be charged at any rate up to what might be considered a quality-adjusted rate charged by NGTL for the same full-path service, especially given that the systems operate in significantly different ways, with different service attributes, and access to different markets. Therefore, a higher degree of scrutiny on market power is appropriate.

With respect to Campus’ dealings with its shippers upon assuming ownership of the Pipeline, specifically termination of contracts, that alone does not constitute an abuse of market power.

Appropriate engagement with shippers and interested parties is particularly important when a pipeline seeks to use market-based tolls to ensure parties can freely and fairly participate in toll discussions with an understanding of the true risks and benefits that the pipeline seeks to allocate. The Commission acknowledges that Campus did engage shippers by providing term sheets, meeting with shippers, and offering to participate in alternate dispute resolution. However, the Commission finds Campus’ early cancellation of contracts in the face of a 15-month notice period for toll changes, coupled with deficient sharing of relevant information in that same time period indicates a lack of transparency27. This was not remedied until the regulatory process was commenced and Campus eventually responded to the Commission’s specific disclosure requirements. With respect to the statement in the transfer

26 Rockpoint, Pine Cliff and Torxen - Written Evidence of the Complainants, PDF at 12 of 39, C09222-2;

Complainants' Responses to Commission IR No. 2, PDF at 12, 14, and 16 of 24, C10050-2; Campus, Reply Evidence at 8 of 17, C10255-2.

27 The Commission’s finding should not be interpreted as making a finding about whether contracts were breached or not breached. Appropriately, the Commission was asked to consider whether there was unfair termination of the TSAs and not whether contracts were breached. The Commission may interpret contracts to the extent they are relevant to the Commission’s statutory authority concerning the just and reasonableness of tolls. In this case there was both a 30 day termination clause in the TSAs and a clause providing a 15 month notice period for toll changes.

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application that the applicants had no immediate plans to implement changes to the tolls and tariffs, once Campus was aware that the previous representation to the NEB was no longer fully accurate, it had an obligation to notify the CER and shippers.

With respect to the Complainants’ claims of duress and oppression, limited evidence and argument was tendered by the Complainants. In the Commission’s view, the Complainants have not made out a case for how duress or oppression specifically applies. As noted above, the Commission is persuaded that Campus did not engage fairly and transparently with its shippers throughout their dispute regarding tolls. However, given the lack of evidence and detail about what the test for duress or oppression is or how it should be applied (including whether this is within the Commission’s authority), the Commission dismisses these claims.

Recognizing the deficiencies associated with the applied-for market-based tolls, the Commission considered whether cost of service tolls could be appropriate. The Commission considers that some of the cost information provided was useful and relevant, but finds that neither party succeeded in providing cost of service evidence that was conclusive. The Commission notes that the Complainants acknowledged, in their discussion of alternative relief, that a market-based toll in an appropriate range could be just and reasonable. Overall, the Commission finds that a cost of service methodology would not be appropriate for the Pipeline for the reasons articulated below.

First, the Commission accepts that the past and current circumstances of the Pipeline - namely, operating commercially at risk historically and currently facing challenges of sustained declining throughput28– support that Campus should have flexibility in toll setting to effectively attract volumes to the Pipeline. In particular, the Commission is persuaded that such flexibility is appropriate to help with the viability of the Pipeline in a period of declining throughput and significant contract transitions.

Second, shippers on the Pipeline have indicated a desire for certainty with respect to tolls on the Pipeline. With the expiry of long term contracts pending and associated throughput uncertainty, a cost of service tolling regime would not provide toll predictability and could result in toll instability.

Finally, if the Pipeline were required to operate on a cost of service basis it would have to forecast annual revenues and expenses in consultation with shippers, perform annual toll recalculations, modify existing contracts, and file additional information on a regular basis. It may also have to use a deemed capital structure, earn a regulated ROE, and maintain full regulatory accounting records. The Commission considers this administrative burden is likely excessive in Campus’ circumstances.

After weighing the evidence of this proceeding and considering the current circumstances of the Pipeline, the Commission has decided to approve a cost-informed toll range within the existing toll framework for the Pipeline. This framework includes being regulated as a Group 2 company, offering term-differentiated firm tolls, and managing its risks outside of a cost of service methodology. In setting a cost-informed toll range, the Commission has used the cost information provided by both parties with a view to determining a toll range between the market-based tolls applied for by Campus and the previous AltaGas tolls urged by the Complainants. Under a tolling method that is not purely cost of service, the consideration of costs must be weighed against the balance of risks shared between the Pipeline and its

28 Campus, Reply Evidence, at 12 of 17, C10255-2.

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shippers. In considering the current complaint, costs can assist in determining the reasonableness of the tolls when framed by the risk balance between parties. The Commission assessed the following factors:

Regarding rate base and depreciation, the Commission accepts the 2018 rate base, as agreed upon by Campus and the Complainants. However, the Commission finds that Campus has not established a rational basis for significant changes to its depreciation rate. In particular, the Commission notes that Campus has made different statements about the economic life of the Pipeline for different purposes. Given the contradictions and lack of detailed evidence to support changes to the underlying assumptions, such as a depreciation study, 29 the Commission gives little weight to Campus’ new ten-year estimate of remaining economic life of the Pipeline. For the purposes of this proceeding, the Commission agrees with the Complainants that the depreciation rate of 2.5 per cent per year should continue to be used.

The Commission gives more weight to Campus’ proposed allocation method based on the capacity of each pipeline. An allocation based on annual throughput, such as the Complainants’ proposed allocation method, would result in costs being transferred back and forth between the North and South Suffield pipelines from year to year. This would not lead to stable and predictable tolls. Allocating the costs based on variable throughput would also be less aligned with the cost causation principle as the majority of the costs are relatively fixed.

With respect to cost of capital, the Commission does not accept that Campus should use the actual cost of capital for the suite of assets it acquired, some of which may be more risky than the Pipeline. Conversely, there is limited application for the comparable entities provided by the Complainants. The Commission believes a reasonable cost of capital would be higher than that proposed by the Complainants as the Pipeline faces higher risk due to throughput risk, low utilization, and the presence of NGTL as a competing pipeline. As the Pipeline is a relatively small pipeline with a smaller, variable shipper base, the ROE is likely closer to that which would result from Campus’ proposed ROE. A more moderate capital structure than proposed by Campus would be appropriate. Therefore, the most reasonable cost of capital lies in between the proposals submitted by Campus and the Complainants.

Finally, with respect to throughput, the evidence indicates throughput is declining and is increasingly supplied by uncommitted volumes30. No significant evidence was tendered to establish that the declines are likely to reverse. The Commission is of the view the most reasonable assumption is that throughput will continue to decline somewhat. Campus will be required to file throughput data so that interested parties will be informed of actual throughput levels.

Complete cost of service information was not provided to the Commission and a true cost of service toll for service on the Pipeline cannot be exactly determined. However, using the agreed upon rate base, Campus’ cost allocation methodology, the Complainants’ depreciation rate and a moderate cost of capital, the Commission estimates that a cost-based toll would likely fall within the range of the previous five-year firm toll of $0.165/GJ and

29 The Commission gave some weight to the argument of the Complainants that there is previous NEB

precedent that changes to pipeline methodology should be underpinned by comprehensive analysis. See NEB, Reasons for Decision – TransCanada PipeLines Limited, RH-1-2002, July 2003.

30 Campus, Response to Commission IR No. 1 at 10 of 12, C08291-2.

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the proposed five-year firm toll of $0.22/GJ. The Commission finds that tolls within this range should adequately protect shippers against Campus’ potential ability to exert market power, while still providing Campus sufficient opportunity to be reasonably compensated. The Commission finds that a toll in the above range is just and reasonable and, on that basis, directs Campus to re-issue term differentiated tolls not exceeding $0.22/GJ.

The evidence provided does not establish that the Pipeline is likely to earn an excessive return based on the information currently available, particularly given that realized rates of return on the Pipeline will fluctuate – a risk accepted by Campus. The Commission never waives its authority to examine whether the returns earned over time by a pipeline are excessive, even if a market-based toll is approved. If circumstances change in the future, a new toll proposal or a complaint may be brought forward. However, the Commission encourages Campus and its shippers to work together to find market solutions in the future.

Term Differentiated Fixed Tolls

The Commission accepts that term differentiated fixed tolls have the benefit of toll stability over a fixed term and incent longer contracting on the Pipeline. Shippers on the Pipeline have indicated a desire for certainty with respect to tolls on the pipeline. By 1 May 2021, Campus is required to file with the CER a toll filing that includes term differentiated firm service tolls not exceeding $0.22/GJ. Campus must include a two-year firm toll as a recourse toll. Depending on the balancing of risks and benefits, the two-year firm toll may or may not include all benefits awarded to longer term commitments such as the right to use ITp service, discussed further below. Campus bears the risk of underutilization and ultimately fundamental risk. Campus should set tolls that send the proper price signals to the market and increase utilization.

Interim Tolls for Firm Service

The Commission did not receive submissions regarding the interim tolls for firm service. The FT tolls to be filed by Campus are approved as final, effective as of the date of this decision and retroactive to the date they were made interim.

Regulatory Filing and Disclosure Requirements

There was considerable dispute amongst the parties regarding the level of cost of service detail to be provided in response to a complaint. With respect to the financial regulation of Group 2 companies, the Filing Manual specifies that every Group 2 company has a responsibility “to provide its shippers and interested parties with sufficient information to enable them to determine whether a complaint is warranted.” A Group 2 Company is also required to make copies of tariffs and supporting financial information readily available. When a complaint is filed, Guide P of the Filing Manual indicates that the Commission may require some or all information required of Group 1 companies as specified in sections P.1 to P.5. With respect to this Application, in its letter of 21 February 2020, the Commission directed Campus to provide the information set out in parts P.1 to P.5. It was not until the revised Application was filed on 26 June 2020 that both the Complainants and the Commission had sufficient financial information to assess whether the tolls proposed by Campus were just and reasonable. In this case, Campus should have offered a more timely response to the Complainants’ requests for financial information.

Nothing in the Filing Manual, the Group 2 framework, or prior decisions of the NEB or Commission relieves a Group 2 pipeline of the obligation to furnish justification, which includes supporting financial information, for proposed tolls which are the subject of a

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complaint. The Commission expects its regulated companies to provide adequate information upon request from the CER and, at all times, to engage fairly and transparently with its shippers and interested parties. Specifically, the Commission reiterates that it is imperative that as a Group 2 pipeline, Campus must share underlying financial information, including the information that would be used in cost of service calculations, with its shippers when requested regardless of the toll methodology used on the Pipeline.

The Commission is not making compliance findings at this time. However the Commission reminds Campus that the Gas Pipeline Uniform Accounting Regulations require a Group 2 company’s accounting records to provide sufficient information to fully explain the facts pertaining to all entries made in the accounts and maintain records that may be useful in determining the history of or facts pertaining to any transaction.

Additional Commission Direction

To encourage transparency in Campus’ relationship with current and potential shippers, the Commission directs Campus to provide three months of notice for changes to firm service tolls and IT tolls31. This does not apply to the discretion regarding IT tolls discussed in section 4.1. This will give shippers time to review proposed changes, seek additional information, and file a complaint with the CER if warranted. Campus is required to include this notice provision in its CER tariff. The revised tariff must be filed with the CER by 1 May 2021.

Campus is required to file traffic data with the CER as discussed in section 4.1 and outlined in Condition 3 in TG-003-2021 (Appendix II). Traffic data and financial information can be used in the future to approximate the pipeline’s notional cost-based tolls and ROE. The Commission believes this data will assist Campus and its shippers in any future negotiations. If Campus and its shippers cannot reach agreements, better data will be available in the event the Commission is required to make a decision regarding Campus’ tolls in the future.

The Commission expects that in the longer term, with the guidance and direction set out in this decision, the accounting and reporting requirements and the sharing of information, the pipeline and shippers can return to a cooperative relationship marked by transparency and resulting in tolls and terms of service that are accepted by the market.

4. Interruptible Transportation Tolls

4.1 IT tolls

Views of Campus

Campus proposed to increase its IT tolls on the Pipeline from $0.1815/GJ to $0.32/GJ for IT service. Campus also requested the Commission grant Campus the discretion to post a revised IT toll from time to time based on Campus’ assessment of prevailing market conditions, in an amount equal to or less than the proposed IT toll.

Campus stated that the markets have evolved over the last 20 years. Throughput on the Pipeline has declined steadily since 2006, with a return to 2017 levels after a temporary uptick in 2018 and 2019.32 As of June 2020, there were only two firm service shippers on the

31 See Condition No. 2 in Appendix II. 32 Campus Final Argument, at 6-7 of 53, C10422-2 which also references Campus evidence.

Letter Decision Page 20 of 32

Suffield System, and only one of them shipped gas on the Pipeline. That shipper has a declining volume commitment under the final years of its contract, with the majority of those volumes to be shipped on the South Suffield Pipeline. Campus’ shippers have indicated a preference for shorter-term firm contracts of one to five years, and for interruptible service as the gas supply available in the area served by the Suffield System is declining. The Pipeline has averaged only 35 per cent utilization over 2018 through mid-2020, with the majority of volumes increasingly shipped on an interruptible basis. This virtually guarantees to IT shippers that any IT volumes they nominate will be transported without interruption.

Campus stated that it is attempting to remain competitive with NGTL, with whom it competes for volumes. Discretionary IT tolls will allow Campus to improve its flexibility to adapt to the constantly changing dynamics of today’s market for natural gas transportation in the region it operates. Campus needs this ability to manage its risks and compete in today’s environment.

Campus referred to RH-003-2011, which provided the ability for TCPL to use discretionary pricing for interruptible services, and said market forces should be met with market solutions that can help to ensure the pipeline remains viable. Citing the same decision, Campus submitted that to require it to provide service on cost of service based tolls would “be an inefficient and non-sensical outcome” and would result in tolls that Campus could not charge in the market.

In response to a proposed condition the Commission provided to parties for comment, Campus had no objection to providing traffic data to the CER. However, it noted that some or all of that data may have some commercial sensitivity, and so if this condition were imposed, Campus would reserve the right to request that it be permitted to file some or all of this data on a confidential basis.

Views of the Complainants

The Complainants believe that a ten per cent premium on the Complainant-calculated cost of service toll is appropriate. This aligns with the premium previously charged by AltaGas for IT service compared to its shortest-term toll, as well as the premium charged for IT service on the NGTL System.

The Complainants provided NGTL toll data showing that the IT receipt toll at NGTL Princess is $0.134/GJ and the IT delivery toll is $0.205/GJ at Empress, which is the NGTL path that provides similar service to the Pipeline.

The Complainants submitted that a higher IT premium would drive excess return for the Pipeline relative to a reasonable return as determined by an appropriately applied cost of service methodology. While it may discourage a shipper with true firm requirements from using interruptible service, it would also discourage interruptible use by shippers with true interruptible requirements.

The Complainants argued that requiring Campus to file traffic data would be helpful to all parties, particularly in the event variable IT pricing is adopted, since it would assist in the assessment of the effectiveness of price signals in attracting incremental volumes to the system. If toll pricing, particularly IT toll prices, fail to attract volumes to the system, the Complainants suggested it may be appropriate for the Commission to adjust any IT toll range it sets in this proceeding rather than requiring shippers to incur the considerable expense and the considerable delay involved in a formal toll complaint process.

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Rockpoint submitted that it connected its Suffield gas storage facility to the Pipeline to provide the option of delivering gas to either the AECO/NIT market via NGTL or to Burstall via the Pipeline when gas is being withdrawn from storage. Rockpoint submitted that its connection to the Pipeline cost $1.1 million and became operational on 29 January 2019. Rockpoint delivered volumes to Campus for a total of 33 days in 2019. After Campus’ termination of its TSA, Rockpoint did not deliver to the Pipeline.

Pine Cliff submitted that it entered into a service agreement with Campus in 2018 so it would have the option of using NGTL or using a third party pipeline to access the Pipeline. Pine Cliff entered a firm contract with the third party pipeline for 2018 and 2019 and shipped on the Pipeline every day of 2018 and 2019. Pine Cliff agreed to Campus’ new terms because Pine Cliff needed to meet commitments under its agreement with the other pipeline. When that agreement expired, Pine Cliff stopped using the Pipeline.

Torxen submitted that it has used the Pipeline every day since December 2017 when it acquired assets from another company. Torxen’s Tide Lake, Princess West and Princess East facilities only have the ability to deliver varying volumes to the Pipeline. In April 2019, the Bantry facility was connected to the Pipeline at a cost of $3.51 million dollars. As of May 2020, the vast majority of Torxen’s sales volumes flow to NGTL and only the gas for which Torxen has no alternative option is being sent to the Pipeline.

Views of the Commission

When considering the relative value of services a pipeline offers, the Commission considers many factors such as the priority, availability and reliability of the service; the level of commitment required from the shipper; and flexibility or other desirable attributes provided by the service. The Commission finds that granting Campus the discretion to set tolls for IT service at $0.32/GJ or lower will provide Campus with the ability to respond to market circumstances and manage risks on the Pipeline.

Campus referenced the context of RH-003-2011 in its application and the Commission asked about potential comparisons to RH-003-2011 in an IR. In that decision, TCPL was granted pricing discretion for IT service and the NEB stated:

In the current circumstances of underutilization, users of discretionary services receive virtually guaranteed service whenever they need it, but pay for only a portion of the annual costs of the capacity, making it difficult for TransCanada to recover the costs of that capacity. In our view, allowing TransCanada to charge higher tolls for discretionary services will provide it with a better opportunity to recover the costs of that capacity from those who use it, during the period of time in which it is used.33

In RH-003-2011 portions of the Mainline were underutilized, as is the North Suffield Pipeline. IT shippers both here and in RH-003-2011 received virtually guaranteed access. The Commission assigns moderate weight to this comparison by Campus.34 The Commission similarly finds in this case that higher discretionary tolls are appropriate. Granting Campus

33 NEB Reasons for Decision, - TransCanada PipeLines Limited, NOVA Gas Transmission Ltd., and

Foothills Pipe Lines Ltd., RH-003-2011, March 2013, at 126 of 257. 34 The Complainants are correct to point out that paragraph 75 of the Campus written argument gets into

detail from RH-003-2011 that goes beyond the detail useful in an analogy to a past precedent. As a result, this submission at paragraph 75 was given low weight.

Letter Decision Page 22 of 32

the ability to charge discretionary tolls for IT service will provide Campus with a greater opportunity to recover the costs of the Pipeline.

The Commission was not persuaded by the Complainants’ arguments regarding price uncertainty. Shippers seeking certainty may contract for firm service. Campus’ introduction of a two year term for firm service is less onerous than the previous minimum of five years. Shippers may elect to contract for firm service and pay the annual costs related to the capacity they need. Shippers who sign up for firm service that grants rights to ITp service can also exercise those rights for variable volumes. Alternatively, shippers may find features of the IT services more attractive and accept the risk that at certain times of the year they may have to choose between paying high discretionary tolls or not using the pipeline.

The Commission accepts the proposed maximum IT toll of $0.32/GJ is competitive with full-path NGTL service to Empress. However, NGTL can be used in many different ways to meet the needs of different shippers. Campus does not only need to compete with the full path (receipt plus delivery) tolls on NGTL, it needs to compete with receipt only service, with delivery only service, with the secondary market, and with various combinations of those factors. As Campus has acknowledged, to effectively manage its risk it will need to set IT tolls lower than $0.32/GJ to respond to ever-changing market dynamics and the different services and markets available through NGTL.

As Campus is at risk for underutilization of the pipeline, it is incented to set tolls which make its pipeline attractive to potential shippers in order to maximize earnings. The maximum IT toll is known, and shippers may use that toll for planning purposes. There is a possibility of a lower toll depending on market conditions. In setting prices for IT service, Campus will implicitly be capped by tolls for FT and ITp service, tolls for various services on NGTL, and by competition from the secondary market.

While the Commission acknowledges the Complainants’ argument that the previous AltaGas rate for IT tolls remains more appropriate than the Campus IT toll at $0.32/GJ or lower, the Complainants did not acquire a right to indefinitely be offered an IT toll that had only a modest premium compared to FT tolls. For all the above reasons, the Commission finds that a market-responsive IT toll at $0.32/GJ or lower is just and reasonable.

By 29 April 2021, Campus must submit to the CER, for Commission approval, a method for communicating interruptible tolls to its shippers based on industry best practices. That submission should include a summary of consultations with interested parties, any outstanding concerns, and Campus’ attempts to address them. Current shippers, interested parties and the Complainants should all be served with this filing. Campus may begin charging the approved tolls on 1 May 2021. As this Pipeline continues to be regulated on a Group 2 basis, shippers always have the right to file an appropriately detailed complaint.

The Commission has already directed Campus to file with the CER a revised tariff. The tariff should include the method by which IT tolls will be posted. For clarity, Campus is not required to file these tolls with the CER unless Campus wishes to change the cap of $0.32/GJ.

The Commission directs Campus to file traffic data at key points on its system pursuant to Guide BB of the CER’s Filing Manual. The data should be as detailed as possible without compromising confidentiality. The data will be publically posted on the CER’s website so interested parties may access it, therefore filing confidential data would not be appropriate in these circumstances. Campus may work with CER staff to determine the key points for which traffic data should be reported. Campus may also discuss with its shippers any aggregation

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that may be necessary, for example, aggregating data for the entire Suffield system or aggregating data seasonally or annually.

4.2 Interim IT tolls

Views of Campus

On 27 June 2019, the NEB ordered that the Pipeline’s tolls be made interim effective 1 July 2019. Campus requested an Order from the Commission directing shippers who have received new firm or interruptible service on the Pipeline since 1 July 2019 to pay to Campus the difference between the interim tolls and the tolls payable under the Revised Tolls and Tariff for the interim period. Campus also requested the discretion to post a revised IT toll from time to time based on Campus’s assessment of prevailing market conditions, in an amount equal to or less than the IT toll proposed in the Revised Toll and Tariff. Campus also submitted that it removed the Annual Increase of Tolls and Charges notice because it desires the flexibility to adjust its IT tolls on a monthly basis in response to prevailing market conditions.

Campus submitted an illustrative monthly market-based Suffield System toll calculation to illustrate how it could use its discretion to decrease the IT toll in response to market conditions. Specifically, Campus showed the receipt and delivery tolls on NGTL along with the Empress transport day ahead index which is a secondary market that provides transportation from NIT to Empress and therefore competes with the Pipeline. Campus submitted that from July 2019 through November 2020 it would have hypothetically set IT tolls at $0.32/GJ for three months; at $0.18, $0.20 and $0.15/GJ for one month each; at $0.13/GJ for five months; and at $0.12/GJ for six months.

Campus clarified that it was not requesting the Commission impose tolls on the interim period consistent with these illustrative tolls. However, Campus noted the Commission has the authority to have reference to the entirety of the evidence on the record in determining the relief to be granted. In oral argument, Campus stated that it never had discretion to change tolls over the period covered in the illustrative example. It stated that it relies on Appendix A of its application for relief in respect of interim tolls. The IT toll listed in Appendix A is $0.32/GJ.

Views of the Complainants

The Complainants submitted that their calculated cost of service tolls are just and reasonable and are reflective of Campus' cost of service during the interim period and prospectively. The Complainants requested these tolls should be made final for the interim period. The Complainants submitted that Campus' behaviour throughout the proceeding delayed the setting of final tolls. The Complainants were also concerned that Campus circumvented the 15-month advance notice requirement of any toll increase set out in the then-existing contracts and made misrepresentations to the NEB at the time of the transfer application. The Complainants submitted that in these circumstances, Campus should not be permitted to benefit from its misconduct in the finalization of interim tolls, and that any increases should only operate prospectively. The Complainants also submitted that because Campus' actions resulted in reduction in use of the Pipeline, Campus should be required to return carrying costs during the interim period. The Complainants submitted that refunds and carrying costs should be calculated for the interim period and provided to shippers. In the alternative, the Complainants request that the Commission set the tolls for a period of 15 months from the date of the Commission's toll order, which is equivalent to the toll change notice period that

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the Complainants negotiated in their TSAs with AltaGas. In essence, this would simply be holding Campus to the bargain struck in the TSAs.

Views of the Commission

Given that the Commission made an interim order regarding tolls, pursuant to section 232 of the CER Act, the Commission may make an order directing the pipeline company to refund or recover tolls in the manner the Commission deems to be appropriate. Typically if the final tolls found to be just and reasonable are higher than the toll set in the interim toll order there would be a recovery, and if final tolls are lower there would be a refund.

The Commission has not approved Campus’ or the Complainants’ proposed tolls, but has instead approved a range of IT rates which may be set at $0.32/GJ or less based on market conditions. This discretion was approved along with an alternative to contract for FT service on reasonable terms with just and reasonable tolls. When Campus proposed an IT toll of $0.32/GJ and tolls were made interim, the Complainants stopped moving IT volumes through contracts with Campus to the extent possible, even despite some recent capital investments to connect to the Suffield System. The Complainants were also unwilling to contract for FT service at the toll level and terms proposed by Campus.

The Commission expects that if Campus had been granted pricing discretion with a range of $0.32/GJ or less during this time period, Campus would have adjusted its IT tolls to meet the market and attract additional throughput to its pipeline. It is possible that Campus would have kept its IT tolls at the maximum of $0.32/GJ even as throughput continued to decline and IT traffic dwindled, but this would have been inconsistent with Campus’ submissions that it is competing with the NGTL pipeline system. The Complainants may have elected to contract for FT service if the tolls were in the range approved by the Commission in this decision, along with reasonable terms and conditions. However, this alternative was not available to the Complainants during the interim toll period.

The Commission is not aware of a discretionary toll being approved retroactively, and the parties in the proceeding did not provide sufficient evidence for the Commission to determine the discretionary toll levels over the interim period. The interim toll for IT service was $0.1815/GJ. Without knowing the market-responsive IT tolls that would have been set in the interim period, the Commission finds it impossible to calculate refunds or recoveries. The Commission notes that over the interim toll period, the simple average of the illustrative IT tolls provided by Campus is $0.168 cents. The interim toll of $0.1815/GJ is slightly higher than the simple average of the illustrative tolls filed by Campus and is in the approved range of IT tolls of $0.32/GJ or less. Factoring in all this information and in considering that Campus had the overall onus to support its position on this issue, the Commission makes the interim IT tolls final for the period of 1 July 2019 to 30 April 2021. The end result is that Campus did not meet its onus with respect to its request for an interim toll refund. For clarity, the Commission is ordering Campus not to refund or recover any part of the IT tolls charged under the interim order.

The Commission declines the Complainants’ request to base this lack of recovery on conduct by Campus. The Commission also declines to assess carrying charges against Campus. The Commission has already provided the direction above to Campus on the concerns raised by the Complainants. The Complainants did not cite authority for their proposal to base a lack of recovery or carrying charges on conduct by Campus.

Letter Decision Page 25 of 32

5. Terms and Conditions

5.1 Billing date

Views of Campus

Campus proposed to change the billing date in Article 7.2(a) of its general terms and conditions. Instead of billing on or before the 20th of each month, Campus proposes to bill “on or before the Day succeeding the Alberta Energy Regulator Volumetric Data and Waste Management Reporting Deadline of each Month” (the “AER reporting date”). Campus submitted that the AER reporting date is an industry standard date well known to current and prospective Suffield System shippers. Tethering the billing date to the AER reporting date ensures that Campus’ billing cycle will be in line with other important industry dates, and will automatically adjust if the AER reporting date is changed in the future.

Views of the Complainants

The Complainants did not object to this change.

Views of the Commission

The Commission approves the proposed change in Campus’ billing cycle to align with industry standards.

5.2 Abandonment funding

Views of Campus

In its 5 June 2019 revised toll filing with the NEB, Campus proposed to collect a $0.02 abandonment fee in addition to its revised tolls. On 20 September 2019, Campus filed further revised firm service tolls that no longer included any abandonment fee. Campus also no longer intended to collect the proposed abandonment fee on IT service. Campus submitted that it is self-funding the abandonment liabilities for the Suffield System, which obligation is secured by a surety bond posted with the CER.

Views of the Complainants

Rockpoint originally objected to the $0.02 abandonment fee proposed by Campus in its 5 June 2019 toll filing on the basis that the surety bond in place already covered abandonment costs. Further, Rockpoint said Campus had not obtained approval from the NEB to charge an abandonment fee, or otherwise provided information to shippers to explain the abandonment fee. Campus also proposed to increase the abandonment fee each year to account for inflation. Rockpoint had concerns with this since abandonment obligations are calculated on a net present value-basis and, per MH-001-201335, all abandonment surcharges collected from shippers must be put into a trust that is expected to earn a certain return which would be realized by the trust. As noted in the Application, Campus is no longer proposing to collect an abandonment fee as part of its "market-based tolls".

35 NEB Reasons for Decision – Set-aside and collection mechanisms, MH-001-2013, May 2014 A60676.

Letter Decision Page 26 of 32

Views of the Commission

Campus is using a surety bond to fund its abandonment funding obligation. The annual cost of this surety bond has been included in all cost of service toll calculations so abandonment funding costs do not need to be dealt with further in this proceeding.

All pipeline companies must comply with MH-001-2013 and all past direction from the NEB and present and future direction from the Commission. As a company using a set aside mechanism other than a trust, Campus must file Appendix XVI of MH-001-2013 with the CER by 31 January each year and must provide an update on the status of the Pipeline. This includes any changes in cost estimates, or other components that could prompt material changes in plans to fund abandonment. The Commission directs Campus to provide an estimate of the timing of the abandonment of its facility as well as any supporting information with regards to these estimates at the time of the next Set Aside and Collection Mechanism Review.

5.3 Annual Toll Increase

Views of Campus

Campus submitted that it removed the Annual Increase of Tolls and Charges notice because it desires the flexibility to adjust its IT tolls on a monthly basis in response to prevailing market conditions.

Campus noted that from a practical perspective an enhanced notice provision would have most relevance to any proposed increase to the IT toll cap because firm tolls will be locked in for the duration of their term. Campus does not object to being required to provide additional notice to its shippers of any proposed changes to its tolls or charges beyond filing those changes with the CER - for instance, being required to send a copy of all changed tolls and charges to all shippers, regardless of whether or not it might immediately affect them; posting tolls on its website; or both. However, Campus believes it should continue to operate and be regulated on a complaint basis as a Group 2 company.

Campus suggested that a 30-day notice period would be consistent with the continued inclusion of a 30-day termination clause in the TSA and might be reasonable. Alternately, a notice period tethered to bi-annual toll changes made on the NGTL system could be reasonable in the circumstances of the competitive market dynamic.

Views of the Complainants

The Complainants were concerned that removal of the notice provision would also allow Campus to adjust firm service tolls on a monthly basis, which would be a further disincentive for parties to contract for firm service. Without an adequate notice provision for adjustment of tolls in a TSA, a shipper would have no certainty with respect to the tolls it would be paying on the Pipeline in any given month. Further, as a Group 2 company, Campus need only file updated tolls with the CER in order to effect toll changes. This would likely lead to disputes between Campus and its shippers, including further complaints, which is contrary to regulatory efficiency. The Complainants requested that the 15-month notice provision, or a similarly reasonable notice provision not less than 12 months, be included in the TSA.

Letter Decision Page 27 of 32

Views of the Commission

The Commission has approved an IT toll of $0.32 or lower. Campus may set IT tolls at any price within this range and such changes would not be considered a toll increase. As discussed in section 4.1, Campus must submit to the CER, for Commission approval, a method for communicating interruptible tolls based on industry best practices. That submission should include a summary of consultations with interested parties, any outstanding concerns, and Campus’ attempts to address them. The Commission does not accept that approval of discretionary tolls within a specified range necessitates removing notice requirements for increases in tolls outside of that range.

The Complainants’ concern about adjustments to firm tolls on a monthly basis has been addressed by Campus’ commitment to keep FT tolls consistent for the length of any FT contract that may be entered into.

If Campus wants to change tolls for future FT contracts, or change IT tolls outside of the approved range, the Commission requires Campus to provide notice to shippers as discussed in section 3. The Commission notes that Campus did not object to inclusion of a notice period, and recommended the notice period be 30 days, or on bi-annual dates. The Commission approves modifying the existing notice period to three months as discussed in that section. The Commission is of the view that this would provide Campus time to consult with interested parties. It would also provide shippers with the opportunity to obtain additional information from Campus about the basis for the proposed tolls, attempt to resolve any concerns, and file a complaint with the CER, if required.

The Commission has already directed Campus to file a revised tariff with the CER. The tariff should include the notice period for modifying tolls. Predictability and stability are desirable attributes of tolls. Therefore the Commission encourages Campus to post IT tolls as far in advance as practically possible, while balancing the need to be responsive to market forces. The Commission expects Campus and interested parties to work together to determine an appropriate balancing of interests.

5.4 Interruptible Preferred Service

Views of Campus

Campus introduced ITp which has priority over regular IT service but not firm service volumes. Campus introduced ITp in response to shipper feedback requesting firm service that includes flexibility while still incorporating priority of service. Campus submitted that the intent of this service is to provide firm service shippers transportation service that has priority over IT service at an amount below the IT toll with no additional minimum quantity obligation. ITp allows shippers that subscribe for firm service to ship a certain percentage of their firm service volumes on a priority interruptible basis at a $0.02 premium over the shipper’s applicable firm service toll as shown in the table below.

FT Term ITp Firm Capacity Portion ITp Toll (Term toll + $0.02)

2 years 40% $0.26/GJ

5 years 50% $0.24/GJ

10 years 100% $0.23/GJ

20 years 300% $0.22/GJ

Letter Decision Page 28 of 32

ITp service features are meant to provide firm service shippers with greater operational flexibility and therefore incent shippers to subscribe for firm service on the Suffield System. In turn, this would provide the potential for longer-term throughput stability and revenue for the system.

Campus submitted that any volumes shipped through ITp service result in a cost savings to firm service shippers relative to the IT tolls they would otherwise incur to ship such volumes and the difference in pricing is associated with the term commitment of firm service shippers compared to the lack thereof for interruptible service shippers.

Campus provided daily average annual throughput data on the Pipeline from 2017 to 2019. These data show that firm throughput steadily declined and interruptible throughput steadily increased. Campus explained that IPC, a shipper under a legacy agreement, has a renewable 20-year firm-service contract which expires on 31 December 2022, and is renewable for successive one-year terms thereafter.

Views of the Complainants

The Complainants objected to the adoption of ITp service on the Pipeline as it would further erode the value of IT service. The Complainants submitted that if the Commission were to approve ITp service, IT tolls should be set lower than ITp tolls in order to reflect the latter's higher priority of service.

The Complainants argued that the introduction of ITp service represents a material change in the service offered on the Pipeline. This is particularly the case for IT service shippers, who will be prejudiced in their ability to utilize the Pipeline by the new priority service. In the Complainants' view, Campus did not justify the need to offer ITp service and should not be permitted to do so.

Views of the Commission

The Commission encourages its regulated companies to consult with interested parties and explore innovative ways to find market solutions.36 The Commission has taken into consideration that FT throughput on the Pipeline has been declining and encourages Campus’ attempts to respond to shipper feedback and introduce flexible new services. The Commission accepts Campus’ assertion that ITp service features provide firm service shippers with greater operational flexibility and may incent shippers to subscribe for firm service. Accordingly, the Commission approves ITp service on the Pipeline at an amount corresponding with the shipper’s FT service toll plus $0.02.

Campus focused on the commitment required by shippers in the form of FT service contracts, with longer contract terms required to obtain greater portions of ITp service. Campus also noted that ITp being a feature of FT contracts makes FT contracts more desirable. The Commission finds that these factors support ITp having a lower price than IT service.

36 This is consistent with NEB, Reasons for Decision - NOVA Gas Transmission Ltd – MH-031-2017, North

Montney Mainline Variance GC-125, May 2018 at 41.

Letter Decision Page 29 of 32

The Complainants focused on the higher priority of this service and submitted that ITp should therefore be charged at a higher amount compared to IT service. The Commission finds that the Complainants’ position fails to sufficiently account for the commitment required in order to qualify for ITp service.

Although Campus stated that ITp would be priced at an amount lower than the IT service toll, this may not always be the case, as the Commission has given Campus the discretion to lower the IT toll when market conditions warrant. The Commission notes that shippers with FT service would have the choice of using IT service or ITp service in circumstances where the IT tolls may be lower than the corresponding ITp toll.

5.5 Failure of Supply and Market

Views of Campus

Campus amended the general terms and conditions regarding the price at which the transporter will sell gas to or buy gas from the customer in the event of a discrepancy between a customer’s receipts and deliveries on the system. Given that shippers are the most knowledgeable about their gas supply and downstream demand, and given that the customer has the obligation to balance its quantity of gas, Campus believes it is reasonable for shippers to bear the risk of their receipt and delivery volumes falling out of balance.

Previously, Article 5.4 of the general terms and conditions stated the transporter could charge the customer “130% of [transporter’s] highest cost of gas on that day” if the customer’s deliveries on the system exceeded its receipts. Now Article 5.4 provides that the customer will be charged “the highest price transacted at the AECO/NIT index published by CGPR plus the higher of the Empress transportation tariff published by TCPL and the Empress – AECO/NIT market differential published by CGPR on that Day…” to balance the customer’s account.

Article 5.5 of the general terms and conditions previously provided that the transporter could purchase gas from the customer at “seventy (70%) percent of [transporter’s] lowest purchase of gas on that day” if the customer’s receipts exceed its deliveries on the system. Now Article 5.5 provides that the transporter “will purchase from the customer at the lowest price transacted at the AECO/NIT index published by CGPR less the lower of the Empress transportation tariff published by TCPL and the Empress – AECO/NIT market differential published by CGPR on that Day…” to balance the customer’s account.

Campus submitted that specifying the AECO/NIT index as the benchmark for the gas price is reasonable, based on a readily identifiable market price and provides added clarity for both Campus and its shippers. The Empress tariff or differential is representative of downstream markets that Campus’ shippers have access to using the Suffield System.

Views of the Complainants

The Complainants submitted that the proposed pricing mechanisms appear to heavily favour the transporter and may be considered punitive. This represents a significant and unwarranted shift in risk to the shipper. Further, the articles of the general terms and conditions do not clearly contemplate or outline the interplay between upstream/downstream force majeure events on interconnected pipelines that may impact supply or delivery on the system and that are beyond the control of the shipper. If no relief is provided to a shipper in such cases, while the transporter is insulated from associated risks pursuant to Article 5.7, there may arise an unreasonable imbalance in the TSA.

Letter Decision Page 30 of 32

The Complainants requested that the pricing mechanisms in Articles 5.4 and 5.5 from the AltaGas TSA be reinserted, and that Campus include language to clarify the nature of the obligations where there are upstream/downstream force majeure events on interconnected pipelines.

The Complainants submitted they are concerned that Campus is proposing to ensure that shippers assume the total risk of supply or market failures, and that Campus is completely insulated from such risks. The Complainants’ position is not that Campus assume all risks of such force majeure events, but that a sharing of those risks between the carrier and shippers would be just and reasonable. This is particularly the case where the pricing mechanisms in Articles 5.4 and 5.5 heavily favour Campus and are punitive to a shipper.

Views of the Commission

The Commission does not approve the proposed changes to the wording in Articles 5.4 and 5.5 of the TSA and instructs Campus to revert to the previous provisions. The Commission acknowledges that it is reasonable for shippers to bear the risk of their receipt and delivery volumes falling out of balance as they are the ones who tender volumes and determine the receipt and delivery points for their tendered gas. Where a shipper fails to ensure this balance, it is reasonable for the pipeline to be compensated for the costs of the actions it must take to ensure its pipeline system continues to operate within normal parameters. It may also be appropriate for these provisions to provide a disincentive for this behavior. However, Campus did not provide any evidence that failure of supply or market has become problematic, nor that greater disincentives are required.

The Commission agrees with the Complainants that upstream/downstream force majeure events on interconnected pipelines may impact supply or delivery on the system and are beyond the control of the shipper. This should not create an opportunity for the pipeline to earn excessive profits. The Commission notes that the previous provisions contained a 30 per cent premium on the cost of gas purchased in the event of failure of supply and a 30 per cent discount on the cost of gas in the event of failure of market. In both cases these costs were related to gas that was actually purchased by the transporter, whereas the proposed provisions seek to link the costs to the most extreme (highest or lowest priced) transactions on the AECO/NIT index. Campus did not provide any evidence of how these extreme transactions are relevant to the costs actually incurred by the Pipeline to balance its receipts and deliveries or otherwise provide appropriate justification for the proposed changes.

5.6 Testing of Measuring Equipment

Views of Campus

Campus revised Article 4.3 of its general terms and conditions to require that the shipper, rather than the transporter, bear the costs of conducting standardized testing to ensure the accuracy of measurement equipment at the shipper’s receipt and delivery points. Campus submitted that it implemented this change because many Suffield System shippers own the measurement equipment at their receipt points and it is reasonable for shippers to bear the costs of ensuring the accuracy of their own measurement equipment. For shippers relying on Campus’ measurement equipment, Campus believes requiring these shippers to pay for periodic testing is reasonable compared to the alternative of Campus requiring such shippers to install and maintain their own measurement equipment. Under a market-based toll regime where Campus is not assured the recovery of its invested capital or costs of operation,

Letter Decision Page 31 of 32

Campus believes it should be permitted to enter into commercial arrangements with its shippers that allocate costs and risks as mutually agreed.

Campus explained that its approval of tests and methods is required to ensure consistency across the transmission system and ensure the standards meet regulatory requirements. Given the tests and methods for verifying the accuracy of measuring equipment previously required transporter approval, this change was made to simplify the agreement. The shipper still has the right to exceed the transporter’s requirements to meet their own should they so choose. Campus does not believe there has been a material shift in risk to the shippers as a result of this change. Campus stated that it maintains and completes much of the calibration and testing on the legacy devices at receipt points but has been shifting the responsibility with many of the new tie-ins to the customer given they already have and maintain meters. This was done to keep the tie-in and ongoing maintenance costs as low as possible. Campus also submitted that the change in frequency from three months to 90 days was not material and there is a provision to change this upon the reasonable request of either party.

Campus estimated that the cost for instrumentation, testing and analysis would be $78,000.00 for 2020 for the entire Suffield System and these costs were included in Campus’ illustrative cost of service tolls.

Views of the Complainants

The Complainants observed that with the proposed change, the expense of testing measuring equipment has been moved from the transporter to the shipper in all cases. The Complainants submitted that the fact that some shippers may own the measuring equipment does not justify the proposed shift of costs. The Complainants requested that Campus revert to the language from the AltaGas TSA in Article 4.3. Pursuant to the change, the shipper will be responsible for the costs of all tests of measuring equipment, regardless of whether such tests are requested by the shipper. Under the AltaGas TSA, the transporter bore the costs of tests of measuring equipment, except where a shipper-requested test showed an inaccuracy of less than two per cent (in which case, it was the shipper’s expense). The Complainants submitted that this is appropriate, as the transporter should be expected to pay the expense of ensuring the integrity of its system, including in relation to measurement of gas, while still holding a shipper accountable if a potentially unnecessary test has been requested.

Views of the Commission

The Commission generally accepts Campus’ position that it should be permitted to enter into commercial arrangements with its shippers that allocate costs and risks as mutually agreed. The Commission notes that the Complainants, who were all shippers, do not agree to this shifting of costs. Campus did not provide evidence of the proportion of measuring equipment owned by Campus versus its shippers, the proportion of the costs of testing that is currently paid for by Campus versus its shippers, nor data on how these arrangements have changed over time. As discussed in section 4.1, shippers on the Pipeline have already constructed interconnecting equipment. In the interest of transparency and regulatory certainty, the Commission would not approve a change to an existing commercial agreement in the absence of compelling evidence. Campus did not provide evidence of why its proposed change would result in a better outcome. Therefore the Commission does not approve the proposal for shippers to pay for all costs of testing at this time.

Letter Decision Page 32 of 32

6. Conclusion

Toll Order TG-003-2021 gives effect to this decision.

Campus is directed to serve a copy of this decision on its shippers on the Suffield System and interested persons.

The Commission thanks parties for their helpful submissions and participation in the hearing process.

Yours sincerely,

Signed by Jean-Denis Charlebois Secretary of the Commission Attachments c.c. Mr. Jason Dubchak Vice President, Legal and Regulatory Rockpoint Gas Storage Canada Ltd. Email: Jason.dubchak@rockpointgs.com Mr. Terry McNeill Chief Operating officer Pine Cliff Energy Ltd. Email: tmcneill@pinecliffenergy.com Mr. Bradley D. McFadden Director, Corporate Affairs and General Counsel Torxen Energy Ltd. Email: bmcfadden@torxen.net

April 2021

Calgary, Alberta

Attachment to Letter Decision dated 7 April 2021

Page 1 of 1

Appendix I

Past Rulings

Ruling No. 1 – Motion directing Campus to file a revised application that contains all the information required by Guide P issued on 5 June 2020 The Commission directed Campus to refile its application to include the information required in Guide P (including information already filed and the information in Appendix A), for the North Suffield Pipeline, disaggregated from the South Suffield Pipeline. Ruling No. 2 – Request for Confidentiality issued on 31 July 2020 The Commission granted confidential treatment of the 2019 Audited Financial Statements of Campus Energy Partners LP, Campus’ parent company, to be filed in connection with Campus’ toll application in respect of the Pipeline. Ruling 2a – Motion to Compel and Request for Extension to File Evidence issued on 25 September 2020 The Commission established an expedited comment process and granted, in part, the extension request. Ruling No. 3 – Complainant’s Motion to Compel issued on 19 October 2020 The Commission partly granted the motion to compel full and adequate responses to information requests. The Commission also provided an updated Hearing Timetable.