Vector Pipeline Limited Partnership Remission Order: SI/2021-13
Canada Gazette, Part II, Volume 155, Number 8
Registration
SI/2021-13 April 14, 2021
FINANCIAL ADMINISTRATION ACT
Vector Pipeline Limited Partnership Remission Order
P.C. 2021-224 March 26, 2021
His Excellency the Administrator of the Government of Canada in Council, considering that it is in the public interest to do so, on the recommendation of the Minister of Natural Resources and the Treasury Board, pursuant to subsection 23(2.1) footnote a of the Financial Administration Act footnote b, remits $1,241,925 to Vector Pipeline Limited Partnership, representing the amount by which the cost recovery charge payable by Vector Pipeline Limited Partnership under the National Energy Board Cost Recovery Regulations footnote c for 2019 exceeds its revised cost recovery charge for that year.
EXPLANATORY NOTE
(This note is not part of the Order.)
Proposal
This Order in Council is to approve the remission of $1,241,925 to Vector Pipeline Limited Partnership (Vector) pursuant to subsection 23(2.1) of the Financial Administration Act, considering it in the public interest to do so.
Objective
The objective of this Order in Council is to remit the surplus cost recovery charges collected by the former National Energy Board (NEB) and by the Canadian Energy Regulator (CER) to Vector.
There is currently a credit balance of $1,241,925 owing to Vector, which was originally collected under the National Energy Board Cost Recovery Regulations (the Regulations). Subsection 17(3.1) of the Regulations provides the mechanism by which the credit balance is set off against Vector's future billings; however, it will take approximately 122 years to remit against future billings. Accordingly, remitting the credit balance through the remission order is reasonable and just in this circumstance.
Background
The CER recovers its operational costs from regulated companies under the National Energy Board Cost Recovery Regulations (the Regulations).
Every year, companies pay cost recovery charges based on size and commodity:
- Large companies footnote 1 pay charges based on the CER's annual costs, as allocated between the principal commodities regulated by the CER (i.e. oil, gas and electricity). These charges are typically large and regularly exceed $1 million;
- At the same time, large companies can apply for “cost of service relief” to reduce their charges if the estimated cost recovery charges are greater than 2% of their annual cost of providing service. The timeline for relief in a three-year cycle is described in the following table:
Year (Y) Step Before Y1 The company applies for relief based on estimated Y1 cost of service under section 4.1 of the Regulations. Y1 Relief (calculated based on estimated Y1 cost of service) is credited against Y1 cost recovery charge. Y2 The company confirms actual Y1 cost of service. Y3 The CER uses actual Y1 cost of service to adjust Y3 cost recovery charge under subsection 17(3.1) of the Regulations. - If relief is granted, the company receives a credit against future cost recovery charges (i.e. no payment is normally issued). The reduction of a company's cost recovery charge results in a corresponding increase in the cost recovery charges of other companies in that commodity group; and
- In contrast, intermediate companies footnote 2 pay an annual fixed levy of $10,222 and cannot apply for cost of service relief.
Vector, a regulated gas pipeline company, is a limited partnership that operates a gas pipeline from Dawn, Ontario, Canada, to Joliet, Illinois, United States of America, which provides a strategic connection for transporting gas from Western Canada to the Midwestern United States and Eastern Canada.
Prior to 2021, Vector was classified as a large gas pipeline company, as defined by the Regulations, because its annual costs of providing service to shippers exceeded $10 million. During the 2021 billing cycle, Vector was automatically reclassified as an intermediate pipeline company when its annual cost of service fell below this $10 million threshold. Vector, as of 2021 and as an intermediate gas pipeline company, only pays annual fixed levies of $10,222.
In October 2018, Vector, then a large gas pipeline company, became aware that its 2019 cost of service could entitle it to request cost of service relief. If granted, the relief would have reduced the amount of Vector's 2019 invoice; unfortunately, due to an administrative error, Vector missed the deadline prescribed in the Regulations by which it should have applied for the relief. On December 24, 2018, the CER advised Vector that it had rejected its application for the relief.
On January 9, 2019, Vector asked that the NEB reconsider its decision to reject the relief, as it could result in a significant increase in its 2019 fees and levies. In the context of Vector's request for reconsideration, the then NEB sought comment from the large regulated gas pipeline companies who would bear the cost of the adjustment as to whether to grant Vector the cost recovery relief despite missing the prescribed deadline. After receiving comments from other large companies in Vector's commodity group, the NEB decided on February 12, 2019, to not provide relief in 2019 (i.e. in Year 1), but instead to apply a credit adjustment against Vector's future cost recovery charges starting in 2021 (i.e. in Year 3).
In August 2020 (i.e. Year 2), Vector informed the CER that they would become an intermediate company in 2021, as they knew that their annual costs of providing service to shippers would fall below $10 million as per the Regulations. Had Vector remained a large company, it would have received the entire benefit of the credit in 2021. As intermediate companies only pay annual fixed levies of $10,222, it would now take approximately 122 years for Vector to use up the full credit owing to them. Based on the foregoing, Vector has requested that the CER provide a lump sum payment for the overall credit.
Implications
It is fair and in the public interest to remit the funds to Vector because
- the CER has, through the correct application of the Regulations, collected cost recovery charges relating to Vector's 2019 cost of service that exceeds the company's revised cost recovery charge for that year; and
- remitting the money provides an opportunity for Vector to make full use of $1,241,925 immediately, rather than the much more limited impact of receiving an annual recovery credit of $10,222 against its annual fees for approximately 122 years;
In order to remain transparent and accountable for the collection and use of public funds, the surplus funds will be remitted and returned to Vector.
Contacts
Canadian Energy Regulator:
Mark Power
Chief Financial Officer and Vice President, Performance and Results
Telephone: 403‑870‑5729
Email: mark.power@cer-rec.gc.ca
Jim Fox
Vice President, Regulatory Strategy and Coordination
Telephone: 403‑299‑3628
Email: jim.fox@cer-rec.gc.ca
Natural Resources Canada:
Jeannine Ritchot
Assistant Deputy Minister, Communications and Portfolio Sector
Telephone: 343‑292‑6110
Email: Jeannine.Ritchot@canada.ca