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Energie sans Frontieres: Gas & Electricity Converge Along the U.S.-Canadian Border

Fortnightly Magazine - April 1 1998

that will terminate in the same area¼ [W]hat will happen when all this capacity is constructed?"

One way to prove need is to conduct an open season, inviting shippers to bid on and sign "precedent agreements" for new capacity. What if the pipeline applies under the FERC's "optional certificate" procedure so it can keep its shipper list confidential?

NGPL challenged that strategy in the Alliance case: "[We] are handicapped by the refusal to require Alliance to identify its shippers. The commission [must] determine whether the proposed pipeline is actually needed, or is merely an outlet for excessive production."

NOVA (now talking merger with TransCanada Pipelines) added, "Alliance denies its own shippers an opportunity to realize the full benefit of competition by shielding their identities from competitors." On Feb. 24, the FERC Office of Pipeline Regulation required Viking Voyageur to release its precedent agreements.

Keith Bailey, CEO for the Williams Companies, testified at FERC's January technical conference in Docket pl908-2-000, criticizing commission policy setting equity returns. So did David N. Fleicher, gas analyst at Goldman Sachs, who noted, "The new projects on the drawing board contemplate higher returns than are available under the FERC's new policy."

David A. Arledge, president and CEO, of the Coastal Corp. adds, "All the projects leading out of Chicago are proposed expecting things to get better. If return on equity stays the same, these projects won't get built."

On Oct. 27, a five-person panel set up by the Canadian NEB to review proposals for development of Sable Island offshore gas fields voted to allow the Maritimes and Northeast project to proceed, denying requests by the North Atlantic partners and the Trans Québec & Maritimes project to delay proceedings to allow their competing applications to be reviewed. On Feb. 6, Kevin Madden, director of the FERC OPR, wrote to Charles M. Darling, president of North Atlantic Pipeline Partners: "Your application contains serious deficiencies¼ I am placing the application in an inactive status."

Power: Remaking Ontario Hydro

Meanwhile, the "unsatisfactory" business record of state electricity giant Ontario Hydro, particularly with regard to its nuclear division, has been cited as one "compelling" need for change in Ontario's electric industry. More than 90 percent of the province's electricity is generated by the giant, and when all units are in operation, more than two-thirds of that is generated by nuclear power.

There have been signs for a while that the Ontario Hydro's nuclear plants were cause for concern. An internal study conducted last year for Ontario Hydro found management problems, inadequate maintenance and barely acceptable safety practices. Former President Allen Kupcis took responsibility for the problems and resigned in August.

In November 1997, the Ontario provincial government released a White Paper outlining a move to competitive wholesale and retail markets in 2000. The paper, Direction for Change (em Charting a Course for Competitive Electricity and Jobs in Ontario, echoes much of an earlier recommendation by a government advisory committee to restructure Ontario Hydro. The plan would form a holding company, the Ontario Electric Service Corp., for transmission, distribution, retail and operating contracts, along