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NEB Sets TQM's Total Return on Capital for 2007 and 2008 at 6.4 per cent

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09/05
For release at 2:30 p.m. (MDT)
19 March 2009

CALGARY - In a decision released today on the 2007 and 2008 cost of capital application submitted by Trans Québec & Maritimes Inc. (TQM), the National Energy Board (NEB) agreed to vary from its previous methodology and set a 6.4 per cent total weighted average after-tax return for each of the two years.

Had no changes been made, TQM's total allowed return would have been approximately 5.5 per cent.

Until this application, TQM had relied on the formula established in the RH-2-94 Decision, which determined its return on equity. In the current Decision, the NEB granted TQM's request to vary from the RH-2-94 Decision and did so after considering, among other things, changes that have impacted financial markets and economic conditions.

To determine TQM's total return for 2007 and 2008, the NEB took into account financial market information. In doing so, the Board relied on the market-based After-Tax Weighted Average Cost of Capital (ATWACC) methodology. For the purpose of the current proceeding, the NEB stated that this methodology better utilizes financial market information.

The NEB found that changes in the dynamics of natural gas end-use markets and potential supply sources, as well as increased competition among pipelines, have combined to create greater business risk for TQM.

The NEB set TQM's total return without identifying a capital structure, in keeping with the Board's goal-oriented approach to regulation. In the Board's view, this approach is more aligned with the way capital budgeting decision making takes place in the business world.

With this decision, TQM will finalize the tolls it charges to its shippers for service during the period of 1 January 2007 to 31 December 2008.

Celebrating 50 years of regulatory leadership, the NEB is an independent federal agency that regulates several parts of Canada's energy industry. Its purpose is to promote safety and security, environmental protection, and efficient energy infrastructure and markets in the Canadian public interest, within the mandate set by Parliament in the regulation of pipelines, energy development and trade.

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For further information:

Carole Léger-Kubeczek
Communications Officer
National Energy Board
E-mail: carole.leger-kubeczek@neb-one.gc.ca
Telephone: 403-299-2717
Telephone (toll free): 1-800-899-1265
Telecopier: 403-292-5503
Telecopier (toll free): 1-877-288-8803
TTY (Teletype): 1-800-632-1663

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NEB Sets TQM's Total Return on Capital for 2007 and 2008 at 6.4 per cent

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