TransCanada raises pipeline tolls for gas producers

The pain of rising pipeline tolls for Alberta's natural gas producers will be slightly less than expected. TransCanada Corp. has agreed to raise tolls on its Canadian mainline system to $1.6381 per Gigajoule, an increase of 45 cents, or 38 per cent. Though the National Energy Board must still approve the raise, it is likely to become effective Jan. 1. Low commodity prices have caused Alberta's natural gas production to drop at nearly a double-digit rate this year, leaving empty space on the 14,101-kilometre TransCanada pipeline, which connects western gas fields with eastern Canadian customers. Since TransCanada receives a regulated rate of return, it charges more for a particular volume of gas when the total volumes drop - a sort of economies-of-scale in reverse. TransCanada had warned that rates could rise as high as $1.95. That prompted some natural gas producers to warn that high tolls would start a "death spiral," where higher tolls would cause further production declines, which in turn would cause more toll hikes. TRP (TSX) fell 23 cents to $33.90.