Other major features of the ASRS include: Further, there is a commitment by parties to the ASRS to engage in future discussions to resolve rate and services issues. During 2001, TransCanada filed two applications with the NEB requesting (a) approval of the Canadian Mainline S&P Settlement; and (b) approval of a change to the cost of capital for 2001 and 2002. In May 2001, TransCanada filed its 2001 and 2002 Tolls and Tariff Application based on the terms of the S&P Settlement. The S&P Settlement, which received significant support from shippers, is essentially a cost of service tolling methodology, with the exception of the incentive earnings associated with the Revenue/Asset Management Program and other incentive mechanisms including OM&A costs, Fuel Gas Incentive Program, Foreign Exchange and Interest Rate Management Program, and Severance Program. The term of the S&P Settlement is 2001 and 2002. The S&P Settlement covers all components of the Canadian Mainline’s revenue requirement, with the exception of the cost of capital. At the time of approval of the S&P Settlement in November 2001, the NEB also directed TransCanada to continue with its interim tolls pending the NEB’s final decision on the cost of capital in the Fair Return Application proceedings. In June 2001, TransCanada filed its Fair Return Application with the NEB. The application addresses the company’s proposed changes to the cost of capital and requests a departure from the NEB’s formula for deter- mining the rate of return on common equity that was established in 1995. The company is seeking approval of an after-tax weighted average cost of capital (ATWACC) of 7.5 per cent effective January 1, 2001. This compares to an ATWACC of 5.84 per cent based on the 2001 return on equity under the current NEB formula. Final tolls for 2001 will be established following the NEB’s decision which is expected in mid-2002. Safety TransCanada continues to work closely with its regulators, customers and communities to maintain safe operation of all of its facilities. Pipeline integrity expenditures are anticipated to decline to approximately $80 million in 2002 in response to positive testing results from the 2001 program and application of a rigorous risk management system. In response to recent heightened attention to the security of North American energy transportation infrastructure, TransCanada is working closely with industry associations and government agencies in Canada and the U.S. to maintain high levels of system security across the industry. Gas Supply Based on year-end 2000 estimates, the WCSB had remaining discovered reserves of 61 trillion cubic feet (Tcf) and a reserves-to-production ratio of approximately 10 years at current levels of production. Additional reserves are continually being discovered to maintain the reserves-to-production ratio at close to 10 years. Gas prices in the future are expected to be higher than historical averages due to a tighter supply/demand balance. TransCanada expects that high gas prices could result in continued modest growth in WCSB supply as producers increase their focus on deeper, more productive areas of the basin. 2001 ANNUAL REPORT  23 the introduction of two new services – a point-to-point firm service and a one-year  non-renewable receipt firm service; amortization of severance costs over four years; the introduction of a reserve account to allow for recovery of foreign exchange gains or  losses on long-term debt principal; and the provision of an incentive to reduce costs through a continued focus on operational excellence. an increase in the composite depreciation rate from 3.5 per cent to 4.0 per cent; MANAGEMENT ’ S DISCUSSION AND ANALYSIS