Gas distribution

Distribution networks

Gas distribution networks transport natural gas from transmission pipelines to end users. They typically consist of a backbone of high and medium pressure pipelines running between the ‘city gate’ (the point of connection to the transmission pipeline) and major demand centres. This network feeds low pressure pipelines, which deliver the gas to businesses and homes.

Energy retailers are the distribution networks’ main customers. They buy natural gas in large volumes and on-sell it to consumers. Retailers arrange with gas distribution network operators for the supply of gas to end users via the distribution network.

Regulation

The National Gas Law and Rules provide a framework for the regulation of distribution network services. The Australian Energy Regulator regulates network services in all jurisdictions except Western Australia where the Economic Regulation Authority holds this responsibility.

Based on an assessment of the degree of competition that exists for the service, the National Competition Council recommends whether a distribution network should be regulated. The jurisdictional minister decides whether to regulate and the form of regulation that should apply – light or full.

Most gas distribution networks are subject to full economic regulation.

For a fully regulated service, the network operator has to prepare an access arrangement for the regulator to approve. The access arrangement includes price and non-price terms and conditions for third parties to gain access to the network.

The access arrangement provides a starting point for parties to negotiate access on commercial terms. In the event of a dispute, the National Gas Rules contain a dispute resolution mechanism.

New rules made by the AEMC at the end of 2012 introduced a common approach to setting the rate of return for both gas and electricity networks. For more go to Price and Revenue Regulation of Gas Services rule.

For more on how the AER regulates network services, go to the AER’s State of the Energy Market reports.