Rule Changes: Completed

Dandenong Liquefied Natural Gas Storage Facility

Reference:
GRC0003
Proponents:
AEMO
Decision:
Rule made
Amending rule:
2010 No. 4
Commenced:
23-Dec-2010
Amending chapters:
19
Rule version:
7
Other rule versions:

Overview

On 16 December 2010, the AEMC made its final Rule determination for the Dandenong Liquefied Natural Gas (LNG) Storage Facility Rule change request. In the final determination the AEMC decided to make a Rule incorporating the key elements of AEMO's Rule change request as it considered the proposal would be likely to contribute to the achievement of the National Gas Objective (NGO). This was because the Commission considered that the proposal would be likely to lead to price benefits without adversely impacting the security of supply of natural gas.

On 16 December 2010, the AEMC made its final Rule determination for the Dandenong Liquefied Natural Gas (LNG) Storage Facility Rule change request. In the final determination the AEMC decided to make a Rule incorporating the key elements of AEMO's Rule change request as it considered the proposal would be likely to contribute to the achievement of the National Gas Objective (NGO). This was because the Commission considered that the proposal would be likely to lead to price benefits without adversely impacting the security of supply of natural gas.

The National Gas Amendment (Dandenong Liquefied Natural Gas Storage Facility) Rule 2010 No. 4, commenced operation on 16 December 2010.

On 23 December 2010 the AEMC gave notice of an amendment of the National Gas Amendment (Dandenong Liquefied Natural Gas Storage Facility) Rule 2010 No. 4, under Clause 20 of Schedule 2 of the National Gas Law.  The amendment corrected an omission in that Rule to delete rules 280(2) to 280(4).

The amendment commenced on 23 December 2010.

Overview of Rule change request 

This Rule change request was submitted by AEMO on 10 June 2010. In the Rule change request AEMO sought, in light of its claim of a decreased reliance on LNG for system security, to partially liberalise the operation of the Dandenong LNG storage facility. The 12 000 tonnes Dandenong LNG storage facility provides LNG storage services to participants in the Victorian Declared Wholesale Gas Market (DWGM) and to others. In addition, the Rule Change Request essentially removed AEMO's right to 3000 tonnes of storage capacity in the Dandenong LNG storage facility for an LNG reserve.

Arrangements at the time the Rule change request was submitted

The National Gas Rules (Rules) regulate the operation of the Dandenong LNG storage facility. Amongst other things, the Rules, at the time the Rule change request was submitted to the AEMC:

  • obliged the facility's owner to provide AEMO with 3000 tonnes of storage capacity in the facility for AEMO's LNG reserve unless and until AEMO otherwise agreed;
  • specified that LNG injected into the facility was to be automatically divided between storage holders according to a fixed formula; and
  • regulated the transfer of storage capacity and LNG stock held in the facility between parties.

Commission's draft Rule determination

The Commission published a draft Rule determination together with a draft Rule on 23 September 2010. The draft Rule incorporated the key elements of AEMO's Rule change request. Submissions were accepted on the draft Rule determination until 4 November 2010. Four submissions were received.

How the final Rule differs from the draft Rule

Following the Commission's analysis of the issues raised in submissions, the final Rule was different from the draft Rule in that the relevant Rules were to only regulate declared LNG storage providers (instead of all LNG storage providers).

Reasons for the Commission's decision

The Commission decided to make a Rule as it considered that the proposal was likely to contribute to the achievement of the NGO. In coming to this view, the Commission considered that the proposal:

  • was not likely to adversely impact AEMO's ability to manage system security in the Victorian Declared Transmission System and that it had the potential to enhance AEMO's ability to manage system security;
  • was likely to promote efficient capital investment in the Dandenong LNG storage facility and the wider natural gas supply chain;
  • was likely to promote the efficient operation and use of the Dandenong LNG storage facility and of natural gas services; and
  • might promote competition in the market for providing gas storage services, the Victorian DWGM and in other markets.

AEMC's fast track Rule change process

The AEMC initiated a "fast track" process to assess this Rule change request under section 305 of the National Gas Law (NGL). The AEMC decided to use a fast track process as it considered that AEMO adequately consulted with the public on the nature and content of the Rule change request before submitting it to the AEMC.

The AEMC published a notice on 19 August 2010 under section 303 of the NGL informing of the initiation of a fast track process. Under the fast track process:

  • the AEMC was required to publish a draft Rule determination no later than five weeks after it published the section 303 notice;
  • the AEMC was required to invite written submissions and comments on the draft Rule determination for at least six weeks after it publishes the draft Rule determination; and
  • the AEMC was required to publish a final Rule determination no later than six weeks after close of submissions on the draft Rule determination.

The AEMC met this timetable with the publication of the final Rule determination on 16 December 2010

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