This review has made recommendations to help gas pipeline users negotiate lower prices and better deals under Parts 8 to 12 of the National Gas Rules. Changing the way gas pipelines are regulated will make it cheaper and easier to move gas around the market. This helps keep gas and electricity prices as low as possible.

If the recommendations from this review are adopted in full, then pipeline users and gas consumers will benefit from lower prices and fairer terms and conditions of access to pipeline services.

Final report

On 3 July 2018 the AEMC published its final report for the review into the regulation of covered pipelines. The report includes 32 recommendations for the economic regulation framework for full and light regulation (covered) pipelines, which will make it easier and cheaper to move gas to where it is most valued. 

The AEMC recommends:

• all expansions to the capacity of covered pipelines be economically regulated in the same way as the original pipeline. This addresses the ACCC’s concern that under the current rules, an expansion of the capacity of a covered pipeline may not be subject to regulation. This may provide the pipeline owner with the opportunity to use its market power in negotiations with users who seek to use that expanded capacity. The AEMC’s recommendation is expected to result in services on the expanded capacity not being monopolistically priced.
• a new approach for the regulator to determine which pipeline services should be specified as ‘reference services’. ‘Reference services’ are those services for which the regulator approves prices, terms and conditions. As a result of this change the regulators are expected to approve a larger number of reference services. This will result in more services being efficiently priced and will place a greater constraint on the use of market power by pipeline owners.
• changes to regulatory decision-making to lower regulatory costs for pipeline owners and regulators
• clarification of  regulatory assessment of efficient costs to deliver pipeline services, so that prices move to lower and more efficient levels
• changes to the dispute resolution framework to improve access to dispute resolution and outcome certainty, as well as create a more credible threat to motivate fair access negotiations.

In addition, the AEMC has designed an improved financial and pipeline usage and capacity information reporting regime. The purpose of this is to make pipeline users better informed to negotiate fairer prices, terms and conditions for pipeline services to transport gas.

In conducting this review, the AEMC has found that the separate gas sector reforms that have taken place recently may not operate together smoothly. We recommend that the Commission be tasked with reviewing all the forms of regulation applied to pipelines so that the recent reforms work effectively together, to maximise the benefits for pipeline users and gas consumers.

The recommendations of the review fall under two packages:

• rule changes that can be actioned immediately through a rule change request to the AEMC; and 
• law changes that trigger subsequent rule changes. 

The AEMC recommends that both packages be implemented as soon as possible so as to apply to access arrangement reviews scheduled for 2020. 

Background

On 5 May 2017 the AEMC received from COAG Energy Council terms of reference to review the scope of economic regulation applied to covered gas pipelines. The review covers Parts 8 to 12 of the National Gas Rules (NGR) which set out how covered gas transmission and distribution pipelines are regulated. These parts include rules on the access arrangement process, information disclosure, revenue and price calculations, access terms and conditions, and an arbitration framework.

The AEMC published an issues paper on 27 June 2017. The issues paper aimed to facilitate public consultation on the policy objectives of the gas access regime, in addition to the purpose and operation of the current regulatory framework in relation to the economic regulation of covered gas transmission and distribution pipelines.

The AEMC held an all-day workshop at the AEMC office in Sydney on 14 December 2017. Workshop participants discussed potential recommendations to key issues. Workshop documents are posted on this page.

On 31 October 2017 the Commission published an interim report for the review into the effectiveness of regulation of covered gas pipelines. 

The interim report summarised stakeholder submissions to the issues paper and identified the issues that would be considered by the Commission in the draft report.

On 27 February 2018 the Commission published a draft report that summarised its findings and draft recommendations. Submissions to the draft report closed on 28 March 2018.