The Australian Energy Market Commission today released a final package of recommendations for stronger regulation of gas pipelines.
The recommendations follow a request from the COAG Energy Council to undertake a review of Parts 8-12 of the National Gas Rules to address concerns that customers may be paying more than necessary for gas pipeline services.
AEMC Chairman John Pierce said the reforms will make it easier and cheaper to move gas around Australia to where it is most valued, helping to keep gas and electricity prices for consumers as low as possible.
“The changes we have recommended will help pipeline users negotiate lower prices and better deals for shipping gas. Gas users like manufacturing businesses that rely on gas, gas-fired electricity generators, and retailers who supply small businesses and households will be better off as a result,” said Mr Pierce.
Access arrangements set out prices, terms and conditions for pipeline users and are approved by the regulator. Under this package, more pipeline services will be subject to access arrangements. Also, prices would be set at more efficient levels, contract terms would be more balanced, and arbitration would act as a more credible back-stop if negotiations fail.
The AEMC has also recommended giving regulators oversight of a wider range of pipeline services, and to allow all stakeholders, including pipeline users, to have more input into regulators’ decisions on appropriate prices, services and conditions. This would mean pipeline users are better represented and better protected.
“Pipeline users can start benefiting from these reforms as soon as next year. This depends on the AEMC receiving the necessary rule change requests, and also on changes to the dispute resolution process under National Gas Law which would need to be passed by the South Australian Parliament,” Mr Pierce said.
In developing these recommendations, the AEMC has worked closely with the ACCC as it continues its gas market inquiry, the Australian Energy Regulator, the Economic Regulation Authority of Western Australia and the Gas Market Reform Group. Stakeholders also provided valuable input in a series of workshops and bilateral meetings. Stakeholders’ submissions to the February draft report were broadly supportive of the recommendations.
This work is another step in the ongoing redesign of Australia’s gas markets. The AEMC’s initial reforms to make it easier to buy and sell gas are already being implemented by the Gas Market Reform Group established by the COAG Energy Council.
These reforms include introducing new ways to trade unused pipeline capacity; requiring more and better information so buyers and sellers can make informed decisions; and developing standard products and contracts to facilitate trade across different locations. Redesigning gas markets will improve competition and lower the costs to households and businesses.
Background
Gas markets are transforming. Isolated point-to-point pipelines have evolved into an interconnected network with two-way flows.
As the market evolves, the AEMC’s gas market reforms, including our recent reviews of the east coast gas market and Victorian gas market, will make it easier and cheaper to move gas around Australia to where it is needed and valued most by consumers. This helps keep gas and electricity prices as low as possible.
How gas pipelines are regulated
Gas pipelines in Australia are regulated under a negotiate-arbitrate framework. Pipeline owners and pipeline users negotiate the terms, conditions and prices for access to pipeline services.
Access arrangements set out the prices and terms and conditions which are approved by the regulator. These access arrangements serve as benchmarks for negotiations between pipeline owners and users.
Negotiation is supported by information disclosure and regulatory decisions. Arbitration can be used if a deal cannot be agreed.
Media: Prudence Anderson, Communications Director, 0404 821 935;
(02) 8296 7817