The Australian Energy Market Commission today made a final determination to implement a range of improvements to how transmission and distribution gas pipelines are regulated across Australia.
These new rules follow a COAG Energy Council rule change request based on recommendations in the AEMC’s recent 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.
The new rules are designed to help gas pipeline users negotiate lower prices and better deals. This will make it cheaper to move gas around the market, helping to keep gas and electricity prices for consumers as low as possible.
Specifically, the rules:
- set out a new process for determining which services will have reference tariffs set by the regulator. Reference tariffs are the prices that pipeline operators can charge their customers
- clarify how regulators calculate efficient costs so reference tariffs can be set at more efficient levels
- strengthen reporting obligations to support more balanced negotiations. Pipeline owners will be required to provide more relevant, timely and accessible information for pipeline users through the Natural Gas Bulletin Board or on the pipeline owners’ websites
- give stakeholders, including pipeline users, more input into regulators’ decisions
- set a clear trigger for pipeline users to start arbitration if negotiations fail.
As some decision processes are currently underway, we have developed an implementation plan that allows the phased introduction of some of the rules to support a smooth transition.
Most provisions of the final rule will commence on 21 March 2019.
The AEMC fast-tracked this rule change as we had already consulted extensively on the issues and recommendations during the Parts 8-12 review.
Media: Prudence Anderson, Communication Director, 0404 821 935 or (02) 8296 7817
Background
How covered gas pipelines are regulated
Covered gas pipelines are pipelines that are regulated by the Australian Energy Regulator (AER) or, the Economic Regulation Authority of Western Australia (ERA).
They 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.
Covered pipelines are subject to either:
- full regulation, where the AER or ERA must approve a full access arrangement that sets out reference tariffs, terms and conditions, or
- light regulation, where pipeline owners must comply with information provision requirements to support negotiations or alternatively seek regulatory approval for a limited access arrangement.
Review into the scope of economic regulation applied to covered gas pipelines
The COAG Energy Council requested the AEMC to undertake a review of Parts 8-12 of the National Gas Rules 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.
In our final report in July 2018, the AEMC recommended a package of reforms to rebalance negotiating power between pipeline users and owners when negotiating gas transportation contracts.
In addition to this rule change, we recommended:
- the COAG Energy Council proposes law changes to the South Australian Parliament related to the dispute resolution process
- a review of the test used to determine whether a pipeline is subject to light or full regulation, as set out in parts of the National Gas Law and rules. This review is being carried out by the COAG Energy Council
- regulators and AEMO update guidelines, systems and procedures to reflect changes to gas rules and law.