On 30 August 2018 the AEMC published a final determination and final rule to allow the recovery of revenue for Jemena Gas Networks (NSW) Ltd (JGN) to be shifted between two access arrangement periods, rather than be recovered in one. This aims to minimise price volatility for JGN’s NSW gas consumers that may occur following the delay in the finalisation of JGN’s 2015-2020 access arrangement. This delay is due to judicial review and merits review proceedings.

The rule amends the National Gas Rules (NGR) to enable the Australian Energy Regulator (AER) to shift JGN’s revenue between the current and subsequent access arrangement periods. The objectives of the rule are to:

•  minimise network price volatility that may occur for JGN’s customers as a result of the outcome of the remade 2015-2020 access arrangement decision
•  allow JGN to recover the revenue that it is entitled to recover, but no more, for the current access arrangement period.

The final rule provides the AER with discretion regarding whether or not to make an adjustment determination. If the AER decides to make an adjustment determination, it must make it on or before 1 March 2019, otherwise the rule expires.

While the final rule is a more preferable rule, it incorporates elements proposed in the rule change request and is designed to achieve the same outcome of minimising network price volatility for JGN’s customers.

Background on rule change process

On 7 June 2018 the AEMC published a draft rule determination on the rule change request. 

The AEMC started consultation on the rule change request on 27 March 2018, when it published a consultation paper. 

Submissions on the draft rule determination and consultation paper can be found below. 

JGN submitted the rule change request to the AEMC on 14 December 2017.

Background on JGN and the rule change request

JGN operates the largest gas distribution network in New South Wales. 

There has been a delay in the finalisation of the AER’s final decision for JGN’s 2015-2020 access arrangement due to judicial review and merits review proceedings. During this delay, JGN provided undertakings to the AER which set JGN’s tariffs higher than what it considered would have been the case had the AER’s original final decision not been set aside. The judicial review and merits review have now been completed and the AER has started the process of remaking its final decision.

JGN considers that, due to these delays, potential exists for network price volatility for customers over the next three years, from 2018/19 to 2020/21. JGN submits that this is because there is currently no mechanism in the NGR to shift revenue recovery between access arrangement periods in order to reduce network price volatility. JGN considers that there is uncertainty around the extent of network price volatility, given the range of outcomes that could result from the AER’s remade final decision.

To minimise the potential for network pricing volatility, JGN submitted a rule change request to allow for revenue to be shifted between the current and subsequent access arrangement periods.