On 12 March 2020 the AEMC has made a final rule that amends the NGR to replace the current AMDQ regime in the Victorian declared wholesale gas market with a new entry and exit capacity certificates regime. The final rule comes into effect on 1 January 2023.

The final rule

The final rule amends the NGR by retiring the current instruments of authorised MDQ and AMDQ credit certificates (AMDQ cc), and replaces these with a new regime consisting of:

• entry capacity certificates that provide injection tie-breaking benefits
• exit capacity certificates that provide withdrawal tie-breaking benefits.

The allocation of capacity certificates will primarily occur via the capacity certificates auction, which will be operated by AEMO.

The final rule also requires AEMO to develop a listing service, which market participants can use to list any capacity certificates they may want to buy or sell. Bilateral trading outside the service will still be allowed, however these trades will be required to be registered with AEMO. AEMO is also required to report all bilateral trades.  

The final rule:

• improves the ability of market participants to obtain capacity certificates to manage scheduling risk through tie-breaking benefits
• creates a level playing field for all market participants to obtain capacity certificates through primary auctions, which allows them to be allocated to those that value those most and promotes efficient use of pipeline capacity
• encourages more efficient allocation of pipeline capacity by allowing market participants to buy a set of entry and exit capacity certificates, that gives greater price and volume certainty to their preferred gas transportation pathways
• improves and simplifies current arrangements, which may encourage new entrants and promote competition in upstream and downstream markets and inter-regional trade.

Consultation process

On 14 March 2019 the AEMC published a consultation paper on the rule change request. Eleven submissions were received, which can be found below.  

The AEMC also held a stakeholder workshop in Melbourne on 16 May 2019 with extensive participation from a wide range of participants. Slides from the workshop are available below. 

On 5 September 2019 the Commission published a draft determination, along with a more preferable draft rule. We received thirteen submissions, which can be found below.

On 9 December 2019 the AEMC held a technical workshop to discuss implementation issues and interactions between the rule changes on DWGM simpler wholesale price (GRC0049) and DWGM improvement to AMDQ regime (GRC0051). 

The Commission formed a technical working group to discuss implementation issues and interactions between the rule changes on DWGM simpler wholesale price (GRC0049) and DWGM improvement to AMDQ regime (GRC0051). Working group meetings were held on 9 December 2019 and 3 February 2020. The material presented and the discussion notes from the workshop can be found below.

Extensions

On 13 June 2019 the Commission published a notice under s. 317 of the NGL to extend the publication date of the draft determination to 5 September 2019. The Commission considers that this extension is necessary due to the complexity of the issues raised in the rule change request.

On 14 November 2019 the Commission published a notice under s. 317 of the NGL to extend the publication date of the final determination to 12 March 2020. The Commission considers that this extension is necessary due to the complexity and volume of the issues raised in stakeholder submissions.

Background

On 5 November 2018, the AEMC received three rule change requests from the Victorian Minister for Energy Environment and Climate Change to amend the National Gas Rules (NGR). The rule change requests proposed the following changes:

• introduce a simple wholesale gas price for the DWGM in Victoria (DWGM Simpler wholesale price)
• establish a forward trading exchange which will make it easier for buyers and sellers to trade gas and lock in a future price in the Victorian gas market (DWGM Forward trading market)
• improve the allocation and trading of pipeline capacity rights (DWGM Improvement to AMDQ regime).

These requests were based on recommendations made by the AEMC in June 2017, as part of the Review of the Victorian declared wholesale gas market final report (DWGM Review)