The Australian Energy Market Commission (AEMC) has made a final (more preferable) rule that aims to facilitate greater competition in the provision of Market Operator Services (MOS) in the Short Term Trading Market (STTM) for gas. Competition may be enhanced through lower barriers to entry for potentially a greater number of MOS providers, which also has the potential to increase MOS liquidity in the STTM. The final rule largely adopts the changes proposed by the Australian Energy Market Operator (AEMO). These include:

- reducing the MOS period to one month in the National Gas Rules (NGR);

- broadening the eligibility requirements for MOS providers to include trading right holders; and

- maintaining a requirement for AEMO to notify the market of an upcoming MOS period.

The final rule will commence on 1 April 2014, with the new monthly MOS period to be in effect from 1 June 2014.

Background

MOS is a daily pipeline balancing service in the STTM which is provided to bridge the difference between actual and scheduled gas flows on a pipeline into the hub. It may take the form of supplying additional gas to the hub, or absorbing excess gas being delivered to the hub. MOS is deemed to have provided this service if it has not otherwise been accounted for by shipper nominations to the pipeline operator.

MOS is operated by AEMO. AEMO invites MOS providers to submit offers for the provision of MOS for the next 'MOS period'. Prior to the final rule being made, the length of the MOS period was determined by AEMO in the STTM Procedures and was set at three months. In addition, under the NGR, MOS could only be provided by shippers in the STTM who held a contract with a facility operator, such as an STTM pipeline operator, that allocated capacity to them on that facility to increase or decrease the amount of gas on a pipeline. From 1 June 2014, the MOS period will switch to a monthly schedule and the eligibility requirements for MOS providers will be broadened to include trading right holders.

AEMO's rule change request comprised of two components. It proposed to:

- Move certain provisions related to the MOS offer process and associated time frames from the NGR to the STTM Procedures. The length of the MOS period and timings of the MOS offering process would then all be determined by a single regulatory instrument.

- Amend the NGR in order to broaden the group of potential MOS providers. The proposal sought to amend the NGR such that MOS could not only be provided by facility contract holders, but also by trading right holders that have a sub-contracted arrangement with a facility contract holder that provides them with access to pipeline capacity.

The AEMC initiated the rule change request on 13 September 2012. An AEMC consultation paper, identifying specific issues and questions for consultation, was also published with the rule change request. Submissions to the consultation paper closed on 11 October 2012.

On 28 February 2013, the AEMC published the draft rule determination and draft rule in relation to the rule proposed by AEMO. Submissions to the draft rule determination closed on 11 April 2013.

On 23 May 2013, the AEMC published its final rule determination and final rule.

Copies of the rule change request, the consultation paper, rule determinations (final and draft) and submissions are available on the AEMC website.