On 27 June 2013, the Australian Energy Market Commission (AEMC) published the final rule determination and final rule for the pipeline operator cost recovery processes rule change request.

The final rule is largely reflective of, and consistent with, the draft rule, with some minor clarifications. It will commence on 1 July 2013.

The Commission’s final rule

The final rule is a more preferable rule which incorporates several of the changes proposed by the Australian Energy Regulator (AER) in its rule change request. It also makes a number of additional amendments to further promote efficiency in the operation and use of the pipeline operator cost recovery provisions in the national gas rules (NGR).

Specifically, the final rule establishes a single process for pipeline operator cost recovery that is proportionate to the size and nature of the recoverable costs and includes some flexibility in its operation. As a result of the final rule, gas market participants will not pay the costs incurred by pipeline operators in providing information services without the AER having first reviewed the costs to ensure they are reasonable.

A detailed description of the final rule is provided in the Commission’s final rule determination.

Background

Cost recovery processes for gas transmission pipeline operators exist in the NGR in relation to the provision of:

• the market operator service (MOS) allocation service in the Short Term Trading Market (STTM); and
• pipeline aggregation and information services in the National Gas Market Bulletin Board (BB).

These services relate to the provision of certain information by pipeline operators to the Australian Energy Market Operator (AEMO) to assist in operation of the market. On this basis, the NGR allows for pipeline operators to recover the costs associated with the provision of these services from other market participants, via AEMO.

Examples of the costs which a pipeline operator may seek to recover include: project management costs (for example, the time it takes an employee to process the steps for MOS allocation services), IT support costs and legal and regulatory compliance costs.

The rule change request was initiated following the first practical application of the MOS allocation service cost recovery arrangements by AEMO in 2011. At this time, AEMO and the AER identified a number of issues with the existing assessment process.

To address these issues, the AER proposes to amend the pipeline operator cost recovery processes set out in the NGR. The key amendments relate to the decision maker role, the decision making test, assessment timeframes, pipeline operator information requirements and the scope of recoverable costs.

A detailed description of the proposed rule is provided in the AER’s rule change request. 

Initiation and first round of consultation

On 6 December 2012, the AEMC published a notice under s. 303 of the NGL to commence consultation on the rule change request. This was accompanied by a consultation paper.

Submissions on the consultation paper closed on 24 January 2013. In total, five submissions were received.

On 6 December 2012, the AEMC also published a notice under s. 317 of the NGL to extend the period of time for making the draft rule determination on this rule change request. This extension was required due to the consultation period coinciding with the Christmas-new year period. It also allowed stakeholders to fully and adequately consider the issues and to prepare their submissions to the consultation paper.

Draft rule determination and second round of consultation

On 4 April 2013, the AEMC published the draft rule determination and draft rule for the pipeline operator cost recovery processes rule change request.

The draft rule was a more preferable rule which incorporated several of the changes proposed in the AER’s rule change request. It also made a number of additional amendments to further promote efficiency in the operation and use of the pipeline operator cost recovery provisions in the NGR.

A detailed description of the draft (more preferable) rule is provided in the Commission’s draft rule determination.