On 14 March 2019 the AEMC made a final determination to implement a range of improvements to the regulation of covered transmission and distribution gas pipelines across Australia. This follows a COAG Energy Council rule change request based on recommendations in the AEMC’s 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. 

Final determination

The new rules will improve information disclosure, support more effective negotiations and improve access by pipeline users to covered pipelines. A covered pipeline is a pipeline regulated by the Australian Energy Regulator (AER) or Economic Regulation Authority in Western Australia (ERA).

Specifically, the new 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.

The Commission has considered how the final rule will be implemented and its interaction with decision processes that 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.

Background

Fast track rule change process

The Commission consulted extensively on the issues and recommendations within the rule change request during our review into the scope of economic regulation applied to covered pipelines. As a result, the AEMC progressed the rule change request under a fast track process, with no first round of consultation.

Draft rule determination  

On 6 December 2018 the Commission published a draft rule determination. It received eight stakeholder submissions which were addressed in the final determination, and can be found below.

Review into the scope of economic regulation of covered gas pipelines

The COAG Energy Council requested the AEMC to undertake a 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. Parts 8-12 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. 

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, the AEMC recommended:

• the COAG Energy Council proposes law changes to the South Australian Parliament related to the dispute resolution process,
• that the test used to determine which form of regulation is to be applied to a pipeline be reviewed, and 
• regulators and AEMO update guidelines, systems and procedures to reflect changes to gas rules and law.