On 5 November 2004 VENCorp applied to the ACCC proposing six minor variations to the authorisation of the Victorian gas market and system operations rules (MSO rules).
VENCorp states that the proposed minor variations to the MSO rules provide for:
restructuring of provisions relating to compensation for directions to inject gas and/or the application of an administered price cap under market suspension, force majeure, and IT failure preventing normal determination of market price
amendments to the process for raising disputes on settlement outcomes and making revisions to settlement statements to better manage billing periods.
On 5 November 2004 VENCorp also applied to revise its access arrangement for the principal transmission system in Victoria. The proposed revisions relate to the above minor variations to the MSO rules, which are incorporated into VENCorp’s access arrangement.
On 16 November 2004 the ACCC sent out a consultation notice to interested parties inviting comments on the proposed variations to the MSO rules and revisions to VENCorp’s access arrangements. Submissions were due by 30 November 2004.
The ACCC issued its draft decision not to approve Epic Energy's proposed access arrangement revisions for the South West Queensland pipeline on 8 October. The ACCC proposed that Epic make two amendments to its revisions.
The ACCC, however, accepted Epic's proposal to no longer offer certain non-forward haul and interruptible services as reference services, subject to an undertaking on future tariffs for these services. While interested parties raised concerns with this proposal, insufficient evidence was presented to the ACCC to indicate that these services were ‘likely to be sought by a significant part of the market' within the two-year time-frame of the proposed access arrangement.
The ACCC did not accept Epic’s proposal to remove the review trigger from the access arrangement. The review trigger provides for review of the non-derogated elements of the access arrangement should certain events occur. This is important given the potential for significant changes to the gas transmission network in Queensland over the next decade. Without the review trigger, certain elements of Epic's access arrangement would be outside of the ACCC's scope for review until 2016.
Epic has responded to the ACCC’s draft decision with a submission and a revised access arrangement. The ACCC is assessing the revised access arrangement and a final decision is expected by early December. No other submissions have been received from interested parties on the draft decision.
The ACCC issued draft decisions on 10 November 2004 with respect to the four revisions GasNet Australia (Operations) Pty Ltd proposed on 24 August 2004 to its access arrangement. The GasNet system transports natural gas through Victoria, and extends into southern NSW.
The ACCC proposed to approve GasNet’s proposed revisions to:
its price control formula
the weather standard included in its demand forecasts for 2004 to 2007
introduce a mechanism which would allow implementation of the revisions for the calculation of its 2005 tariffs.
GasNet also proposed to change the structure of its refill tariff at the Iona underground storage facility. That tariff was designed to only recover the marginal costs incurred when gas is injected into the underground storage facility, with the associated common costs being recovered when the gas is subsequently withdrawn from storage and transported through the GasNet System to end-users.
Users who withdraw gas at the nearby SEA Gas delivery point for transportation to South Australia pay the withdrawal tariff for the south-west zone which includes common costs. GasNet became aware that some gas which was being charged the refill tariff was being exported to South Australia. Its proposal is to change its tariff structure so that the refill tariff will not be available for exports via the storage facility.
After considering GasNet’s submission and the views expressed in submissions by interested parties, the ACCC proposed to not approve this revision. The ACCC was concerned, in particular, that the change could be detrimental to the interests of customers who had entered into contracts with the reasonable expectation that GasNet’s tariffs would only vary over the period to the end of 2007 in accordance with the revised access arrangement approved in 2003.
The ACCC requested submissions on the draft decisions by 26 November and expects to issue its final decisions by the end of December.
The National Third Party Access Code for Natural Gas Pipeline Systems (the code) sets out the minimum ring fencing obligations for service providers of covered pipelines. This involves developing and maintaining structures and procedures to prevent certain flows of information and personnel which could be detrimental to users of the pipeline and to competition in upstream and downstream markets.
The ACCC requires service providers to submit ring fencing compliance reports annually. These reports describe the measures service providers have taken to ensure compliance with their obligations under the code. This year annual ring fencing compliance reports were received from 19 service providers, reflecting their interests in nine transmission pipelines.
As in previous years, the ACCC found that the level of detail and usefulness of the information provided varies between service providers. In summary, in terms of meeting the requirements currently set out by the ACCC:
some reports fully complied
some generally complied, but the ACCC identified areas for improved reporting in future with respect to confidential information and/or marketing staff
while also generally complying, a small number of reports did not provide adequate information about the cost allocation process employed, and
in one instance, issues in relation to sections 4.1(c) and (e) of the code were identified.
The ACCC has written to the service providers individually identifying as appropriate areas where better future reporting appears warranted.
On 29 September 2004 NECA lodged an application for authorisation of the National Electricity Code (code) changes relating to site-specific loss factors for smaller generators to be treated as a minor variation.
Currently, smaller generators are restricted to receiving an average loss factor. The code change allows generators below 10MW or 40GWhr a year capacity to receive a site-specific loss factor provided the smaller generator meets the reasonable costs of the network service provider in performing the calculation of those specific factors necessary.
The code change will provide a fairer and more accurate outcome for some smaller generators, without resulting in additional costs or workload for distributors.
The ACCC has on the basis of the application from NECA satisfied itself that the variation sought is a minor variation, in that it does not involve a material change in the effect of the authorisation.
On 17 November 2004 the ACCC approved the final determination authorising the code change.
On 28 April 2004 the ACCC authorised a derogation to the code regarding the formulation of constraints. The derogation was designed as a short-term solution to limitations to the market dispatch arrangements, and was intended to stay in place whilst the Ministerial Council on Energy conducted a review on the regional structure of the National Electricity Market. The derogation has a sunset clause meaning that it will cease to have effect at the end of December 2004.
However, the Ministerial Council on Energy have not completed their review, and are unlikely to before the end of the year. In light of that, NECA on behalf of NEMMCO have applied for an authorisation for extension to these short-term arrangements.
The ACCC received the application on 16 November 2004, including a request for interim authorisation.
NECA states that the extension to the derogation will allow NEMMCO to continue to use constraint formulation methods which address the formerly inadequate arrangements for the management of power system security and the efficient use of available transmission capacity in the short term.
NECA states that the extension will continue to provide NEMMCO with express powers to manage negative settlement residues and to combine inter and intra-regional limits in the same constraint equations.
The ACCC has called for submissions on the applications which close on 14 December 2004.
Directlink’s application for conversion to regulated interconnection
On 6 May 2004 the ACCC received the Directlink Joint Venturers' (DJV) application for conversion from a market network service to a prescribed service and a maximum allowable revenue (MAR) for 2005–14.
In light of the proposed augmentations in south-eastern Queensland, DJV advised the ACCC of its intention to provide a supplementary submission which takes into account this information. On 30 August 2004 the ACCC requested the DJV to submit a complete revised application package to facilitate the assessment by the ACCC, its consultants and interested parties.
On 22 September 2004 DJV submitted a revised application for conversion from a market network service to a prescribed service and a MAR to 30 June 2015.
As part of the inquiry, a review of DJV’s application of the regulatory test is required. The ACCC has engaged two separate consultancies to assist with the consideration of the DJV application. The first consultant is to undertake a review which will establish a suite of feasible alternatives. The second consultant is to assess the market benefits of each alternative identified.
After selecting the alternative that maximises the net market benefits, the ACCC will use that alternative to establish the value of the regulated asset base, operating expenditure and calculate the MAR.
In November 2004 DJV also submitted an alternative asset valuation method and proposed a performance incentive scheme as part of its conversion application.
To assist the ACCC in its consideration of the revised application, interested parties were invited to comment on any issues relating to Directlink's conversion to a prescribed service and the determination of an appropriate MAR for its network service by 15 October 2004. The first consultant's report (by PB Associates) is available from the ACCC website and interested parties can submit comments by 16 December 2004. The ACCC expects to receive the second consultant's (IES) report by late December 2004. The ACCC is proposing to release a draft decision in the first quarter of 2005.
The ACCC issued a draft decision in November on Airservices Australia’s first five year pricing proposal.
Airservices is the monopoly provider of terminal navigation (TN), en route (ER) navigation and aviation rescue and firefighting (ARFF) services in Australia. These services are declared services under Part VIIA of the Trade Practices Act, which means that Airservices is required to notify the ACCC if it intends to increase prices for these services.
The pricing proposal is the first longer-term pricing proposal from Airservices and contains proposed increases in the charges for TN and ARFF services and reductions in the prices for the ER service.
ACCC Chairman, Mr Graeme Samuel, said while the ACCC welcomed the new approach and is overall supportive of Airservices’ methodology, it is concerned about the way in which Airservices’ proposed charges will impact on users of airports that have ARFF services.
The ACCC has advised Airservices to address the charging structure for ARFF services and is calling for comment from interested parties on the appropriate basis for imposing ARFF charges.
Copies of the ACCC’s draft decision and other documentation relevant to Airservices’ pricing proposal are available on the ACCC website.
