ACCC paves the way for new gas transmission investment

The Australian Competition and Consumer Commission today issued a draft decision approving a significant gas transmission investment in Victoria. The draft decision ensures that GasNet Australia has investment certainty and that Victorian gas users benefit from increased security of gas supply.

The ACCC's draft decision is to approve $62.5 million ($2005) as prudent costs for the construction of the Corio Loop.

"It is in the interest of all users of the gas system to ensure that adequate funding is provided in a timely manner to address system capacity and reliability issues when they are identified", ACCC Commissioner, Mr Ed Willett, said.

"VENCorp has forecast the need for this project pursuant to its system planner role for the gas industry in Victoria".

The investment provides system-wide benefits to all users through:

• addressing impending network constraints through increasing system capacity
• providing extra supply insurance in the event that there is an outage affecting flows into the system (i.e. such as occurred in the 1998 Longford gas explosion), and
• competition benefits due to stronger flows of gas from the Otway Basin.

"The Corio Loop provides the potential for increased competition in Victoria through increasing gas flow capability from the Otway basin fields to the west of Melbourne to compete with the currently much larger flow of gas coming from the Gippsland basin fields to the east of Melbourne", he said.

The ACCC invites submissions from interested parties on its draft decision by 28 April 2006.

The ACCC is currently the regulator of the Victorian transmission network under the national gas code. However, it is anticipated that from January 2007 this function will pass to the Australian Energy Regulator. In making this draft decision, the ACCC has been assisted by AER advice.

The ACCC's draft decision document is available on the AER's website, www.aer.gov.au, or by contacting the Networks Regulation South Branch Administrative Officer on (03) 9290 1436.

Background

GasNet Australia (Operations) Pty Ltd have applied under the National Third Party Code for Natural Gas Pipeline Systems (the gas code) for an agreement that forecast new facilities investment near Geelong, Victoria, will be included in its capital base when future revisions to its access arrangement occur. The new facilities investment is an expansion of Victoria's primary high-pressure gas transmission system serving residential, industrial, commercial and power generation customers. The proposal is to expand the Southwest pipeline from Lara to Brooklyn (the Corio Loop).

GasNet's application seeks an investment approval under section 8.21 of the gas code. This section recognises that circumstances may necessitate investment within a covered pipeline within an access arrangement period that was not contemplated at the time the access arrangement was approved, and provides a mechanism through which such an investment can be accommodated consistently with the objectives of the gas code. As the new facilities investment for the Corio Loop is not included in GasNet's current access arrangement, before it commits funding to this project, GasNet is seeking the ACCC's agreement under section 8.21 of the gas code that its forecast new facilities investment in the Corio Loop meets the requirements for inclusion into GasNet's capital base at the time of the next access arrangement revision. The effect of such an agreement would be to bind the regulator's decision when it considers future revisions. GasNet's current access arrangement is for the period 2003-2008. In accordance with the gas code, revisions to GasNet's access arrangement for the 2008-2013 period will be considered in 2007.