ACCC approves increase in GasNet's regulated tariffs
The Australian Competition and Consumer Commission today issued its final decision on GasNet's revised 2008–12 access arrangement.
In its proposal, GasNet sought substantial increases in investment and a consequent large rise to gas transmission charges. While the ACCC considers that some of these increases are justified, it has not accepted several aspects of the proposed GasNet revisions to the access arrangement.
The decision sets out some 42 amendments GasNet must make to the access arrangement for approval by the ACCC.
"The final decision provides for refurbishment and replacement investment of $86 million in GasNet's gas transmission network over the next five years, to maintain the reliability and security of supply, which is 48 per cent above the amount approved for the current access arrangement period. This recognises the need to replace ageing and obsolete assets as well as the need to upgrade assets over the next five years. The ACCC has also carefully considered GasNet's investment proposals to significantly expand the network, but maintains the view that most of these proposals have not been justified. The ACCC considers that some of GasNet's augmentation expenditure to meet growing demand is not required until after the next access arrangement period," Australian Energy Regulator Chairman, Mr Steve Edwell said.*
"The ACCC's proposed amendments to the access arrangement will result in an initial real average tariff increase of 51 per cent to $0.44/GJ for 2008 rising by 2.8 per cent each year until 2012. This is an increase on what was proposed by GasNet, which mainly reflects the increased costs of borrowing as a result of the ongoing credit crisis impacting on global financial markets as well as lower overall forecast volumes," Mr Edwell said.
"GasNet also proposed to amend its cost allocation methodology for deriving tariffs which will result in a re-allocation of costs between tariff zones, as well as changes to the way peak tariffs are set. This final decision does not approve these changes to GasNet's proposed cost allocation methodology on the basis it will result in reference tariffs which are not cost reflective in both the short run and long run. The ACCC maintains the view that ensuring tariffs are cost reflective will facilitate efficient usage and investment decisions by users and is consistent with the requirements of the code," Mr Edwell said.
"The ACCC has also decided not to regulate under the access arrangement 'authorised maximum daily quantity'/credit certificates issued and administered by GasNet to users in the Victorian gas wholesale market on the basis that this would require setting a tariff which may hinder the efficient allocation of these certificates to users. The regulation and allocation of AMDQ/credit certificates raise broader issues which cannot be effectively addressed in the access arrangement. The ACCC will be raising these matters with the Victorian Government which may require amendments to the market rules," Mr Edwell said.
*The ACCC is currently the regulator of the Victorian transmission network under the National Gas Code. However, it is anticipated that in 2008 this function will pass to the Australian Energy Regulator (AER). In making this final decision, the ACCC has been assisted by advice from the AER, and taken into account submissions from interested parties and advice from independent experts. These documents are available on the AER's website.
The ACCC's final decision document will be made available on the AER's website www.aer.gov.au (under Regulation/Gas Transmission Pipelines) or by contacting the Networks Regulation South Branch Administrative Officer on (03) 9290 1436.
GasNet is part of the APA Group that owns the Principal Transmission System, which is the primary pipeline for the transmission of natural gas at high pressure in Victoria. Under the market carriage capacity management system operating in Victoria, users currently pay tariffs to both the system owner, GasNet Australia, and the independent system operator, the Victorian Energy Networks Corporation.
The PTS is approximately 1,900 km in length, delivers over 220 petajoules annually and serves approximately 1.4 m residential customers and 45,000 industrial and commercial customers. The PTS is not a traditional point to point pipeline as there are a number of supply points. The majority of gas is sourced from the Gippsland basin via Longford with increased supply projected from Otway's basin via Port Campbell. In addition, the PTS is connected to the:
Moomba to Sydney pipeline via the NSW interconnection at Culcairn
SEA Gas pipeline to South Australia
Western Underground Gas Storage Facility at Port Campbell
The VicHub interconnection with the Eastern Gas pipeline
The Yolla gas fields (BassGas) connection at Pakenham, and
