The Australian Competition and Consumer Commission has revoked the existing authorisation of the Australian Gas Light Company's Cooper Basin natural gas supply arrangements and granted a substitute authorisation, ACCC Chairman, Professor Allan Fels, announced today.
"The ACCC has been conducting an extensive review of the authorisation of the arrangements which date from the 1970s.
"Under the arrangements the Cooper Basin producers supply gas extracted from fields in the vicinity of Moomba, South Australia. The gas AGL purchases is distributed to users in Sydney, Newcastle, Wollongong, Canberra and regional centres in New South Wales.
"The central purpose of the authorisation, granted in 1986, was to permit AGL and the producers to conduct contract gas price reviews and arbitrations in Sydney. The Parliament of South Australia had passed the Cooper Basin (Ratification) Act 1975 to exempt the AGL supply arrangements, and a number of other contracts associated with the development of Cooper Basin gas reserves, from the reach of the Trade Practices Act. However, that exemption did not extend outside the State of South Australia.
"The ACCC has decided to revoke the existing authorisation and to grant a substitute authorisation which is limited to letting the parties establish contract prices and conduct price reviews and arbitrations in terms of a clause the parties negotiated in 1988 (and subsequently amended), some time after the original authorisation was granted.
"This will let the parties continue to hold arbitrations, if need be, in Sydney (or elsewhere), thereby saving AGL and its customers costs of arbitration compared to Adelaide arbitration costs.
"The authorisation will continue only for as long as the Ratification Act protects the agreements, or for three years, whichever is the shorter.
"The new ACCC authorisation does not extend to clauses tying AGL to the producers (previously authorised by the Trade Practices Commission), although the tying clauses continue to be protected by the Ratification Act.
"The ACCC believes the Ratification Act's protection of the provisions tying AGL to the producers has become a barrier to the development of inter-basin competition and ultimately intra-basin competition.
"It is also the Commission's view that the Ratification Act falls for review under the Council of Australian Governments' commitment to free and fair trade in gas and under the COAG Competition Principles Agreement.
"The ACCC has taken the opportunity, in releasing its decision, to include comment placing the AGL decision in the context of the broader competitive reform of Australian gas markets.
"This comment, Facilitating competition in gas markets: the ACCC viewpoint, focuses on a range of issues, many of which are outside the scope of the review decision but, nevertheless, are relevant to the development of efficient and competitive gas markets. It also presents the ACCC's current position on the state of competitive reform of gas markets.
"It concentrates on remaining obstacles to the development of upstream gas supply competition.
"While the AGL authorisation review decision is an important and necessary step, much remains to be done to eliminate remaining barriers to competition in order to achieve the stated COAG objective of free and fair trade in gas by July 1996.
Note to Editors:
Authorisation: Part IV of the Trade Practices Act prohibits anti-competitive practices, but the granting of authorisation provides immunity from court action for some restrictive practices that could otherwise breach the Act. The Commission has the power to grant authorisation to certain types of anti-competitive agreements. To gain authorisation the applicant must satisfy the Commission that authorisation will result in a benefit to the public that outweighs the anti-competitive effect. In reviewing an existing authorisation, the Commission must satisfy itself whether there has been a material change of circumstances before it can re-evaluate the balance of public benefit and anti-competitive detriment of the authorised arrangements. The Commission seeks submissions from interested parties before reaching a decision. Determinations may be appealed to the Australian Competition Tribunal.
"The ACCC has been conducting an extensive review of the authorisation of the arrangements which date from the 1970s.
"Under the arrangements the Cooper Basin producers supply gas extracted from fields in the vicinity of Moomba, South Australia. The gas AGL purchases is distributed to users in Sydney, Newcastle, Wollongong, Canberra and regional centres in New South Wales.
"The central purpose of the authorisation, granted in 1986, was to permit AGL and the producers to conduct contract gas price reviews and arbitrations in Sydney. The Parliament of South Australia had passed the Cooper Basin (Ratification) Act 1975 to exempt the AGL supply arrangements, and a number of other contracts associated with the development of Cooper Basin gas reserves, from the reach of the Trade Practices Act. However, that exemption did not extend outside the State of South Australia.
"The ACCC has decided to revoke the existing authorisation and to grant a substitute authorisation which is limited to letting the parties establish contract prices and conduct price reviews and arbitrations in terms of a clause the parties negotiated in 1988 (and subsequently amended), some time after the original authorisation was granted.
"This will let the parties continue to hold arbitrations, if need be, in Sydney (or elsewhere), thereby saving AGL and its customers costs of arbitration compared to Adelaide arbitration costs.
"The authorisation will continue only for as long as the Ratification Act protects the agreements, or for three years, whichever is the shorter.
"The new ACCC authorisation does not extend to clauses tying AGL to the producers (previously authorised by the Trade Practices Commission), although the tying clauses continue to be protected by the Ratification Act.
"The ACCC believes the Ratification Act's protection of the provisions tying AGL to the producers has become a barrier to the development of inter-basin competition and ultimately intra-basin competition.
"It is also the Commission's view that the Ratification Act falls for review under the Council of Australian Governments' commitment to free and fair trade in gas and under the COAG Competition Principles Agreement.
"The ACCC has taken the opportunity, in releasing its decision, to include comment placing the AGL decision in the context of the broader competitive reform of Australian gas markets.
"This comment, Facilitating competition in gas markets: the ACCC viewpoint, focuses on a range of issues, many of which are outside the scope of the review decision but, nevertheless, are relevant to the development of efficient and competitive gas markets. It also presents the ACCC's current position on the state of competitive reform of gas markets.
"It concentrates on remaining obstacles to the development of upstream gas supply competition.
"While the AGL authorisation review decision is an important and necessary step, much remains to be done to eliminate remaining barriers to competition in order to achieve the stated COAG objective of free and fair trade in gas by July 1996.
Note to Editors:
Authorisation: Part IV of the Trade Practices Act prohibits anti-competitive practices, but the granting of authorisation provides immunity from court action for some restrictive practices that could otherwise breach the Act. The Commission has the power to grant authorisation to certain types of anti-competitive agreements. To gain authorisation the applicant must satisfy the Commission that authorisation will result in a benefit to the public that outweighs the anti-competitive effect. In reviewing an existing authorisation, the Commission must satisfy itself whether there has been a material change of circumstances before it can re-evaluate the balance of public benefit and anti-competitive detriment of the authorised arrangements. The Commission seeks submissions from interested parties before reaching a decision. Determinations may be appealed to the Australian Competition Tribunal.