The Australian Competition and Consumer Commission today issued its Final Decision on the terms and conditions of gas transportation services for the Moomba to Sydney gas pipeline (MSP) for the next five years.
The ACCC has not agreed with all the terms and conditions of the access arrangement as submitted by the owner of the MSP, East Australia Pipeline Ltd (EAPL). In particular, the ACCC did not agree with the tariffs EAPL proposed should be charged to transport gas through the MSP from Moomba to Sydney and several regional centres, such as, Lithgow and Wagga.
"EAPL is currently charging approximately 66 cents per gigajoule to ship gas from Moomba to Sydney", ACCC Chairman, Mr Graeme Samuel, said. "The ACCC has determined that the starting tariff should be 52 cents (GST-exclusive)".
Consequently some of EAPL's customers, such as gas retailers, may be able to obtain transportation services at a price less than what EAPL is currently charging.
"Even though the ACCC has approved a lower tariff, EAPL's cash flows will not be affected in the short term", Mr Samuel said. "This is because EAPL has a contractual arrangement with its main customer, AGL, under which AGL is required to make minimum monthly payments to EAPL regardless of the level of tariff".
"Furthermore, EAPL has the opportunity to earn additional revenue if it can increase the level of demand for its services above the level it has forecast for the five years of the access arrangement period".
While the ACCC broadly agrees with important aspects of EAPL's proposed access arrangement, such as proposed capital expenditure and volumes the ACCC could not agree to EAPL's proposal for:
- the value of the pipeline assets at $779 million. The ACCC concluded that the value should be $559 million.
- operating costs of $23 million per annum. The ACCC concluded $18 per annum million was a better estimate of the efficient costs of operating the pipeline.
- a return on equity for the MSP of around 15 per cent. The ACCC estimates that a return on equity of 11.3 per cent is more consistent with the benchmark for regulated pipeline assets.
The ACCC's Final Decision sets out the amendments that will have to be made by EAPL for the access arrangement to be approved. EAPL is require to submit by 23 October an amended access arrangement that meets the required changes set out in the Final Decision, or otherwise address the reasons why the changes where required.