The Australian Competition and Consumer Commission today released its Draft Decision on the Victorian Gas Transmission Access Arrangements and its Draft Determination on the Victorian Gas Industry Market and System Operations Rules (MSOR).
The preliminary decisions proposed by the ACCC are to approve the Access Arrangements subject to certain amendments being made and grant conditional authorisation to the MSOR. Both these decisions are subject to further public consultation prior to the ACCC reaching a final decision. The access arrangements set out the terms and conditions on which access to transmission services will be made available to third parties in Victoria.
The MSOR sets out procedures for the operation of the Victorian wholesale gas spot market and includes provisions for system security, dispatch procedures and metering standards. 'The package of Victorian reforms is likely to lead to the realisation of benefits to consumers,' ACCC Chairman, Professor Allan Fels, said today.
'This is because the arrangements have potential efficiency benefits in terms of better use of infrastructure and capital than allowed for in the current regime. Efficiency gains are also expected from price transparency in trading of the commodity and purchase of transmission services.' 'However, the ACCC's assessment of the access arrangements has identified a number of apparent shortcomings in terms of compliance with the Victorian Third Party Access Code for Natural Gas Pipeline Systems.'
Therefore, the ACCC's draft seeks a number of amendments to the access arrangements, including: changes to the Reference Tariffs in order to achieve compliance with the code and improve cost-reflectivity; and revised derivation of the proposed weighted average cost of capital (WACC) and target revenues.
If adopted, the amendments proposed by the ACCC will result in a reduction in proposed revenue to Transmission Pipelines Australia Pty Ltd of approximately 17 per cent, which in turn will result in Reference Tariffs that are on average lower than those proposed by the same percentage. The preliminary conclusions on the Access Arrangements are based on the ACCC's analysis of data and information currently before it and will be subject to further public consultation and review before the release of the final decision. Matters such as the appropriate capital base and the cost of capital raise a number of substantive issues.
In addressing the issue of the WACC the Commission recognises the large number of complex and controversial issues to be resolved. The Commission is particularly interested in receiving submissions addressing the WACC and will take such submissions into account in its final decision. The Commission expects a pre-decision conference to be called in regard to matters arising from the authorisations.
It also intends to convene a conference to specifically consider the WACC and looks forward to active participation of interested parties. Interested parties will be advised of this public consultation process and are encouraged to make comment to the ACCC on all of the findings reached in the Draft Decision. The ACCC has also identified a number of shortcomings in the MSOR which may influence the effectiveness of competition and hence impact on the balance between public benefit and anti-competitive detriment.
Therefore, the ACCC is seeking a number of changes to the MSOR to address issues such as: potential market distortions, which arise as a consequence of VENCorp intervention in the market, the provisions for force majeure and the value of lost load (the price cap); and concerns over the accountability and transparency of the system operator, VENCorp. These and other changes are conditions for the granting of authorisation.
The ACCC also issued today a draft determination granting conditional authorisation for a generic service performance contract for the exclusive provision of certain services by Gas Services Business Pty Ltd to newly formed gas companies in Victoria. The applicants and interested parties are invited by the ACCC to notify it within 14 days if they wish a pre-decision conference to be held on any of the draft Determinations outlined above. The ACCC will publish a final decision and final determinations after taking into account any issues raised in the conference and any submissions made after the release of the drafts.
Copies of the draft Decisions and draft Determinations are available on the ACCC website under 'gas' or directly from the ACCC by contacting Jan Batho of the ACCC's Canberra office on (02) 6243 1295.
For further information about this media release: Professor Allan Fels, Chairman, pager (016) 373 536 Ms Lin Enright, Director, Public Relations, (02) 6243 1108 MR 94/98 28 May 1998