The Australian Competition and Consumer Commission today issued its Final Decision on Epic Energy’s (Epic) proposed access arrangement for the Moomba to Adelaide Pipeline System (MAPS).
The arrangement describes the terms and conditions on which Epic proposes to market its natural gas haulage services on the MAPS, and the maximum price (reference tariff) that customers would be charged for these services for the period to 31 December 2006.
Natural gas hauled on the MAPS is used for electricity generation, other industrial purposes and to meet domestic energy requirements. Consequently, the access arrangement affects a range of residential and commercial energy users. It is therefore important for the access arrangement to adequately balance the interests of pipeline users and Epic.
While the ACCC’s final decision provides for a reduction in tariffs in the order of 10 per cent, the revenue stream that the ACCC has established would provide a post-tax return on equity to Epic of 12.6 per cent. Under the National Gas Code, Epic could achieve a return on equity in excess of 12.6 per cent through lower than forecast operations and maintenance expenditure and the sale of non-reference services. This return is consistent with previous decisions made by the ACCC, and is a reasonable return when compared to other return benchmarks.
The analysis in the Final Decision suggests that if the access arrangement were approved in its current form, consumers and industry would face excessive energy charges in years to come. Epic’s proposed terms and conditions could potentially make third party access to the MAPS difficult. The combination of these factors could discourage investment and harm the South Australian economy in the absence of the ACCC's Final Decision.
Under the Gas Code, existing haulage agreements and revenues are preserved as the pipeline is fully contracted. The existing gas haulage contracts expire in 2006 at which time the terms of the access arrangement will form an important input to the negotiation of new gas haulage contracts.
The ACCC's Final Decision is made under the National Third Party Access Code for Natural Gas Pipeline Systems.
Epic is required to submit a revised access arrangement that incorporates the amendments outlined in the Final Decision by 30 November 2001.