The Australian Competition and Consumer Commission has issued a draft decision which shows that NT Gas has proposed excessive tariffs in its access arrangement for the Amadeus Basin to Darwin Pipeline.
The access arrangement describes the terms and conditions on which NT Gas proposes to market its natural gas haulage services on the ABDP, and the maximum price (reference tariff) that customers would be charged for those services. Australian Pipeline Trust has a 96 per cent stake in NT Gas.
"The draft decision recommends reference tariffs that would be up to 45 per cent lower than those proposed by NT Gas", ACCC Chairman, Professor Allan Fels, said today.
"The draft decision analysis suggests that if the access arrangement were approved in its current form, consumers and industry would face excessive energy charges in the future, which could discourage investment and harm the Northern Territory's economy.
"The majority of natural gas hauled on the ABDP is used for electricity generation. Consequently, the reference tariff could affect a range of residential and commercial energy users.
"The treatment of depreciation when calculating the initial capital base is the key reason for the difference between the reference tariffs proposed by NT Gas and the ACCC. The ACCC accepted NT Gas's claim that the ABDP faces a significant risk of stranding after 2011 due to uncertainty regarding the remaining reserves in the Amadeus Basin, the expiration of NT Gas's foundation contract and the possibility of Timor Sea gas being brought onshore. This risk of stranding was evident since the construction of the pipeline. The ACCC also considered that NT Gas's proposed initial capital base was inconsistent with its forward looking depreciation schedule.
"The ACCC's proposed initial capital base reflects an appropriate value for the pipeline assets given the potential future use of the pipeline.
"The ACCC believes it has balanced NT Gas's interests with those of potential pipeline users. The reference tariff proposed by the ACCC would generate sufficient revenue to cover efficient operating costs, depreciation and a return on investment commensurate with assumed risks and current market parameters.
"The revenue stream that the ACCC has established would provide a post-tax return on equity for NT Gas over the next five years of 12 per cent.
"Furthermore, under the National Gas Code, NT Gas could achieve a return on equity in excess of 12 per cent by achieving lower than forecast operations and maintenance expenditure and the sale of non-reference services.
"NT Gas does not anticipate earning revenue from the reference tariff until the expiration of existing gas haulage contracts in 2011 as the pipeline is fully contracted. Under the Gas Code, existing haulage agreements and revenues are preserved. However, when new gas haulage contracts are negotiated, the terms of the access arrangement will form an important input to these negotiations.
"The ACCC considers that this decision is consistent with the principle of fostering efficient investment in new pipelines, and that the amendments proposed in the draft decision would ensure fair access and appropriate signals to parties undertaking future negotiations involving the ABDP".
The ACCC's draft decision is made under the National Third Party Access Code for Natural Gas Pipeline Systems.
The ACCC now invites interested parties to make submissions in response to the draft decision. Submissions close on 8 June 2001. The draft decision will soon be available from the ACCC's website (under 'Gas' at www.accc.gov.au).