- Gas pipeline owners face a harsher arbitration system for settling tariff disputes and a widening of the pipeline services subjected to regulated prices under measures put forward to the government to cut the cost of moving gas around the country.
- The 32 recommendations from the Australian Energy Market Commission also include more efficient and cost-reflective pricing for services and stricter rules on regulating pipeline expansions.
- The package firms up draft recommendations from the AEMC made in February and is intended to address "a number of shortcomings" the regulator identified in the existing regime for gas pipelines that are covered by either full or "light" regulation. AEMC chairman John Pierce said the changes would "help pipeline users negotiate lower prices and better deals for shipping gas".
- Pipeline tariffs have been a key focus for the federal government in its drive to end the escalation of gas prices that has blighted manufacturers, small businesses and households across the east coast over the past two years. Gas prices have surged to $10 a gigajoule or higher, up from historical levels of $3-$4/GJ.
- Gas transporters such as APA Group and Jemena are already dealing with a new arbitration system for tariff negotiations on pipelines that are not covered by independent economic regulation, which was introduced last August. The latest recommendations concern pipelines that are covered, either fully, or through a limited access arrangement.
- To the expected consternation of APA and some other pipeline owners, the AEMC is also recommending that it carry out a further review into the tests that are applied to decide what type of regulation is applied to pipelines, or whether they are regulated at all.
- The regulator acknowledged the opposition to such a move from some pipeliners but said the existing tests "are not consistent with good regulatory practice". They can result in either under-regulation, which opens the way to the exercise of market power by a pipeline owner, or over-regulation, resulting in increased costs that flow through to consumers, it noted. That review would be carried out in 2019 at the same time as a planned review into the access regime for unregulated pipelines.
- The failings identified by the AEMC in the existing system include that the arbitration framework to settle unresolved negotiations on tariffs is not regarded as "a credit threat to the use of market power" by pipeliners. To address that, a clear trigger would be set for the dispute-resolution process and clarification given on how access terms would be settled. A new fast-tracked process for arbitration would also be used, while other pipeline users could join in existing disputes.
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