The rapid development of three LNG facilities in Gladstone is driving structural change throughout Eastern Australian gas markets.
As to be expected in times of change, those affected aren’t always thrilled to have change thrust upon them, which in turn leads to public and private complaints, assessment and analysis of the issues, a wide range of reform proposals advocated by different groups, Government reviews and, in time, action.
This has certainly been the case for the last four or so years for Eastern Australia’s gas markets, with the ongoing discussion and debate leading to a large number of government reviews and providing a great amount of content for conference organisers.
One of the few “˜actions’ that has been taken during this time is the Council of Australian Governments (CoAG) Energy Council’s progression of reform to improve pipeline capacity trading, a fairly familiar refrain that has continued to keep the secretariat and the Policy Committee busy for a while now.
The Energy Council first agreed to progress the issue in 2012.
Since then, we have had extensive consultation; including a formal Regulation Impact Statement process with a detailed cost benefit analysis canvassing four options ranging from do nothing to mandatory “˜use-it-or-lose-it’ provisions for shippers.
That process led to a decision that the most appropriate approach, balancing the measurable costs and benefits of any reform, is to create a better environment for capacity trading through enhanced information and standardisation of trading contracts.
Action has been taken to achieve this: the pipeline industry has introduced harmonised terms and conditions for operational capacity transfers; the Australian Energy Market Operator (AEMO) has developed a standard contract for bare capacity transfers; and a rule change proposal for the National Gas Rules has been developed, setting out new information to be provided and published on the National Gas Bulletin Board commencing in January 2016.
As it often the case, the Energy Council has committed to reviewing the situation within two years of the rule change being implemented.
Despite this extensive process, detailed analysis and appropriate solution, capacity trading is still on the agenda for review and discussion.
The Australian Energy Market Commission (AEMC) has recently released its draft Stage 1 Report for its Review of East Coast Wholesale Gas Markets and Pipeline Frameworks.
Despite all the work to date, and its own ability to consider the issue during the rule change determination process, the AEMC has flagged the need for the Review to consider new information.
Despite the CoAG Energy Council’s undertaking to review capacity trading by January 2018, the AEMC will be considering the issue further in Stage 2 of its Review.
In addition, the Australian Competitor and Consumer Commission’s (ACCC) East Coast Gas Inquiry is starting to pick up steam, with the release of the issues paper.
Among the topics it is investigating is, of course, capacity trading.
Eight of the 60 questions posed by the ACCC pertain to capacity trading.
APGA has long maintained there are no “˜silver bullets’ to address the issues created by the structural change underway on the East Coast.
We need to explore, analyse and implement as many improvements to gas markets as appropriate.
Capacity trading is clearly a concern to a vocal portion of market participants.
It has been subjected to a rigorous and extensive policy development process.
It’s time to implement the outcomes of that process and for the Government to allocate its resources investigating other needed improvements as further reforms are developed.