The Federal Government has released the ACCC’s East Coast Gas Inquiry report, which proposes increased pipeline regulation.
However, the Australian Pipelines and Gas Association (APGA) says pipeline regulation is not the way for the domestic gas market to adjust to the development of three LNG export pipelines in Queensland.
“Some of the recommendations of the report issued today demonstrate the ACCC’s inclination to regulate infrastructure even though that will do little to address the fundamental problem in the system: how to ensure there is enough gas available for both export and domestic users,” said APGA Chief Executive Cheryl Cartwright.
“When considering the ACCC’s recommendations, it’s important to remember what triggered the inquiry – a tightening demand-supply balance and rising wholesale gas prices.
“Changing regulation for gas transportation does not solve these problems.”
The country’s largest pipeline operator, APA Group, agrees with APGA on the need for increased gas supply and rejects the ACCC’s findings that further regulation of gas transmission pipelines will assist in resolving gas supply shortages in the east coast market.
“APA welcomes initiatives that result in increased gas supply. However, the challenges of developing new gas supplies in a number of States have been obvious for a number of years. It is a perverse approach for the ACCC to consider that more regulation of the pipeline industry will contribute to solving this issue,” said APA Managing Director Mick McCormack.
“To increase regulation of pipelines will stymie further investment and innovation. It will result in pipelines being built for current demand, not future supply. This can only adversely affect future gas supply.”
Mr McCormack also dismissed claims in the ACCC’s report of monopoly pricing by pipeline operators.
“APA refutes any suggestion of monopoly pricing,” said Mr McCormack.
“Pipeline tariffs are the result of negotiations with commercially strong and savvy counterparties and often the outworking of competitive process, as was the case with the South West Queensland Pipeline.”
In its Gas Markets 2015 Report, the Department of Industry, Innovation and Science showed that, while industrial wholesale gas prices on the East Coast might have increased over the past decade, gas transportation costs have remained the same.
According to the Australian Energy Regulator, gas transmission costs comprise 3 to 8 per cent of the retail price of gas in each State.
For large users connected directly to the transmission network, transportation costs tend to be between 10 to 20 per cent of the delivered price of gas as they do not incur retail or distribution costs.
The ACCC’s published views of the efficacy of the Gas Access Regime are consistent with its views on the National Access Regime covering ports, rail, airports and other critical infrastructure.
“Unfortunately, the ACCC’s views are at odds with those of independent experts, the Harper Review and the Productivity Commission,” said Ms Cartwright.
You can read key findings of the East Coast Gas Inquiry for yourself here.
