The AEMC has made a draft determination not to make a rule to remove an exemption in the National Gas Rules that applies to the Northern Gas Pipeline.
The Northern Gas Pipeline, between Tennant Creek in the Northern Territory and Mt Isa in Queensland, was built by Jemena after it won a competitive tender process run by the Northern Territory Government in 2015. It started commercial operations in January 2019.
The pipeline is exempt from the framework for arbitration and information disclosure due to a derogation in the National Gas Rules. Environmental Justice Australia and the Institute for Energy Economics and Financial Analysis sought to revoke the derogation so the Northern Gas Pipeline would need to comply with the requirements for providing information, as well as the dispute resolution procedures, set out in Part 23 of the National Gas Rules.
The AEMC’s draft determination finds the existing regulatory regime for the pipeline – which was put in place by the Northern Territory Government as part of a binding contract – is effective. Also, adding new regulatory requirements for the pipeline would be costly and potentially confusing for both Jemena and users.
In not making a draft rule, the AEMC notes the unique circumstances at the time the derogation was made, in particular, that Part 23 of the National Gas Rules was not yet in place. To provide protections for pipeline users, the Northern Territory Government included a range of conditions in the binding contract. In particular, Jemena must offer any potential pipeline users services at a set price.
The Commission considers that that there is currently likely to be an appropriate level of protection to restrict Jemena’s ability to exercise market power when negotiating with prospective users seeking access to the NGP services. This is provided by the NGP access principles, the current market conditions and possibility that any party could seek to have light or full regulation apply to the pipeline
In the future, pipelines like the Northern Gas Pipeline will be regulated under the framework set out in Part 23, which will eliminate the need for specific exemptions of this type. The NGR also has other forms of regulation that can be selected by service providers of new pipelines available to manage regulatory risk.
Submissions on the draft determination are due 4 April 2019. A final determination is due in May 2019.
Media: Bronwyn Rosser, Communications Specialist, 0423 280 341 or (02) 8296 7847
Background - How gas pipelines are regulated
Gas pipelines in Australia are regulated under a negotiate-arbitrate framework. Pipeline owners and pipeline users negotiate the terms, conditions and prices for access to pipeline services.
Full regulation under Parts 8-12 of the NGR require pipelines to have access arrangements which set out the prices and terms and conditions which are approved by the regulator. These access arrangements serve as benchmarks for negotiations between pipeline owners and users.
Negotiation is supported by information disclosure and regulatory decisions. Arbitration can be used if a deal cannot be agreed.
Regulation under Part 23 of the NGR relies on information disclosure and the use of negotiation and arbitration. There are no regulator decisions made on tariffs or non-tariff terms and conditions.