Rule Change: Open

Overview

This rule change request from Jemena Gas Networks (NSW) Limited (JGN) seeks to amend the National Gas Rules to allow the recovery of its revenue to be shifted between two access arrangement periods, rather than be recovered in one. This aims to minimise price volatility for JGN’s NSW gas consumers that may occur following the delay in the finalisation of JGN’s 2015-20 access arrangement. This delay is due to judicial review and merits review proceedings.
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This rule change request from Jemena Gas Networks (NSW) Limited (JGN) seeks to amend the National Gas Rules to allow the recovery of its revenue to be shifted between two access arrangement periods, rather than be recovered in one. This aims to minimise price volatility for JGN’s NSW gas consumers that may occur following the delay in the finalisation of JGN’s 2015-20 access arrangement. This delay is due to judicial review and merits review proceedings.

Draft determination

On 7 June 2018 the AEMC published a draft rule determination that enables the Australian Energy Regulator (AER) to shift JGN’s revenue between the current and subsequent access arrangement periods. The objectives of the draft rule are to:

  • minimise network price volatility that may occur for JGN’s customers as a result of the outcome of the remade 2015-20 access arrangement decision
  • allow JGN to recover the revenue that it is entitled to recover, but no more, for the current access arrangement period.

The draft rule provides the AER with discretion regarding whether or not to make an adjustment determination. If the AER decides to make an adjustment determination, it must make it on or before 1 March 2019, otherwise the rule expires.

While the draft rule is a more preferable rule, it incorporates elements proposed in the rule change request and is designed to achieve the same outcome of minimising network price volatility for JGN’s customers.

Submissions to the draft determination and draft rule are due by 19 July 2018.

Background on rule change process

The AEMC started consultation on the rule change request on 27 March 2018, when it published a consultation paper. Submissions were due by 24 April 2018 and can be found below.

JGN submitted the rule change request to the AEMC on 14 December 2017.

Background on JGN and the rule change request

JGN operates the largest gas distribution network in New South Wales. 

There has been a delay in the finalisation of the AER’s final decision for JGN’s 2015-20 access arrangement due to judicial review and merits review proceedings. During this delay, JGN provided undertakings to the AER which set JGN’s tariffs higher than what it considered would have been the case had the AER’s original final decision not been set aside. The judicial review and merits review have now been completed and the AER has started the process of remaking its final decision.

JGN considers that, due to these delays, potential exists for network price volatility for customers over the next three years, from 2018/19 to 2020/21. JGN submits that this is because there is currently no mechanism in the National Gas Rules (NGR) to shift revenue recovery between access arrangement periods in order to reduce network price volatility. JGN considers that there is uncertainty around the extent of network price volatility, given the range of outcomes that could result from the AER’s remade final decision.

To minimise the potential for network pricing volatility, JGN submitted a rule change request to allow for revenue to be shifted between the current and subsequent access arrangement periods.
 

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