Rule Change: Completed

Overview

This rule change request from Environmental Justice Australia and the Institute for Energy Economics and Financial Analysis sought to revoke a derogation in the National Gas Rules which exempts the Northern Gas Pipeline (NGP) from application of the framework for arbitration and information disclosure for non-scheme pipelines (Part 23). The NGP is owned and operated by Jemena.
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This rule change request from Environmental Justice Australia and the Institute for Energy Economics and Financial Analysis sought to revoke a derogation in the National Gas Rules which exempts the Northern Gas Pipeline (NGP) from application of the framework for arbitration and information disclosure for non-scheme pipelines (Part 23). The NGP is owned and operated by Jemena.

Final determination

On 4 July 2019 the AEMC published the final rule determination to not make a rule to remove the derogation applicable to the NGP.

The AEMC considers that that there is currently an appropriate level of protection to restrict Jemena’s ability to exercise market power. This protection is provided by the NGP access principles, the current market conditions and the threat of making the pipeline subject to either light or full regulation. 

Revoking the derogation would lead to two arrangements, the Part 23 framework and the NGP access principles, concurrently applying to the NGP. This is likely to increase regulatory complexity and increase uncertainty for prospective users of the pipeline as well as Jemena. Concurrent application of the two regulatory regimes may also result in adverse outcomes such as forum shopping between the regimes by prospective users of the NGP. Additionally, revoking the derogation for any capacity of the pipeline above its current capacity would lead to similar issues as revoking the derogation altogether.

There are special circumstances affecting the NGP in relation to the NGP’s tender process, the timing of the tender process with respect to development of the Part 23 framework, and the existence of a binding third access regime due to which a different regulatory regime for the NGP is acceptable. 

Background 

As part of the recent reforms to regulation of the gas market, a framework for arbitration and information disclosure was introduced for non-scheme pipelines. The framework came into effect with the introduction of Part 23 of the NGR on 1 August 2017. These initial rules made by the South Australian Minister to give effect to the framework included derogation for the NGP.

Initiation

On 18 July 2018 the AEMC received a rule change request from EJA and IEEFA that sought to revoke the derogation from the framework for arbitration and information disclosure applicable to the NGP.

On 15 November 2018 the AEMC published a consultation paper for the Northern Gas Pipeline – Derogation from Part 23 rule change request. The AEMC received 23 submissions. 

Draft determination 

On 21 February 2019 the AEMC published a draft rule determination to not make a draft rule to remove the derogation applicable to the NGP. The AEMC received six submissions and a request to hold a hearing prior to making a final rule determination. 

On 18 April 2019, the AEMC published a notice that it extended the time to make a final rule determination to 4 July 2019. This extension of time was made to allow it to hold a hearing as requested by the proponents. 

Public hearing

On 7 May 2019, the AEMC held a pre-final determination hearing. Five stakeholders presented their views to the Commissioners. 

An additional consultation period was provided allow stakeholders to respond to any issues raised at the hearing. The AEMC received 26 submissions.  Submissions received as part of the rule change process are available below.   

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Documentation

FINAL

AEMC Documents