Today’s decision by the National Competition Council to recommend continued
regulation of the Moomba to Sydney pipeline system was unjust and appeared
arbitrary, according to Australia’s largest natural gas pipeline company, The
Australian Pipeline Trust (APA).
APA managing director Jim McDonald said the NCC, in reaching its decision after
almost 18 months, threatened to stifle competition and drive away much needed
investment in the natural gas industry.
“We are dismayed by the NCC’s decision which we believe ignores the objectives of
competition reform in the gas pipeline industry,” said Mr McDonald.
East Australian Pipeline Limited (EAPL), a wholly owned subsidiary of APA, applied
in June 2001 for removal of regulatory coverage of the Moomba to Sydney Pipeline
system which brings gas from Moomba in South Australia and from Victorian gas
fields to the gas markets of NSW and the ACT. EAPL is the owner and operator of
the pipeline system.
The application was sought following an earlier decision by the Australian
Competition Tribunal to exclude the Duke Eastern Gas Pipeline, which also brings
Gippsland gas to the same two markets, from regulation under the Gas Access Code.
“In determining that EAPL should still be regulated whilst the competing Eastern Gas
Pipeline is not, the NCC has created an unfair playing field effectively choosing to
give Duke Energy a significant competitive advantage over EAPL,” said Mr
McDonald.
“The fact that it took 18 months to reach its decision suggests the NCC had some
doubt about whether EAPL should be covered. Furthermore, its own consultant found
the case for coverage was not compelling. A regulator’s role is to administer the law,
not make the law. There is a clear test for competition which sets out whether
coverage should apply to a gas transmission pipeline and the NCC has chosen to
ignore it,” said Mr McDonald.
Mr McDonald added “The NCC had the opportunity to enhance competition reform
and send a signal that they support investment in a truly competitive infrastructure
system. Instead they have chosen to entrench the power base of the regulatory
bureaucracy and stifle competition, a decision which will ultimately be to the
detriment of all consumers of natural gas.”
“It is gas transmission companies and their owners who are investing in infrastructure
that will enable competition in the natural gas industry. These sorts of arbitrary
decisions are driving investment away.”
The NCC stance justifies the concerns of the Productivity Commission which
identified the need for reform of the coverage test in its 33 recommendations for
change to the National Access Regime.
Mr McDonald said he was hopeful Resources Minister, Ian Macfarlane would
recognise the NCC’s recommendation as flawed and damaging to the natural gas
industry, and reject it.
Background
East Australian Pipeline Ltd made its application for revocation of coverage of the
Moomba to Sydney Pipeline System to the NCC in June 2001.
In December 2001 the NCC made a draft recommendation with the final
recommendation expected to be published in February 2002. There have been at least five extensions to the date of its final recommendation before today’s decision.
The Moomba to Sydney pipeline system transports natural gas from the Moomba gas
fields in South Australia to Sydney and Canberra and regional NSW. It is also
connected to the Victorian system with the Interconnect pipeline across the Murray
River, which is able to contract gas transportation bi-directionally.
Historically the Moomba to Sydney pipeline system has delivered all the gas
requirements of both NSW and the ACT. Following commissioning of the Duke
Eastern Gas Pipeline in September 2000 there is a second competing pipeline also
capable of supplying NSW and ACT markets.
The Australian Pipeline Trust is Australia’s major listed natural gas pipeline
company, with interests in over 7,000 kilometres of pipeline infrastructure. It
transports almost 25 per cent of the country’s natural gas to a variety of customers
including AGL, Cooper Eromanga Basin Producers, MIM, Normandy, CS Energy,
BHP Minerals, Pasminco, Incitec and WMC.
The natural gas market for NSW and the ACT services approximately 900,000
customers and is valued in excess of $1 billion per annum.