Alcoa is the state's largest gas user.

$200m gas saving from tribunal decision

Monday, 30 July, 2018 - 14:03

Gas users will save nearly $200 million over five years after the Australian Competition Tribunal dismissed a move by the owner of the Dampier to Bunbury Natural Gas Pipeline to alter a pricing decision by the state’s Economic Regulation Authority.

The decision upholds the 2016-2020 access arrangement, which was decided by the ERA in June 2016.

Duet Group, then owner of the pipeline, applied for a merits review of the decision in July of that year.

“At the hearing in February 2017, the company contested two matters: the value of systematic risk relative to the market as a whole, used for calculating the return on equity; and the value of imputation credits,” a spokesperson for the ERA said.

“If the owners had been successful in its appeal, the revenue received through reference tariffs on the DBNGP would have increased by $198.22 million.”

To put that in context, the pipeline is the major source of gas for the South West, moving around 800 terajoules of gas per day from operations such as Gorgon and North West Shelf down to the area surrounding Perth.

That would be roughly two thirds quarters of use.

Since the appeal was first filed, the ownership of Duet has changed, it is now controlled by Hong Kong outfit Cheung Kong Infrastructure through Australian Gas Infrastructure Group.

In October last year, the federal government abolished the merits review process, arguing it created an opportunity for utilities to drive up prices.

Energy minister Josh Frydenberg said judgements of the Australian Energy Regulator, which effectively undertakes the ERA’s function in the states where energy is connected through the National Electricity Market, should be decisive and adhered to.

“Simply because networks feel that the AER’s decision was unreasonable, or that its discretion should have been exercised in a way more favourable to the networks, should not be grounds for appeal,” Mr Frydenberg said at the time.

“(Abolishing the review) will reduce pressure on power prices.

“Since 2008 electricity networks have used reviews to challenge 32 out of 51 AER decisions, amounting to some $6.5 billion being passed on to consumers in their electricity bills.

“In not one instance has an appeal by the networks led to reduced cost for consumers.”

He said it was unnecessary that energy utilities were given access to the limited merits review process while companies in water, postage and telecommunications were not.