ACCC pipeline draft prompts urge to talk

AGAINST a backdrop of daily talk around numerous proposed pipeline developments, industry players and organisations are positioning themselves to respond to the Australian Competition and Consumer Commission’s draft for greenfields gas transmission pipelines, released late last month.

The draft was produced to allay the reported fears of potential new pipeline investors regarding regulatory risk and inflexibility.

It was also intended to shed light on the ACCC’s preferences in addressing project-specific risks and likely regulatory outcomes for proposed projects.

Releasing the draft, ACCC chairman Allan Fels said the guideline had been produced in response to the volume of queries received by the commission and the level of reported concern at perceived detractions from greenfields pipeline investment in Australia. The ACCC would hold a public forum before finalising the guideline, he said.

Industry players such as the Australian Pipeline Industry Association, which met with the ACCC in November last year to provide input prior to the draft, have been quick to seek an audience with the ACCC following the draft’s release.

APIA executive director Allen Beasley said the association could not see anything in the guideline that would create greater certainty for new pipeline projects, just some window-dressing on issues.

“It just crystallises the risks,” he said.

APIA had invited the commission to a meeting of industry experts this month, but the ACCC has said it cannot meet before August 8.

One company to confirm its presence at this meeting is Epic Energy, which along with other service providers will talk with a visiting ACCC representative in Perth this week.

Epic said it was surprised to find the draft release on the ACCC’s website. It had expected notification of the release as a participant in the pre-draft process last November, but had received no formal feedback or notification that the draft was ready for release.

The company last year challenged a tariffs decision for its South West Queensland pipeline, made by the ACCC, the gas regulator for Queensland, and is waiting for a WA Supreme Court decision on its challenge to the WA gas access regulator’s decision on tariffs it can charge for the Dampier to Bunbury Natural Gas Pipeline.

In December 2001 Goldfields Gas Transmission, operator of the Goldfields Gas Pipeline, WA’s second biggest natural gas pipeline, also challenged a draft tariff decision by the State regulator.

Epic has maintained current regulatory decisions are discouraging greenfields investment. Other energy players looking to diversify or enter as newcomers in a more contestable energy market in WA have commented that uncertainties, including factors affecting the ability to make profits, would restrict their interest to laterals or small pipe-lines.

Regulatory decisions are made on interpretations of the National Third Party Access Code for Natural Gas Pipelines and Part IIIA of the Trade Practices Act, and both APIA and the Australian Gas Association are calling for the release of the Productivity Commission’s Review of the National Access Regime to assist in finalising guidelines for greenfields gas pipelines.

AGA chief executive Bill Nagle said the association was still examining the draft guideline but had “fundamental concerns with the current regulatory framework”, in that it offered “inadequate returns to infrastructure investors while also posing high regulatory risks”.

Mr Nagle said the AGA would be looking for the guideline to improve the regulatory framework.

But Epic general manager corporate services and strategy development David Williams believed the draft guideline did just that, and was of no comfort to those looking at investing in pipelines.

“And there’s a degree of in-consistency in the ACCC’s approach,” he said.

The guideline stated the rate of return calculation for a new pipeline need be no different than that for an established line, Mr Williams explained, but also gave an example of a new pipeline showing there was a higher rate of risk.

Epic has also taken issue with the framework, contending a new pipe-line project under development can-not go through the current regulatory process with its public disclosure without surrendering its edge to potential competitors.

The company says it can’t go through the regulatory process after development without wasting the strategy and work put into economics prior to the development.

It took a theoretical approach, Mr Williams maintained, one that virtually gave no credit to customers to be able to negotiate deals, and that suggested they did not know what was good for them.

The reality, Mr Williams said, was that pipeline customers were often large, sophisticated energy utilities, practised in commercial negotiation.

However, despite criticism of a regulatory regime that appeared bent on controlling pipeline development at the expense of encouraging it, Epic remained optimistic regarding further involvement in the business of delivering gas through-out Australia.

With regards to a proposed Darwin to Moomba line and other options to supply gas to eastern States markets, Epic continued to work with the market and was in constant contact with those who buy and supply gas, Mr Williams said.

And on the Dampier to Bunbury line, Epic believed it had a good relationship with the regulator and that there would ultimately be a good outcome.

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