Epic can determine tariff

THE gas access regulator’s office, OffGAR, says it is up to pipeline owner Epic Energy what tariff it can charge for gas transported through the Dampier-Bunbury pipeline.

“The decision was not about ‘this is a tariff you must set’,” an OffGAR legal spokesperson said.

“The decision was about looking at the (gas) code and determining if Epic’s proposed arrangements complied with this or not.

“The average tariff of $0.95 per GigaJoule, given in the regulator’s summary, was just an example of how such a figure could fit in the overall context.”

Epic’s position that it could not understand how the regulator derived an average tariff or determined a capital base and total revenue for the pipeline was “disingenuous”.

All necessary information was contained within the decision, she said. How Epic reworked its tariff structure to arrive at a tariff it could charge was constrained by figures contained in the regulator’s decision but could vary according to how the company applied various variables.

The major pipeline figures determined by the regulator, and contained within the decision, were the initial capital base, total revenue, and rate of return, plus a depreciation schedule.

However, Epic maintained four days after the regulator’s decision was released that it was “trying to negotiate the release of the regulator’s tariff and total revenue models”.

“Without this, Epic Energy cannot verify the results,” Epic general manager commercial and project development Ian MacGillivray said.

OffGAR said several fundamental issues were being misunderstood in the week following the release of final access arrangements.

One of these was that the regulator had determined Epic had not used the tariff figures linked to the pipeline’s 1998 purchase in calculating its purchase price.

Epic had not supplied information on its purchase price calculations before the regulator made his draft decision, OffGAR said. This had been forthcoming only after the Supreme Court directed that the regulator give consideration to the purchase price and sales process in determination of final access arrangements, provided this was commercially reasonable and sensible, OffGAR said.

Epic, however, appears unhappy that the regulator has continued to consider capital base and revenue calculations, to prescribe, from first principles, a final tariff arrangement.

Epic’s long-term and fundamentally different contention is that the tariffs ought to conform with what was provided within the 1998 pipeline sales contract.

“Epic purchased the pipeline on these tariffs,” Epic general manager commercial and project development Ian MacGillivray said.

“But the regulator has used a cost-of-service base to arrive at tariffs.”

Epic has maintained an adverse final access decision would put the company at risk.

The pipeline capacity is fully contracted and any future expansion would require significant capital.

Epic’s bankers have currently extended financing arrangements until September this year.

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