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Regulation no disincentive: Michael

WA’S Independent Gas Pipelines Access Regulator Ken Michael delivered arguably the WA energy conference’s definitive understatement when he told delegates: “Regulation has created a lot of interest in this country”.

Dr Michael defended the need for pipeline access regulation, saying it was necessary to keep the market for pipeline services contestable.

He also quoted from the Productivity Commission’s recently released Review of the National Access Regime report, which argued that, as Australia had limited experience with access regimes, abandoning the access code would be inappropriate at this stage.

Dr Michael also rejected national industry claims that pipeline regulation in its current form was a disincentive to investment.

While some have claimed the Productivity Commission’s re-port was held over so that the Australian Competition and Consumer Commission could produce a draft guidelines paper on greenfields pipelines in support of incentives arguments, Dr Michael did not let the opportunity pass to highlight the importance the ACCC placed on the investment aspect.

Dr Michael also addressed accusations the rates of return afforded to pipeline owners were insufficient to compensate for the risks involved and to underpin investment in new infrastructure.

Determining appropriate rates was a complex issue, he said, and this was the subject of studies conducted throughout Australia.

Dr Michael said he, too, had concerns with the current system, one being access to sound information.

There were significant restraints on regulators, he said, but their decisions necessarily de-pended heavily on accessible information.

The access regime was new, Dr Michael said, and it was understandable the determination and approval processes took some time, but nonetheless the length of time taken to finalise access arrangements was too long.

Of the 25 regulated pipeline systems in Australia, 20 had required between 34 and 44 months for final approval, while the other 20 per cent were yet to be finalised.

“We need to look at legislation and the code in particular, to improve this,” Dr Michael said.

Three WA pipeline systems were still without final access arrangements, including the Goldfields Gas Pipeline and the Dampier to Bunbury Natural Gas Pipeline.

A writ by the owners of Goldfields line, Goldfields Gas Transmission, regarding the regulator’s draft tariff decision, remained outstanding, with additional parties applying to be part of the process, and the matter had not yet been scheduled for court consideration.

Dr Michael said he remained hopeful of delivering a final decision on the DBNGP by March 2003.

But while access processes had proved complex and protracted, presenting a significant challenge in balancing competing interests, the benefits were worth pursuing, he said.

Meanwhile, Dr Michael also was assessing the full retail contestability costs for AlintaGas and expected to announce a decision in November.

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