The owners of the Dampier to Bunbury natural gas pipeline and the industry regulator are at odds on the tariff increases users of the pipeline should have to pay.
The owners of the Dampier to Bunbury natural gas pipeline and the industry regulator are at odds on the tariff increases users of the pipeline should have to pay.
The Economic Regulation Authority issued its draft decision yesterday to not approve proposed revisions to the access arrangement for the pipeline.
The proposed revisions were submitted by DBNGP Transmission (DBP), under the National Gas Access Act (Western Australia) 2009.
The ERA's decision proposed a 7.6 per cent increase in the reference tariff, a smaller increase than the 33.4 per cent increase DBP requested in its filing.
The dispute over tariffs is based on debates over appropriate rates of return and estimated capital expenditure on the pipeline.
The authority determined the rate of return to be 7.16 per cent on a real, pre-tax basis, while DPB proposed a rate of return of 10.76 per cent.
The ERA forecast capital expenditure of $114 million for the 2011 to 2015 access arrangement period, $22.5 million less than the amount of forecast capital expenditure proposed by DBP.
The ERA said it was not satisfied that the capital expenditure forecast by DBP met the prudence and efficiency requirements of the National Gas Rules.
The two sides cannot even agree on what the capital base of the pipeline is, with the ERA determining the value of the pipeline's capital base at January 1 to be $3.3 billion, less than DBP's proposed value of $3.4 billion.
DBP chief executive Stuart Johnston said: "While it is important that the ERA has agreed to roll in almost all of the capital expenditure we have invested in the last five years expanding pipeline capacity, it is just as important the business be allowed to earn an appropriate return on that investment.
"That return must be commensurate with the prevailing conditions in the market for funds, as well as the risks in operating an essential high pressure gas transmission pipeline and providing services to customers.
"As a result, we will closely review this aspect of the draft decision."
DBP said the decisions would not impact its revenues over the access arrangement period, as its contracts were independent of the regulatory access terms and reference tariffs until December 31, 2015.