Gas Access Regulation in Australia

Australia has an industry-specific regime for third party access to natural gas transmission and distribution pipelines, consisting of the Gas Pipelines Access Law and the National Third Party Access Code for Natural Gas Pipeline Systems (the Code), which is implemented in each State and Territory through legislation. The regime establishes a transparent regulatory decision-making process for determining the terms and conditions of access to both transmission and distribution pipelines. The Code contains a set of rules for coverage, that is, the process of determining which pipelines, including distribution systems, should be made subject to the Code.

Under the provisions of the Code, service providers of covered pipelines are required to submit an Access Arrangement, outlining access conditions and reference tariffs, for consideration by the relevant Regulator. The Code also provides for binding arbitration where there is a dispute between prospective users and service providers about the terms and conditions of access.

In September 2005, the Ministerial Council on Energy (MCE) announced that the Gas Pipelines Access Law and Code would be replaced with a new National Gas Law (NGL) and National Gas Rules to align the gas and electricity regimes more closely and bring gas under new energy market governance and institutional arrangements. This followed the establishment of the Australian Energy Market Commission, responsible for market development, managing the rule change process and approving rules, and the Australian Energy Regulator (AER), responsible for regulation and enforcement of the National Gas Law and Rules.

The framework of existing gas access regulation will be retained, including the coverage system. However, following the May 2006 release of the MCE response to the Productivity Commission Review of the Gas Access Regime, a number of new elements will be incorporated in the regime.

The MCE agreed with the Productivity Commission's recommendation that a single objects clause be included in the NGL. For consistency across the energy market, the objective of the NGL will be to "promote efficient investment in, and efficient operation and use of, natural gas services for the long term interests of consumers of natural gas with respect to price, quality, safety, reliability and security of supply of natural gas".

The MCE also agreed that a "light-handed" regulatory option for covered pipelines would be included in the NGL. This approach will involve price monitoring by the AER, with a possibility to seek binding arbitration if access seekers and service providers cannot reach agreement on negotiated terms of access.

The NGL will also contain two new incentives to encourage investment and provide regulatory certainty for new pipelines. Each incentive will require an application, independent assessment and recommendation by the National Competition Council, and a Ministerial decision. Under the first, pipeline proponents will be able to seek a binding up-front "no coverage" ruling that would exempt the new pipeline from access regulation for 15 years. Under the second, proposed international transmission pipelines that bring foreign gas to Australia may apply for a binding 15 year exemption from price regulation – a pipeline granted this exemption will still be required to fulfil a number of non-price related obligations.

For further information contact:

Manager- Gas and Market Development
National Energy Market Branch
Energy and Environment Division
Department of Industry, Tourism and Resources
GPO BOX 9839
CANBERRA ACT 2601
AUSTRALIA
Telephone: +61 2 6213 7381
Facsimile: +61 2 6213 6168

Information on National Third Party Access Code for Natural Gas Pipeline Systems or Gas Market Reform - Gas Access Regime may be found by following the links from www.industry.gov.au and www.mce.gov.au.