The gas access regime covers the economic regulation of Australia's 75 000 kilometres of gas distribution networks (valued at around $6 billion) and most large gas transmission pipelines with the review being a Council of Australian Governments' Energy Market Review initiative.
"The past six years of the gas access regime's operation have highlighted significant deficiencies that have the potential to result in medium-term under-investment in gas infrastructure, and also regulatory failure" said AGA Chief Executive, Bill Nagle.
"There is a need to rebalance current gas access regulation and pricing, to ensure the community continues to benefit from a modern and expanding gas network in the future. Ensuring appropriate ongoing investment in the gas network is particularly important, if more Australian communities are to benefit from the delivery of natural gas to their areas.
"Crucially, significant amendments must be made to the regime, to provide appropriate incentives for ongoing investment in network expansion, reinforcement, maintenance and upgrading."
Key proposals put forward by the AGA to improve the gas access regime included a clear objects clause in the National Gas Code to guide regulators in making their determinations. A lack of clear guidance in the regime has led to a lack of appropriate emphasis on the need for incentives for medium-term investment in existing and new gas network assets;
The AGA wanted clearer access pricing principles and a broader range of access pricing models. It said it believed it was essential that the regime provides choice from an expanded range of less intrusive and less costly access pricing models, to allow for different network characteristics and market conditions to be recognised. Current access pricing approaches, as applied by regulatory authorities, do not provide adequately for investment in new and existing infrastructure, contain poor incentives for efficiency, and have led to intrusive forms of cost-based pricing.
The lobby group wanted to ensure that all regulated gas businesses across Australia had consistent and effective merit appeal arrangements in line with the significant impact that access pricing decisions had on the private property rights of investors in sunk capital assets.
The AGA said there needed an improved treatment of efficiency gains. Currently, approaches to the treatment of efficiency gains deprived regulated gas businesses of all the benefits of forecast efficiency gains and a high proportion of any unforecast gains achieved.
There needed to be specific measures to facilitate new 'greenfields' investment in downstream gas infrastructure, such as 'access holidays' or 'economic regulation free periods' and binding pre-investment rulings on proposed investments.
"Importantly, improving the gas access regime also involves ensuring that access regulation is not applied where it is not necessary, and that where it is applied, the regime is administered efficiently" Mr Nagle said.
"The AGA has been calling for a review of the gas access regime for some time-we are pleased that it is now underway in earnest, and that the Productivity Commission is undertaking it.
"We look forward to continuing to contribute to the review as it progresses, and welcome today's opportunity to appear before the Commission, to outline the AGA's concerns with the current regime."
