"The final decision does not provide strong incentive for gas market expansion or adequately recognise the level of commercial and regulatory risks facing gas distribution business," the AGA said.
The AGA did say the commission had taken some positive steps in allowing some access charges to rise so that prices move to a more sustainable level. However, this approach has not been applied across all gas distributors.
"A significant flaw in the final decision is an unrealistic set of assumptions about the risk characteristics and actual cost of capital of Victorian gas distribution businesses," said AGA chief executive Bill Nagle.
"The determined regulatory cost of capital (6.8%) is the lowest ever set for any gas distribution business in Australia. This may act as a significant impediment to new and ongoing investment in gas distribution networks.
"The lack of an appropriate balance in this regard in the final decision and its potentially negative impact on new and ongoing investment in Australian gas infrastructure is another demonstration of why there is an urgent need to commence the proposed review of the National Gas Code."
The AGA added that some aspects of the final decision also appeared to ignore the key findings of the recently released Productivity Commission Review of the National Access Regime.
In particular, its central conclusion that regulators should not be overly ambitious in seeking to determine the efficient costs of regulated businesses, and the potential for regulatory failure that such an approach risks.
