East Australian Pipeline, the operator of the MSP, had applied for the MSP and Canberra lateral systems to be removed from regulation under the code, which has four criteria against which the need for regulation is judged.

In the decision handed down yesterday Macfarlane said National Gas Code coverage of the Canberra lateral system will be retained and to revoke coverage of the MSP Mainline between Moomba and Marsden, but not between Marsden and Sydney.

Already the Australian Pipeline Trust (APA) has welcomed the Minister's decision to revoke coverage of gas transmission into New South Wales because it is likely to have no negative financial impact on APA.

However, the company will be reserving its position on whether to appeal the decision in relation to the balance of the MSP system.

MacFarlane said the decision to revoke the Moomba to Marsden section is based on the developing network in South East Australia, which limits the proponent's ability to exercise monopoly power in markets serviced by three or more pipelines.

"I do not take this decision lightly. There were many factors to consider and I believe this is the right decision considering the range of services provided by the MSP Mainline. I have recognised the increased interconnection in South East Australia as well as the practical implications for gas customers, particularly regional customers," said the Minister.

Regulation under the Gas Code requires that competitive parts of a business are kept legally and financially separate from regulated parts. The MSP is owned by APA in which AGL has a 30% stake.

"The dominance of AGL in Sydney, Canberra and regional markets, coupled with its stake in the MSP, was a key consideration. Regulation and the separation of the business ensures other operators are able to pipe gas into downstream markets and compete," said Macfarlane.