consolidated within the detailed design for the transparency and GMRG’s arbitration framework. Recommendation 4 That no change be made to the current coverage test at this stage. The appropriateness of amending the coverage test should be reviewed within five years after the arbitration framework is operational. This recognises that the gas market is changing very quickly and any changes to the test should occur only after the effects of introducing binding arbitration, the capacity trading and transparency reforms, and the CCA amendments are known. Should the proposed amendments to the CCA declaration criteria be implemented, the NGL should also be amended to reflect these changes. The form of the test should be reviewed within five years after the arbitration framework becomes operational. At this stage, it is envisioned that the AEMC would likely undertake the review. Conclusion The aim of the recommendations is to achieve commercial outcomes and therefore sustain investment. Contrary to the implementation of an altered coverage test that would likely lead to increased regulation of the pipeline industry, investment would still be in response to market signals rather than regulation. The reforms are not designed to damage the ability of the pipeline industry to generate appropriate commercial returns, but rather to limit excessive returns. The proposed solution should avoid any on ‘chilling’ effect investment. This approach has the potential to facilitate efficient commercial outcomes while avoiding the time, cost and uncertainty associated with regulatory processes. The recommendations seek to reduce the imbalance in negotiating power, constrain the exercise of market power and encourage downward pressure on gas transportation prices. This could see a minor reduction in delivered gas prices for Australian users and slightly higher ex-plant prices for producers, encouraging investment upstream and downstream. The conclusions and recommendations arising from this examination are consistent with the views of the majority of industry participants that the specification of the coverage test itself is not the major issue at this time.
consolidated within the GMRG’s detailed design for the transparency and arbitration framework. Recommendation 4 That no change be made to the current coverage test at this stage. The appropriateness of amending the coverage test should be reviewed within five years after the arbitration framework is operational. This recognises that the gas market is changing very quickly and any changes to the test should occur only after the effects of introducing binding arbitration, the capacity trading and transparency reforms, and the CCA amendments are known. Should the proposed amendments to the CCA declaration criteria be implemented, the NGL should also be amended to reflect these changes. The form of the test should be reviewed within five years after the arbitration framework becomes operational. At this stage, it is envisioned that the AEMC would likely undertake the review. Conclusion The aim of the recommendations is to achieve commercial outcomes and therefore sustain investment. Contrary to the implementation of an altered coverage test that would likely lead to increased regulation of the pipeline industry, investment would still be in response to market signals rather than regulation. The reforms are not designed to damage the ability of the pipeline industry to generate appropriate commercial returns, but rather to limit excessive returns. The proposed solution should avoid any ‘chilling’ effect on investment. This approach has the potential to facilitate efficient commercial outcomes while avoiding the time, cost and uncertainty associated with regulatory processes. The recommendations seek to reduce the imbalance in negotiating power, constrain the exercise of market power and encourage downward pressure on gas transportation prices. This could see a minor reduction in delivered gas prices for Australian users and slightly higher ex-plant prices for producers, encouraging investment upstream and downstream. The conclusions and recommendations arising from this examination are consistent with the views of the majority of industry participants that the specification of the coverage test itself is not the major issue at this time.
Examination%20of%20the%20current%20test%20for%20the%20regulation%20of%20gas%20pipelines%20-%20Final%20Report.docx