Comparison of the AEMC’s and GMRG’s recommendations The table below compares the AEMC’s recommendations with the GMRG’s final recommendations. Table A.1: Comparison of recommendations AEMC Recommendations Consistency of GMRG’s Final Recommendations Required Outcomes Outcomes that must be progressed by the GMRG and are necessary to the implementation of the reforms A daily, day-ahead capacity auction for contracted but un-nominated pipeline capacity and hub (compression) services. Auction happens shortly after nomination cut-off time. Auction Reserve price of zero dollars, with compressor fuel provided by shippers design: (Note the proposed approach to the reserve price also recognise the potential for alternate arrangements if the service provider provides compressor fuel) At least all contracted but un-nominated capacity placed for sale through auction. Product Accommodate nominations or renominations by incumbent shippers after the (Note the proposed product accommodates nominations and design: auction is conducted. renominations by shippers with firm capacity rights) Preferred outcomes Outcomes that should be pursued by the GMRG unless it is clear there are greater benefits in alternative approaches Geographic Single auction across the east coast market, in order to optimise allocation across as many products as possible. Combinatorial auction where multiple buyers and sellers can simultaneously coordinate trades, managing the complementarities between different pipeline segments. Single round auction to reduce complexity and opportunities for behaviour between participants. Auction Bidders pay the value of their winning bids ("first-price" rule) to reduce design: Advice provided by NERA indicates that a first-price rule is complexity. strategically complex for bidders and may result in inefficient outcomes. NERA therefore recommended a pay-as-cleared pricing rule. The pay-as-cleared approach offers the same simplicity of participation advantages as a first-price approach, but reduces strategic complexity.
Comparison of the AEMC’s and GMRG’s recommendations The table below compares the AEMC’s recommendations with the GMRG’s final recommendations. Table A.1: Comparison of recommendations AEMC Recommendations Consistency of GMRG’s Final Recommendations Required Outcomes Outcomes that must be progressed by the GMRG and are necessary to the implementation of the reforms Auction design: A daily, day-ahead capacity auction for contracted but un-nominated pipeline capacity and hub (compression) services. Auction happens shortly after nomination cut-off time. Reserve price of zero dollars, with compressor fuel provided by shippers (Note the proposed approach to the reserve price also recognise the potential for alternate arrangements if the service provider provides compressor fuel) At least all contracted but un-nominated capacity placed for sale through auction. Product design: Accommodate nominations or renominations by incumbent shippers after the auction is conducted. (Note the proposed product accommodates nominations and renominations by shippers with firm capacity rights) Preferred outcomes Outcomes that should be pursued by the GMRG unless it is clear there are greater benefits in alternative approaches Geographic Single auction across the east coast market, in order to optimise allocation across as many products as possible. Auction design: Combinatorial auction where multiple buyers and sellers can simultaneously coordinate trades, managing the complementarities between different pipeline segments. Single round auction to reduce complexity and opportunities for behaviour between participants. Bidders pay the value of their winning bids ("first-price" rule) to reduce complexity. Advice provided by NERA indicates that a first-price rule is strategically complex for bidders and may result in inefficient outcomes. NERA therefore recommended a pay-as-cleared pricing rule. The pay-as-cleared approach offers the same simplicity of participation advantages as a first-price approach, but reduces strategic complexity.
20180103-Design-of-day-ahead-auction-of-contracted-but-un-nominated-capacity-final-recommendations.docx