The COAG Energy Council has agreed on measures to help reduce electricity prices, streamline processes for interconnectors, and minimise costs for gas users.
While consensus was not reached on the Commonwealth’s position to save consumers money by abolishing the Limited Merits Review (LMR) process, ministers did agree that the existing LMR arrangements were failing and that immediate reform was required.
Wide-ranging amendments to the LMR regime will seek to tighten and clarify grounds for review, introduce strict timeframes and ensure that the AER’s costs in defending network appeals are borne by network businesses.
Officials will finalise detailed amendments for consideration and approval in the first quarter of 2017, with a review of these amendments to be conducted two years following their implementation.
New gas laws to improve liquidity and supply will also be progressed following recommendations presented by Dr Michael Vertigan AC.
Dr Vertigan found that there is an uneven bargaining relationship around the transportation of gas, and that reform is needed to balance out the relationship given transportation makes up 15 per cent of the price of gas.
In response, the council agreed to mandate commercial arbitration and greater disclosure and transparency of pipeline services and pricing. These measures will commence from 1 May 2017, subject to passage of amendments to relevant legislation.
With the continued decentralisation of generation and increasing adoption of intermittent renewables, the COAG Energy Council recognised the need for greater connectivity between states through assets like interconnectors.
Improvements will be made to the Regulatory Investment Test for Transmission to ensure high impact, low probability events, like the South Australian blackout are taken into account and to ensure the consideration process is more streamlined.
Ministers were provided with an update by Australia’s Chief Scientist, Dr Alan Finkel, on his review of energy security.
It was agreed by the COAG Energy Council to fast-track for consideration in February 2017 additional measures to strengthen the National Electricity Market responding to security and reliability issues identified in his preliminary report.
These measures could include undertaking proof of concept for technical solutions to improve system security, like the use of storage to provide fast frequency response.
APA Group said the the COAG Energy Council’s decision to maintain the National Gas Law coverage test in its current form confirmed the robustness of the existing coverage test for Australia’s dynamic gas market and provided certainty for the industry to move forward from the review process.
APA also welcomed Dr Vertigan’s recommendations as enhancing market-driven solutions.
APA Group Managing Director, Mr Mick McCormack, said, “APA’s focus has always been on working with our customers and providing solutions to help grow and develop Australia’s energy industry for the benefit of all Australians. We believe that commercial solutions should continue to incentivise investment and innovation.”
The Australian Pipelines and Gas Association (APGA) said it cautiously welcomed Dr Vertigan’s report and its proposals on aspects of transmission pipeline capacity negotiations.
APGA Chief Executive, Cheryl Cartwright, said Dr Vertigan had led a deep and thorough review of recommendations made in the Australian Competition and Consumer Commission’s Inquiry into the East Coast Gas Market.
“Dr Vertigan’s report rejects the proposal for a blanket increase in pipeline regulation in favour of a program that would provide increased information and commercial dispute resolution to complement the existing regulatory arrangements,” Ms Cartwright said.
Ms Cartwright said the pipeline industry accepted the recommendations would improve negotiated outcomes in gas transportation.
“While this program will directly address the concerns raised by various stakeholders during the ACCC inquiry, it must be clearly understood by everyone that it does nothing to address the central problem in the market which is the lack of availability of natural gas.
“Until policy-makers focus on developing and implementing solutions that will increase the supply of gas, the imbalance in the market will remain.”
COAG Energy Council ministers will next meet again in February 2017.