The Economic Regulation Authority (ERA) has announced its final regulatory decision for the Dampier to Bunbury natural gas pipeline (DBNGP), with DBP Transmission CEO Stuart Johnston expressing concern over some aspects of the decision.
DBP Transmission (DBP) owns and operates the DBNGP, a Western Australian gas transmission pipeline linking the Carnarvon Basin with the state’s south-west.
Less than 15 per cent of the Dampier to Bunbury natural gas pipeline’s firm full haul contracted capacity in the 2016-20 period is subject to the ERA’s revised Access Arrangement.
As a result of successfully recontracting with its shippers in 2014, DBP has tariff certainty for more than 85 per cent of the pipeline’s firm full haul contracted capacity (including Alcoa’s exempt contract) until 2020.
The ERA’s revised access arrangement results is a six per cent increase in the total allowable revenue compared to its draft decision.
DBP’s Chief Executive Officer Stuart Johnston said that while he is pleased that the ERA has allowed almost 95 per cent of the $262 million in capital expenditure incurred by DBP since 2011, as well as approving a material uplift in allowed operating and capital expenditure to be incurred over the next access period compared with what was allowed in the draft decision, he has concerns with other aspects of the decision.
“While we continue to review the detail in the final decision, the rate of return applied by the ERA is not commensurate with prevailing conditions in the market and the risks involved in providing pipeline services,” Mr Johnston said.
Mr Johnston said it’s critical that DBP is allowed to earn an appropriate return on investment to ensure the continued investment in pipeline infrastructure.
Mr Johnston also said that he was disappointed that the final decision did not allow DBP to incur adequate expenditure to deal with the cost of managing the increase in risk to the integrity of the pipeline as a result of Perth’s urban sprawl expanding to parts of the pipeline that are not designed for residential land use.