The Economic Regulation Authority (ERA) has released its draft decision on the proposed five-year plan for APA Group’s Goldfields Gas Pipeline (GGP).
The ERA’s draft decision reduces the proposed increase in tariffs from 54 per cent down to 34 per cent in 2025, rising at the rate of inflation for the remaining four years.
The GGP is a 1,378km transmission pipeline that begins at Yarraloola and extends to Kalgoorlie in the Goldfields-Esperance region. Its customers are mainly mining companies and electricity generators serving mining operations.
The GGP is operated by Goldfields Gas Transmission (GGT), a subsidiary of APA Group.
ERA Chair, Steve Edwell, said that GGT’s proposal for the pipeline for the next five years assumed largely business-as-usual conditions, with two exceptions.
“First GGT, like all business, is operating in a higher cost environment. Changes in financial conditions that affect the overall value of the pipeline are driving about half of GGT’s proposed tariff increase,” Mr Edwell said.
“Second, the capacity of the pipeline has increased through the new Northern Goldfields Interconnect, which provides a new connection point to bring gas from the Dampier to Bunbury Natural Gas Pipeline into the GGP.
“The GGP is unusual, as it has both covered or fully regulated capacity, and uncovered capacity that is only lightly regulated,” Mr Edwell said.
“The ERA must carefully ensure that only efficient costs are allocated to the covered pipeline and therefore charged to those customers using that regulated service.”
As the Northern Goldfields Interconnect has increased the covered capacity of the GGP, GGT proposed to increase the level of shared capital and operating expenditure allocated to the covered pipeline.
However, the ERA’s draft decision states that the interconnect has not meaningfully increased GGT’s capital cost base, and therefore there is no justification for covered pipeline customers to pay a greater share of the pipeline capital costs.
The ERA has approved total revenue of $323.6 million in this draft decision, $65 million lower than GGT’s proposal.
The ERA also said that GGT has substantially under-estimated its capital expenditure for the previous five-year period – from its forecast of $17.6 million to now seeking to add $70.2 million to the regulated capital base.
After considering whether this expenditure was prudent and efficient expenditure, the ERA has approved only $32.3 million of this capital expenditure overspend for the previous five-year period – $38 million less than sought by GGT.
For more information, visit www.apa.com.au
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