APA Group’s Nevenka Codevelle has responded to the ACCC east coast gas inquiry and said she is disappointed the report characterises the pipeline industry as part of the problem rather than part of the solution in relation to rising gas prices.
“Pipeline infrastructure is critical to increasing gas supply, and increasing gas supply will put downward pressure on prices,” Ms Codevelle said.
“The pipeline industry’s success is dependent upon more supply coming into the market and more customers having access to gas.
“To this end, the pipeline industry has a demonstrated record of investing and innovating to give customers the services they need to ensure gas projects proceed.”
Ms Codevelle said when it comes to gas prices, there is no doubt that the LNG market has exposed domestic customers to LNG export pricing, but increases in gas prices have not been a result of pipeline transmission charges.
“Transmission charges make up between 5-10 per cent of the delivered price of gas for retail customers.
“The 2015 Gas Market Report published by the Department of Industry indicates that transmission tariffs for the industry as a whole have not increased in real terms since 2002, notwithstanding rising gas prices.
“We are all in agreement that we need to develop more gas reserves. Gas reserves need infrastructure development, and that’s where the pipeline industry has and will deliver.”
The ACCC report recommends changes to the regulation of pipelines. Ms Codevelle believes this is not the best course of action to increase supply.
“Increased regulation comes at a cost – that is well accepted. The cost is both direct (compliance, administration costs etc) but most significantly, the cost of distorting incentives to invest and innovate in critical infrastructure thereby limiting market growth,” Mr Codevelle said.
Ms Codevelle said the gas market is currently a substantial way through the biggest transition it is ever likely to see.
“The market needs time to transition and adjust, which it is doing. Changing fundamental regulatory settings at this time simply is not the answer to increasing gas supply.
“The industry is working with the Australian Energy Markets Commission as part of its Framework review aimed at increasing liquidity and access to capacity. Improved capacity trading platforms, information transparency and most recently, a proposal for capacity auctions with a zero dollar reserve for unutilised capacity are all on the cards.
“It is by enhancing market mechanisms such as through these initiatives, rather than the prospect of increased heavy handed regulation that gas market growth will be facilitated,” Ms Codevelle said.
