Apa Group · ASX:APA
Apa — Australian Pipeline Industry Association (APIA) — Conference Presentation (March 2004)
18 slides from Apa's conference presentation, Mar 16, 2004
Slide 1: Transmission Regulation - A New Perspective
Tran nsmission Regulation ~ A New Perspective Sydney 16 March 2004
Slide 2: Productivity Commission and Ministerial Council for Energy
Productivity Commission — identifies major deficiencies in gas transmission regulation Ministerial Council for Energy — a parallel agenda
Slide 3: Australian pipeline infrastructure 1993 to 2004
72 PNG Pot Hediand «~~ Onslow wf ie 7 y-Dampier . stetfer ~ Nevinaa, ean ~ Trane-Contienta Pipeline “4, ~ MooMbas Q BRISBANE Moomba Interconnect Griffith Esperance ADELAIDE MELBOURNE Existing Pipelines Pipelines Built During this Port Latta’ Period Proposed / Under Development ructure 1993 to 2004
Slide 4: Two gas markets - east and west Australia
Two gas markets - east and west Australia. Natural gas is essential to the economy, environment and regional development Natural gas faces unique challenges — long transportation distances, thin markets and = competing fuels Privatisation coupled with major development over last decade — SE market l
Slide 5: National market remains immature and is currently in transition
_ National market remains immature and is currently in transition Asset sales under way (Epic, CMS). Sale of Duke announced 4 In the east, interconnection provides limited competition and may stall i Major investment required to provide competitive gas and meet growth projections kX Balance must be
Slide 6: Producer competition very limited
q oducer competition very limited — 3 producers ‘more than 95% (85% by 2010) ABARE bs Tariff regulation of pipelines is a long standing concern to APIA and transmission companies (this is the focus of the PC review) hx We do not require “no regulation” Bs We do require better regulation KX Problem i
Slide 7: National gas use expected to double by 2020
| National gas use expected to double by 2020 ndustry response to Moomba fire Link from Qld to Moomba lacking Northern supply options — major investment required Pipelines needed for regional development Existing pipelines require expansion Market driven, integrated national system is the objective
Slide 8: State of industry - Conclusions
te of | dustry - Conclusions Still an immature market Privatisation and interconnection are still incomplete Industry and Government objectives not aligned | Major development required Regulation is out of step with commercial reality
Slide 9: What is the Gas Access Regime?
What is the Gas Access 7 Regime? sas pipeline specific access regime 4 ‘Industry ‘specific — under umbrella of Trade Practices Act (Part IIIA) ~ SM Agreed in November 1997 under intergovernmental agreement Based on “reference tariff’ approach v4 Implemented by regulators as strict “price control” mo
Slide 10: APIA recognises need to achieve a balance
APIA recognises need to achieve a balance between investor needs (certainty, return on investment) and customer needs (reasonable ‘terms of access) The approach adopted by regulators is intrusive, adopts “least cost" outcomes and is stifling investment 10
Slide 11: Background to the review
Background to the review Code poses maior risk for foundation contracts for — pipelines — size to today’s markets to minimise ris bX To date most new pipelines have avoided being regulated (EGP, TGP, SEAGas, mid-west pipeline) Major successful legal challenges — many more in train bi Regulation of c
Slide 12: Draft Report - overview
raft Report - overview ipeline owners can find the exercising of market power unsustainable because of characteristics of demand a bx Nature of gas market has changed significantly — competition emerging — bs Widespread acceptance of need for gas access regime of sorts sone 12
Slide 13: Review - Conclusions
eview - Conclusions that there are problems with the current regime, mainly arising from the considerable costs it imposes and its . potential to distort and deter investment.” 13
Slide 14: Too great a focus on price regulation
Too great a focus on price regulation Too many conflicting objectives Wide range of objectives to regulators — “virtually unlimited discretion in weighing up these objectives.” ; Wide discretionary powers to regulators — “able to attach any weight they consider relevant.” 14
Slide 15: Too many regulatory decisions before merit appeal
Too many regulatory decisions before merit appeal High information and research costs Investment impact — “Price regulation of reference tariff is likely to be constraining the scope for access providers to deliver and price their services efficiently and offer innovative service offerings.” Other i
Slide 16: Proposed changes
Proposed changes Objects clause — guide regulators, tribunal and courts Raise threshold regulation test — fewer pipelines “covered”; even fewer would be price regulated Introduce price monitoring regime Binding rulings of no “coverage” for 15 years Scope for binding rulings of monitoring for 5 years
Slide 17: Hearings on draft report - March
earings on draft report - March Final report to Government — June 2004 ( Findings to be considered by Ministerial Council for Energy — Change legislation and Gas Access Code Clear statement of Government policy 4 Change culture and attitude of regulators 17
Slide 18: Single national regulator now agreed
gle national regulator = now agreed and industry consultation to commence late March Nea ia SS QANALNZ EAS VAS EAS NY Wa ZAS ZES\ NZ ZS Identity of regulator not an issue for gas transmission — policy direction, rules and accountability are our critical need Two statutory commissions from 1 July 200
Australian Pipeline Industry Association (APIA) — Conference Presentation (March 2004) on 6ix