The Energy Regulation and Markets Review - Stikeman Elliott

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Australia
Transmission/transportation and distribution access
Electricity
The NER sets out a regime that enables generators to connect generation equipment
to the national grid. Transmission and distribution network operators are obliged to
connect generators’ equipment, as long as certain conditions are met. For example, a
generator’s equipment must meet certain technical standards before it can be connected
to the grid. The network operator is required to consult with AEMO about the technical
requirements of connecting a generator’s equipment, and any changes to the network
that may need to be made to accommodate that equipment.
Gas
The NGL and NGR set out a ‘coverage’ process, which determines whether a gas pipeline
should be subject to mandated third-party access arrangement and in what form.
The NCC must recommend that the pipeline be covered if the NCC is satisfied
that the following ‘coverage criteria’ are met:
a that access (or increased access) to services provided by the pipeline would promote
a material increase in competition in another market or markets (whether or not
in Australia);
b that it would not be economical to develop another pipeline to provide the same
services;
c that access (or increased access) to the services provided by the pipeline can be
provided without undue risk to human health or safety; and
d that access (or increased access) to the services provided by the pipeline would not
be contrary to the public interest.
In making a coverage determination, the NCC must also bear in mind the national
gas objective, which is to promote efficient investment in, and operation of, electricity
services in the long-term consumer interest.
Typically, a pipeline will be covered where a monopoly exists on its particular
transmission route. Since the early 2000s, increased investment in gas transmission
pipelines around Australia has increased competition between pipeline operators,
resulting in fewer pipelines being covered under the law.
Pipelines that are not covered are subject only to the general competition law
provisions of the CCA and third-party access to them is a private matter between the
pipeline owner or operator and the access seeker. Accordingly, operators of uncovered
pipelines may negotiate freely with access seekers without regulatory interference.
Alternatively, a form of ‘light regulation’ applies in some circumstances with a low level
of regulatory intervention that does not include setting tariffs.
iii Rates
Electricity
Regulated transmission businesses must periodically submit revenue proposals, together
with a proposed pricing methodology and negotiating framework, to the AER (typically,
every five years). The pricing methodology is a formula for the business to allocate its
revenue allowance and determine the prices it may charge for its services.
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