NO.050

MCE’S RESPONSE TO THE PRODUCTIVITY COMMISSION’S REVIEW OF THE GAS ACCESS REGIME

The Treasurer and the Minister for Industry Tourism and Resources have welcomed the Ministerial Council on Energy’s (MCE) decision on a response to the Productivity Commission’s Review of the Gas Access Regime.

The MCE endorsed the Productivity Commission’s finding that while the Gas Access Regime has delivered substantial competition benefits in upstream and downstream markets, there is scope for further improvements. The MCE has supported key recommendations by the Productivity Commission and its response will mean important improvements to the operation of the Gas Access Regime.

Key improvements to the Gas Access Regime will include introducing an overarching objects clause to clarify the regime’s objectives, aligning the regime’s scope with the National Access Regime and introducing a light handed regulatory option. A significant new addition will be the introduction of an option to seek a full exemption from regulation for 15 years, in the form of a binding no coverage ruling.

The package of improvements to the Gas Access Regime will help provide regulatory certainty for investors and users, strengthen incentives for commercial negotiation and encourage efficient investment in new infrastructure.

In addition, the MCE has agreed to introduce a new option for a price regulation exemption for 15 years for new international transmission pipelines that will bring gas from overseas gas sources into Australia. This should further enhance conditions for investment in such complex pipeline projects which can greatly assist in meeting Australia’s growing energy needs.

This new measure will be available through a streamlined process with the Minister for Industry Tourism and Resources as the decision-maker. There is provision for appropriate safeguards for all stakeholders, including advice from the National Competition Council on competition and public interest issues and also non price obligations for qualifying international pipeline projects.

The MCE’s response to this Productivity Commission Review will be implemented through legislative amendments to the Gas Access Regime, following consultation on the draft legislative package.

Background

The Gas Access Regime facilitates third party access to natural gas transmission and distribution pipelines. The regime has been implemented on a national basis.

On 13 June 2003, the Treasurer asked the Productivity Commission to review the effectiveness of the Gas Access Regime. On 10 August 2004, the Treasurer released the Productivity Commission’s final report and announced that the MCE would develop a response to this review. The MCE released consultation papers on a draft response in August and November 2005.

Further information on the MCE’s energy market reforms, including the Expert Panel’s final report on its Review of Energy Access Pricing, is available at www.mce.gov.au.

25 May 2006

Contact: David Alexander

(02) 6277 7340