On 13 December 2013 the Standing Council on Energy and Resources (SCER) endorsed the Decision Regulation Impact Statement (RIS) for Gas Transmission Pipeline Capacity Trading and agreed to pursue enhancements to information provision and standardisation of contractual terms and conditions. These measures are aimed at reducing transaction costs to facilitate pipeline capacity trading. Australia’s eastern gas supply market is connected by a series of gas transmission pipelines, which vary in terms of both capacity and utilisation. Some domestic gas transmission pipelines are often operating near capacity. However, data indicates there may be periods throughout the year when some eastern Australian pipelines have significant volumes of unutilised capacity. The unused capacity on these pipelines is predominantly contracted to either gas retailers or industrial consumers. These pipelines may be ‘contractually congested’ – that is, market participants are unable to gain direct access to unused capacity on a pipeline because all of a pipeline’s capacity is contracted. It is considered that there may be opportunities to trade contracted, but unused, pipeline capacity on a secondary market. However, these opportunities may not be fully exploited as comprehensive information about unused capacity may not be readily available and developing contracts in the secondary market may be complex. Consequently, the RIS considers that the provision of additional information about pipeline capacity and standardisation of contractual terms and conditions may facilitate further trading in the secondary market. Amongst other factors, this approach would require market participants to provide information about unused pipeline capacity to the Australian Energy Market Operator (AEMO) for publication and to work with AEMO to create a publicly available contract containing standardised terms and conditions for the secondary trading of firm capacity. It is considered that these requirements may increase trading on the secondary market for unused, but contracted, pipeline capacity. However, because demand for unused capacity is not well understood the extent to which this approach would increase trading, and hence the net benefits of the proposal, are uncertain. A Decision RIS was prepared by SCER and assessed as adequate by the Office of Best Practice Regulation.
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