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National Gas Regulatory Framework

Announcement date
12 March 2024

Link to announcement 
 NGR amending rule and NERR amending rule

Problem being addressed
On 20 August 2021, Energy Ministers agreed that the national gas regulatory framework should be amended to bring biomethane, hydrogen blends and other renewable methane gas blends within its scope. 

Energy Ministers agreed that it is appropriate for an independent review of potential gaps in the national gas regulatory framework arising out of amendments to cover hydrogen and renewable gas blends and for the Australian Energy Market Commission (AEMC) to develop the initial rules required to accommodate these blends under an amended framework.  

The AEMC was tasked with a review of the National Gas Rules (NGR) and National Energy Retail Rules (NERR) to develop initial rules that will extend the regulatory frameworks to these gases and blends. It was also asked to provide jurisdictional officials with advice on any changes to the National Gas Law (NGL) and National Energy Retail Law (NERL) required to enable these rules. 

 A number of blending trials and larger blending projects are in development. A review that was conducted as an action of the National Hydrogen Strategy identified the following potential gaps within the national gas regulatory framework:

  • the economic regulatory framework applying to gas pipelines
  • the facilitated and regulated retail gas markets
  • the consumer protections provided for under the NERL and NERR
  • the draft regulatory sandbox rules

Proposal
The AEMC recommended to Energy Minister that changes be made to the national gas and retail regulatory frameworks to enable the natural gas sector to evolve to using hydrogen and renewable gas to support Australia’s emissions reduction plans. 

The AEMC’s recommendations included the following key points: 

  • Enable access to pipelines and support investment by extending the economic regulatory framework.
  • Support competition through improvements to the ring fencing framework.
  • Extend the market transparency mechanisms to enable informed and efficient decision making.
  • Streamline operational arrangements for the short term trading market (STTM).
  • Adapt the Victorian declared wholesale gas market (DWGM).
  • Allow new services and commodities in the retail gas markets.
  • Enable consumers to be informed about a change in the type of gas supplied.
  • Retain the draft regulatory sandbox rules in their current form as these draft rules, once extended to covered gases, will be fit for purpose for enabling trial projects involving those gases. 

Assessed Impact Analysis outcome

OIA considers that the consultation that has been undertaken to date on the Review info Extending the Regulatory Frameworks to Hydrogen and Renewable Gases is equivalent to a Consultation Regulation Impact Statement (Consultation RIS) under the Regulatory Impact Analysis Guide for Ministers Meetings and National Standard Setting Bodies (the Guide), as such only a Decision RIS (The Final Rules Report) was required.

OIA noted that the arrangements for evaluation of these policy matters are handled outside AEMC. In agreeing to the amending rules, Energy Ministers agreed to a policy review of the new framework five years after commencement.

OIA’s assessment is that the quality of the regulatory impact analysis in the Rules Report is compliant with the guidelines as set out in the Guide.