The AER approves Envestra's capacity trading requirements.
Revised proposal
Envestra amended clause 7 of its access arrangement to provide that the capacity available at a Delivery Point can be transferred between Network Users in accordance with the Victorian Retail Market Procedures. Envestra has set out in detail the reasons why the nature of the Victorian gas distribution network means that there is no contracted capacity.1098
In its draft decision the AER required Envestra to amend its access arrangement proposal to state that there are no applicable capacity trading requirements for the purposes of r. 48(1)(f) and 105(1) of the NGR.1099
Envestra addressed this issue in its revised proposal and its capacity trading requirements now accord with r. 48(1)(f) and 105(1)(a) of the NGR.
Queuing arrangements
Final decision
The AER approves Envestra's revised access arrangement proposal insofar as it does not include any queuing requirements.
Revised proposal
Envestra's revised access arrangement proposal did not include queuing requirements. This is consistent with the AER's draft decision
Assessment approach
The AER's assessment approach is set out in section 12.3.3 in chapter 12 of part 2 of the draft decision.
Reasons for decision
As the capacity of Envestra's distribution pipeline is managed by AEMO, queuing requirements are not applicable for Envestra. The AER thereforeapproves Envestra's revised proposal insofar as it does not include any queuing requirements.
The AER approves Envestra's extension and expansion policy.
Revised proposal
Envestra's revised access arrangement proposal set out the same extension and expansion requirements as its initial access arrangement proposal, which were approved by the AER in its draft decision.1100
Assessment approach
The AER's assessment approach is set out in section 12.4.3 in chapter 12 of part 2 of the draft decision
Reasons for decision
In its draft decision the AER accepted Envestra's extension and expansion requirements.1101 For the reasons set out in that decision, the AER approves Envestra’s extension and expansion policy.1102
The AER notes that following the draft decision it considered the possible inclusion of certain assumptions in Envestra’s extension and expansion requirements. The intention was for such assumptions to apply for the purpose of rule 119M(2)(c) of Part 12 of the NGR which is to commence on the implementation of NECF in Victoria.1103 Rule 119M concerns the connections charges criteria and any assumptions included in an access arrangement would assist in determining the appropriate connection charge. Such assumptions may be about, for example, the connection assets required, the discount rate or the expected life of the connection. The AER sought to include the following assumptions:
For Tariff V and Tariff D customers, the discount rate as “the pre tax real WACC included in the distributor’s approved access arrangement”.
For Tariff V customers, for the expected life of the connection, an assumption of 20 years for domestic customers and 15 years for commercial industrial customers with the qualification that a different life for commercial and industrial customers may be used if there are grounds to consider that the life of the connection may be less than 15 years.
For Tariff D customers, for the expected life of the connection, an assumption of 15 years, although a different life may be used if there are grounds to consider that the life of the connection may be less than 30 years.
Currently such assumptions are included in Schedule 2 to the Gas Distribution System Code (Victoria) (Code) but the intention is for the Code to cease to apply on commencement of NECF in Victoria.
The AER sought comment from Envestra, and the other gas distribution businesses, on the need to include the assumptions as set out above.1104 Envestra did not agree to inclusion of assumptions for the following reasons:1105
First, it maintained that it would be inappropriate to preserve elements of the Victorian Gas Distribution System Code when on the commencement of NECF it is the intention for the Code to no longer apply.
Second, it submitted that Schedule 2 of the Victorian Gas Distribution System Code is not relevant to the extension and expansion policy. Moreover, Schedule 2 covers the same ground as Part 12 of the NGR and this is why the Victorian Government has deemed that Schedule 2 (and the remainder of the Code) will no longer apply when NECF commences in Victoria. Furthermore, Envestra notes that under Part 12 of the NGR, the AER will approve Envestra's connection charges under model standing offers for connection services. That is, this provides a further degree of oversight by the AER.
The AER has considered Envestra’s submission but considers that the inclusion of assumptions would provide greater certainty around the calculation of connection charges. Moreover, rule 119M(2)(c) specifically allows for their inclusion.
The AER notes that both SP AusNet and Multinet agreed, subject to amendments being made to the AER’s draft provision, to the inclusion of certain assumptions for the purpose of r 119M.1106 SP AusNet specifically sought inclusion of more assumptions than had been proposed by the AER because “without firm rules on how these will be determined, there could be disputes with customers and so SP AusNet would request that they be included.”1107
However, both SP AusNet and Multinet expressed concern that it was late in the AER’s decision-making process to make this substantial change to the access arrangement.1108 To achieve a satisfactory outcome would require further consultation on possible amendments to the drafting.
Therefore, at this stage, the AER has determined not to include any assumptions in the 2013-17 access arrangements for each of the distributors on the basis that to do so requires further consultation with the gas distribution businesses. This consultation relates to what assumptions should be included in access arrangements in order to minimise disputes and the drafting of any such amendment to an access arrangement.
