The AER considers that Envestra has met its obligations to describe the pipeline services and specify the reference services that it proposes to offer.
Envestra's revised proposal in relation to pipeline services has adopted each of the amendments required by the AER in its draft decision.37 Envestra has not made any further changes to its pipeline services and reference services including the Volume Haulage Service, beyond those required by the AER in its draft decision.38
Assessment approach
The AER's assessment approach is set out in its draft decision. See section 1.3 in attachment A of the AER's draft decision for a detailed explanation of the AER's assessment approach.39
A submission was received from AGL on the characterisation of Delivery Points for the purposes of the Volume Haulage Service.40
The AER accepts Envestra's Volume Haulage Service with respect to the characterisation of Delivery Points.41 For the remaining services, the AER received no further information and for the reasons in its draft decision approves those pipeline services and reference services identified in Envestra's revised proposal.42 In reaching this conclusion the AER has taken into account AGL's submission, which is considered below.
The AER considers Envestra's characterisation of a customer with respect to its volume haulage service is for a separate purpose to the characterisation under AEMO's Retail Market Procedures (Victoria), and therefore is not inconsistent with those procedures.43
The AER notes that clause 2.2.3 of Envestra's access arrangement proposal provides a mechanism for Network Users to seek the reclassification of a Delivery Point for the purposes of the Volume Haulage Service.
AGL submitted that existing obligations within the Retail Market Procedures require a retailer to provide Customer Characterisation details, which advise whether the customer is a business or residential customer.44 AGL also submitted that under NECF, a retailer is required to determine the Customer Characterisation and provide that information to the distributor.45
AGL considers that Envestra should not be required to make its own assessment of how gas has been used at premises. AGL submits that Envestra's approach is not consistent with current practices or the NECF. AGL submits that the method for determining whether a volume haulage Delivery Point is a residential Delivery Point, set out in sub-clause 2.2.1, should be deleted.46
The AER sent an information request to Envestra for comments on AGL's submission given Envestra did not contemplate this issue in its revised proposal.47
Envestra responded to this information request with a number of reasons why it thought the two characterisations were separate and not inconsistent.48
Envestra submitted that the reason why the Retail Market Procedures require a customer characterisation is that customer characterisation is used to determine the approved estimation methodology or approved substitution methodology in the first twelve months after installation. This is done where it is necessary to estimate or substitute a meter read and there is no actual validated meter read or the reading has failed or shown to have been defective (see clause 2.2 of Attachment 4 and clause 2.2.2 of Attachment 5 of the Procedures).49
Envestra submitted that the issues which require consideration for tariff purposes under Envestra’s proposed access arrangement are different from the issues that are relevant to 'customer characterisation' under the Retail Market Procedures and the issues that are relevant to 'customer classification' under the NECF. These distinctions have been partly recognised by industry in the design of the business to business systems in that the participant build packs distinguish between 'customer characterisation' under the Retail Market Procedures and 'customer classification' under NECF. Industry recognises that these may differ and has allowed separate fields for characterisation and classification.50
Envestra submitted that it does not think it is appropriate to give retailers the right to determine which of Envestra’s tariffs apply, in the same way that Envestra would not determine which of the retailer’s tariffs is applicable.51
Envestra submitted that its views are not inconsistent with either the Retail Market Procedures nor the NECF.
Neither the Retail Market Procedures nor NECF require distribution tariffs to distinguish between residential and business customers nor require Envestra to use customer characterisation under the Retail Market Procedures or customer classification under NECF as a basis for the determination of distribution tariffs. In fact, retailer’s practice has been to not provide customer characterisation when they request MFX. Moreover, industry does not contemplate that retailers will provide customer classifications under NECF at the time that NECF is introduced. Rather, industry contemplates that the customer classifications will only be provided to distributors when a customer changes retailer or the retailer lodges an amended site request (and it is not proposed to do that for all customers upon the commencement of NECF).52
Retail Market Procedures (Victoria)
Envestra's proposed access arrangement provides for Envestra to determine whether gas delivered through a Delivery Point is used primarily for residential or other purposes, and therefore whether the Delivery Point is a Residential or non-Residential Delivery Point for the purpose of allocating the appropriate reference service.53
In contrast, clause 2.8.1(b) of the Retail Market Procedures (Victoria),54 provides that:
Where a FRO requests a Distributor to install a meter, the FRO must provide to the Distributor, at the time of that request, a customer characterisation for the distribution supply point to which that meter will relate.
An FRO is defined as in relation to a supply point, the person identified in the metering register as the Market Participant responsible, at the relevant time, for settling the account relating to that supply point.55
Customer characterisation is defined as:
in relation to a Customer, means whether the Customer is:
(a) metropolitan or non-metropolitan (where 'metropolitan' refers to the Melbourne metropolitan area), as published by the Department of Infrastructure (or its successor); and
(b) residential or business, where residential means the primary use of the consumed energy is for household purposes and business means the primary use of the consumed energy is for commercial type purposes as determined by the retail business for customer billing.
Clause 2.2.2 of Attachment 4 to the Retail Market Procedures (Victoria) provides that:
A Distributor must use the four categories of customers in accordance with the customer characterisation provided to the Distributor pursuant to clauses 2.8.1(b) of these Procedures as follows:
Clause 2.2.2 of Attachment 5 to the Retail Market Procedures (Victoria) provides that:
A Distributor must use the four categories of customers in accordance with the customer characterisation provided to the Distributor pursuant to clause 2.8.1(b) as follows:
The purpose of the consideration under Envestra's Volume Haulage Service is for allocating the appropriate reference service and corresponding tariff. On the other hand, the consideration under the Retail Market Procedures (Victoria) relates to determining the approved estimation methodology. The AER considers that these are unrelated purposes that use a similar characterisation process. However, the manner in which the characterisation is used for one purpose has no relevance to the manner in which the characterisation is used for the other purpose. Accordingly, the AER considers there is no inconsistency if the actual characterisation differs.
The AER considers that where the purpose of the characterisation is different and unrelated, there is no inconsistency if a Delivery Point/Supply Point is characterised differently for each of those purposes. This is consistent with Envestra's submission that the 'issues' relevant to each characterisation are different.56
Envestra's submissions make it clear that industry understands these different purposes and accepts the different characterisation.57
NECF
The AER considers that the characterisation of customers that occurs under NECF relates to the terms and conditions and method of billing between the retailer and the customer.58 It does not relate to reference services or the manner in which a Network User will allocate tariffs. Accordingly, the AER considers that should it be adopted in Victoria, there will be no inconsistency between NECF and Envestra's proposed method of assigning the Volume Haulage Service.
