Application Martin No: gr9902 Jones Contents

The relationship between PCQ, MDQ and net available capacity

The access arrangement provides that a user’s maximum daily quantity (MDQ) of gas to be delivered will be the sum of the users’ primary capacity quantities (PCQ). PCQs are defined at individual delivery points. Thus, a user’s MDQ is the sum of its PCQs defined at each delivery point.

AGLES&M raised a number of concerns regarding this issue:

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  it is unacceptable that, since the system’s firm capacity is fully contracted to existing users, available capacity at all delivery points is effectively zero;
  
• 
  the aggregate of all delivery point capacities exceeds 830 TJ per day, which highlights AGLES&M’s point about available capacity;¹⁸³
  
• 
  the current access arrangement does not comply with the Commission’s requirement for amendments to the definitions of spare capacity and available capacity in its Draft Decision;¹⁸⁴
  
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  by permitting FT users to nominate more than their contracted capacity at a delivery point on a day, clauses 18.3 and 18.5 give FT and existing users scope to over nominate for the purpose of denying capacity to IT users.
  

In addition, Origin commented on the definition and allocation of MDQ:

• 
  MDQ should be defined in the access arrangement by reference to the capacity a user has reserved in the pipeline system, rather than the sum of a user’s primary capacity quantities;
  
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  if MDQ is defined in the latter terms, users will be required to reserve more MDQ than they might actually require on any given day.¹⁸⁵ Instead of reserving a particular quantity of MDQ and allocating it where needed across delivery points, users will be required to reserve the aggregate of the quantities that are potentially required at each delivery point;
  
• 
  a clause could be included in the access arrangement to prevent users from exceeding the maximum quantity of delivery points;
  
• 
  the combined effect of clauses 2.2 and 18.3 is that a user can only receive more than its PCQ at one delivery point if it receives correspondingly less than its PCQ at another delivery point;
  
• 
  furthermore, since the PCQs at all delivery points aggregate to 323 TJ, the access arrangement does not permit FT users to obtain access above 323 TJ;
  
• 
  a user’s MDQ should be defined as the sum of the user’s primary capacity quantities and the portion of net available capacity allocated to the user on a day under clause 18.3 (c);
  
• 
  clause (b) of the definition of MDQ should be modified to read:
  

‘not less than the sum of the User’s Primary Capacity Quantities divided by 1.25’.

The OEP commented on exclusivity rights:

On a medium term basis, if a purchaser has no need to nominate for MDQ for say many weeks, and then such unused capacity should be made available to new shippers. This position is supported by the Government, if such transfer of uncontracted capacity does not infringe contractual rights.¹⁸⁶

The provision of non-specified services

Origin made the following submissions in relation to this matter:

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  Epic should be required to negotiate in good faith reasonable terms for the provision of non-specified services;
  
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  pursuant to clause 4.3(b), the access arrangement should spell out the circumstances in which persons with contracts for non-specified service rank in priority ahead of IT service; and
  
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  in circumstances where some non-specified services are required by users to allow them to provide normal services to customers, the revenue from such services should be taken into account in setting reference tariffs.¹⁸⁷
  

TGT made the following submissions in relation to this matter:

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  it is incorrect to allocate total revenue to the FT capacity charge, and that some of the total revenue must be allocated to the IT service;
  
• 
  the FT capacity charge rate in the first period should be determined by first determining what FT and IT services would be contracted in the absence of the haulage agreements, and to allocate total revenue accordingly; and
  
• 
  Alternatively, should Epic’s methodology be accepted, either the IT commodity charge rate should be reduced by deducting the capital component from that rate, or a greater percentage of IT revenue should be rebated.¹⁸⁸
  

Variations to service

Origin also submitted that clause 6.9(b) of the access arrangement (now clause 6.7(b)) gives Epic an excessively wide discretion to refuse to vary a service.¹⁸⁹

With regard to the priority of service provisions in the access arrangement, Origin submitted that when the service provider reduces a user’s nomination, it should be required to disclose to the user all details required to establish that it was necessary for the user’s nomination to be reduced.¹⁹⁰

Back haul and part haul services

Part haul and back haul tariffs have been the subject of substantial consideration throughout this process. In the Draft Decision the Commission proposed that a review of the access arrangement could be triggered in specific circumstances to permit back haul and part haul reference tariffs to be included at a later date.

Most submissions received in response to the Draft Decision did not support the inclusion of a trigger mechanism (see WMC Limited,¹⁹¹ TGT,¹⁹² NRG Flinders,¹⁹³ Potential Energy,¹⁹⁴ OEP¹⁹⁵ and The Department of Industry and Trade (DIT)).¹⁹⁶ Only AGLES&M supported the inclusion of a trigger mechanism.¹⁹⁷

The inclusion of a trigger mechanism was not supported because:

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  a trigger did not provide a high level of certainty for potential users;
  
• 
  a trigger would create uncertainty for the pipeline owner;
  
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  a review of the access arrangement would be a time consuming process; and
  
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  a trigger was seen as inferior to including back haul and part haul services as reference services.
  

By contrast, there was widespread support for the inclusion of back haul and part services as reference services. In particular, the DIT submitted that there is likely to be strong demand for part haul services, including back haul services, in the near future. DIT enumerated several major industrial projects planned for the Upper Spencer Gulf region, including SAMAG’s proposed magnesium smelter and power plant and WMC’s expansion at Olympic Dam. DIT also submitted that this strong future demand satisfies the requirements of section 3.3(b) of the Code, and that accordingly, distance based tariffs for back haul, interruptible transport and forward transport services should be addressed in the access arrangement.¹⁹⁸

Following the receipt of submissions on the Draft Decision, the Commission asked interested parties to comment on whether the inclusion of pricing principles for back haul and part haul tariffs in the access arrangement might be satisfactory. The concept of pricing principles received some support (see TGT,¹⁹⁹ NRG Flinders²⁰⁰ and Potential Energy).²⁰¹