Application Martin No: gr9902 Jones Contents

Allocation of primary capacity

Epic’s response to the suggestion that the maximum capacity of the system should be allocated to FT users is that it is inappropriate to allocate the maximum capacity to FT users. Epic reasons that this would mean that third parties seeking access would be required to deal with the existing users to obtain IT services.²¹⁷

Epic also responded to Origin’s contention that net available capacity should be allocated among FT users pro rata based on their MDQ. Epic submitted that its proposed capacity allocation structure provides more flexibility to users and allows Epic to offer a greater variety of services to users.²¹⁸

The relationship between PCQ, MDQ and net available capacity

Epic submitted that its definition of MDQ is preferable to Origin’s because it prevents users ‘hoarding’ capacity at delivery points by nominating their full MDQ at each delivery point.²¹⁹

Epic disputes Origin’s assertion that its definition of MDQ is inconsistent with the nomination procedure outlined in clause 18.3. Epic submitted that its approach to MDQ limits the potential for users to over-nominate at a point to inhibit third party access.²²⁰ In response to Origin’s contention that the access arrangement prevents FT users from accessing more than 323 TJ per day, Epic submitted that FT users may contract for IT services for quantities exceeding 323 TJ per day.²²¹

The provision of non-specified services

In response to Origin’s contention that Epic should be obliged to negotiate in ‘good faith’ ‘reasonable terms’ for the provision of non-specified services, Epic submitted that the Code already provides such a mechanism in the form of an arbitrator.²²²

In response to Origin’s contention that revenue from some non-specified services should be allowed for in setting the allowed revenue from reference services, Epic submitted that it is not possible to determine revenue from non-specified services yet to eventuate.²²³

Variations to service

In response to Origin’s comments regarding Epic’s right to refuse to vary a service under clause 6.7, Epic submitted that clause 6.7(b) is consistent with sections 3.10 and 3.11 of the Code.²²⁴

Back haul and part haul services

Epic submitted:

Epic has not seen any evidence that section 3.3(b) of the Code has been satisfied in relation to the regulatory period.²²⁵

Epic also made the following comments:

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  it is not reasonable to incorporate a trigger event in the access arrangement in relation to these services;²²⁶
  
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  a trigger mechanism is unnecessary because should a request for back haul or part haul services be made by a user or prospective user, it could simply be dealt with by an arbitrator under the current access arrangement;²²⁷ and
  
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  the access arrangement provides a sufficient reference point for such an arbitration.²²⁸
  

IT service

Epic submitted in relation to this issue:

• 
  Epic will not sell IT service unless there is incentive for it to do so;²²⁹
  
• 
  Epic is prepared to sell interruptible capacity at less than the IT rate if it is necessary to do so to stimulate usage;²³⁰
  
• 
  where IT service uses existing delivery facilities, there is a rebate to existing users;²³¹
  
• 
  since to date there has been no interruptible service utilised, it is impossible to predict future utilisation and so attribute revenue;²³² and
  
• 
  if uncontracted firm capacity were to become available, then until firm capacity was again fully contracted, IT service would effectively be a firm service. In this instance, IT users should contribute toward firm capacity costs.²³³
  
• 
  Commission’s considerations
  

Capacity of the pipeline system

The Commission notes submissions by Origin, TGT and OEP that the capacity of the pipeline is well in excess of 323 TJ per day.

The Commission also notes Epic’s response that FT service is offered to a higher degree of probability than under the EHAs, and that therefore a lower maximum capacity is appropriate.²³⁴ However, the Commission considers that several clauses of the access arrangement give Epic a broad discretion to curtail services, potentially without substantial financial penalty. For example, clause 24.1 allows Epic to curtail services in circumstances where the capacity of the pipeline system is:

…for any reason, inadequate to accommodate the Scheduled Quantities and all of the quantities that have been scheduled for Other Users for that Day…

Furthermore, the definition of force majeure in clause 34 is quite broad. Clause 34.1(a)(iii) in particular would allow Epic to curtail service without penalty in a wide range of circumstances that include breakages, accidents or repairs to plant, machinery, pipelines and equipment.

The Commission takes the view that the effect of these clauses is to lessen the degree of probability to which FT service is offered. The availability of FT service as set out in the access arrangement is not consistent with Epic’s statements on this matter. In view of the substantial discrepancy between system primary capacity and the maximum capacity of the pipeline, the Commission considers that it is reasonable that Epic should be liable for financial penalty in the event that it curtails, discontinues or interrupts FT services. In particular, if an FT user has its service curtailed or interrupted, Epic should forfeit the proportion of any capacity charge for that day equal to that proportion of the service that was subject to curtailment, discontinuity or interruption.

The Commission proposed to Epic that this issue should be clarified by amending clause 4.2(a). In response, Epic proposed that it is more consistent with the liability provisions of the access arrangement to amend clause 24.6.²³⁵ Epic proposed that the introductory paragraph to clause 24.6 be amended as follows:

The Service Provider will only be liable for any losses, costs, damages or expenses (and in respect of clause 24.5(a) this includes, but is not limited to, the proportion of any Capacity Charge for that Day equal to that proportion of the Service of any FT User whose Service is interrupted or curtailed under clause 24.1)…

The Commission has examined Epic’s proposed amendment to clause 24.6 and considers that the proposed amendment does not achieve the intended outcome. In particular, Epic’s proposal does not make it clear that Epic will forfeit the capacity charge (or part thereof) in circumstances where it curtails an FT user. Rather this is left as a matter open to dispute to be resolved in a Court. Accordingly, the Commission requires Epic to comply with amendment FDA3.1.

Amendment FDA3.

For the access arrangement to be approved, the Commission requires Epic to insert the following wording into clause 24:

Where an FT Service is curtailed, interrupted or discontinued pursuant to clause 24.1 the Service Provider will forfeit the proportion of any Capacity Charge for that Day equal to the amount of haulage service curtailed, interrupted or discontinued.
Even with the Commission’s proposed amendment to clause 24, the Commission considers that the system primary capacity has not been correctly specified. The system primary capacity is determined in reference to a maximum pipeline capacity of 393 TJ per day and therefore does not take into account the recent expansion of the pipeline for National Power (now Pelican Point Power).

The Commission considers that the additional capacity created by the expansion to the MAPS carried out for Pelican Point Power should be taken into account. This issue is discussed further in section 3.5.5 of this Final Decision.

The Commission’s requires clauses 2.1, 2.2, Schedule 1 of the access arrangement and the Access Arrangement Information to be amended to include the expansion for Pelican Point Power. This would involve an increase of system primary capacity to 348 TJ per day. This is consistent with the Commission’s approach in Chapter 2 where the ORC was calculated on the basis of a maximum capacity of 418 TJ per day and tariffs are to be determined on the basis of a system primary capacity of 348 TJ per day.

The Commission requires Epic to comply with amendment FDA3.2.

Amendment FDA3.

For the access arrangement to be approved, the Commission requires Epic to include the National Power (now Pelican Point Power) expansion in the access arrangement.

The Commission requires Epic to amend clause 2.1 to include the Pelican Point Power expansion.

The Commission also requires Epic to amend clause 2.2 such that the System Primary Capacity of the Pipeline System includes the capacity of the Pelican Point Power expansion, that is 348 TJ per day. The Commission also requires clause 2 to be amended to take into account the eighth compressor at Wasleys.

The Commission also requires Epic to amend Schedule 1 to the access arrangement to take account of the Pelican Point Power expansion in the capacity of the Pipeline System. The Commission also requires Schedule 1 to be amended to take into account the eighth compressor at Wasleys.

The Commission also requires Epic to amend the Access Arrangement Information to take account of the Pelican Point Power expansion in the capacity of the Pipeline System. The Commission also requires the Access Arrangement Information to be amended to take into account the eighth compressor at Wasleys.