Application Martin No: gr9902 Jones Contents

Epic’s obligation to maximise capacity

The Commission does not accept Origin’s suggestion that a clause should be inserted into the access arrangement requiring Epic to maximise the available capacity of the pipeline system.²³⁶ It is not clear how such a requirement might operate in practice and it may be that such a requirement could induce unintended outcomes. The Commission’s preference is for Epic to face economic incentives that encourage Epic to maximise throughput of the pipeline.

Allocation of primary capacity

The Commission does not agree with Origin’s views in relation to the allocation of net available capacity.²³⁷ The Commission would prefer net available capacity to be allocated as IT and non-specified services. As noted above, the Commission’s preference is for capacity in excess of maximum firm capacity to be available on an interruptible basis as this provides greater flexibility and greater access to the pipeline for third parties.

The relationship between PCQ, MDQ and net available capacity

The Commission regards the definition of MDQ currently included in the access arrangement as appropriate. It allows a reasonable amount of flexibility to users, when applied in conjunction with clause 18.3. Clause 18.3(c) of the revised access arrangement allows users to nominate an amount at a delivery point in excess of their PCQ up to the balance of the net available capacity that is available after each user has been allocated the amount nominated at that delivery point up to their PCQ.

Origin’s contention that FT users can not access capacity above 323 TJ is not justified. Clause 18.3(a) states that 18.3 applies only to agreements for FT service. Therefore, FT users may obtain quantities of gas in excess of maximum firm capacity as IT or non-specified service. Accordingly, the Commission does not accept AGLES&M’s assertion that spare capacity on the MAPS is unavailable.

Epic’s proposal that MDQ be defined as the sum of PCQs has been the subject of significant comment. If users did not have flexibility to shift contracted PCQs between delivery points then Epic’s proposal would impose substantial limitations. In particular, users might need to contract for a total MDQ well in excess of their expected maximum throughput on any one day in order to provide flexibility to meet demands that vary from day to day. Further, users would not be able to exploit aggregation benefits.

However, as discussed above, Epic’s proposed access arrangement does provide flexibility for users to shift PCQs between delivery points. Consequently, users need not contract for annual maximum throughputs at each delivery point and users may exploit aggregation benefits.

The Commission notes that the flexibility afforded by Epic’s proposed access arrangement is significantly less than the flexibility afforded under the existing haulage agreements, but this is not unreasonable. Under the existing haulage agreements only two shippers have access to the pipeline and these two users mostly operate at different delivery points. Thus, there is limited scope for the flexibility of the existing haulage agreements to result in conflicting rights.

Under the new environment where there will potentially be several users operating on the pipeline and potentially more than one user operating at delivery points, there is more scope for rights to conflict. In these circumstances the users’ flexibility must be limited otherwise the rights of each user are likely to conflict. The Commission considers that the limitations imposed under the proposed access arrangement are a reasonable balance between providing flexibility and avoiding conflicts between the rights of users.

Origin suggested users can not access net available capacity. Net available capacity is defined in the context of a single delivery point. A user may obtain access to net available capacity if the user takes less than its PCQ at another delivery point. Therefore, net available capacity is nevertheless available at individual points.

In relation to Origin’s proposed change to the definition of MDQ, the Commission takes the view that clause (b) of Schedule 2 to the access arrangement gives users a reasonable degree of flexibility as to how much capacity they may obtain at any delivery point on an hourly basis. Accordingly, the Commission considers that Origin’s proposed amendment to clause 43.1 is unnecessary. Furthermore, where the capacity of a delivery point is limited, it is necessary that the ability of users to nominate above their MHQs at that delivery point is restricted accordingly.

The Commission does not agree with AGLES&M’s view that clauses 18.3(c) and 18.5(d) give FT users scope to hoard capacity at particular delivery points to exclude IT users. The Commission considers that since FT users may not obtain FT capacity in excess of their MDQ, and given also that FT users face an excess imbalance charge in respect of fluctuations that exceed eight per cent within a zone, the scope for such behaviour is limited.

Provision of non-specified services

The Commission acknowledges Epic’s view that the sections of the Code detailing the arbitration processes give users some assurance as to Epic’s conduct in negotiating the provision of non-specified services. The Commission takes the view that the inclusion of an explicit term requiring Epic to negotiate in good faith in relation to non-specified services would not enhance the protection afforded to users by the arbitration process established by the Code.

In relation to those non-specified services for which there has been limited requests in submissions, such as park and loan services, the Commission is satisfied that the negotiate and arbitrate model should be adopted in the first instance. If it becomes apparent that this model does not produce acceptable outcomes the Commission would reconsider requiring additional reference services at the next access arrangement review. The other non-specified services of back haul and part haul are discussed later in this section.

The Commission’s view is that revenue from non-specified services should not form part of allowed revenue at this time, because the expected demand, and hence revenue, for these within the initial access arrangement period is uncertain. This approach will provide Epic with the incentive to maximise sales (and throughput of the pipeline system). This is in accordance with the Commission’s views towards FT capacity discussed in this section of the Final Decision.