Application Martin No: gr9902 Jones Contents

Commission’s considerations

The Commission considers that clause 36 is unreasonably biased towards the service provider’s interest.

The Commission regards the ability to terminate for an event of default to be an insufficient remedy for users because they would loose their capacity rights and need to negotiate a new agreement. Potentially, the service provider could force users into terminating agreements. Also, given that 36.2(a) provides for the service provider to suspend an agreement as well as terminate, a reciprocal provision for users would balance the rights of the parties.

In relation to the other matters raised, the Commission considers that:

• 
  Under clause 36.1(b), an event of default only includes defaults that are capable of being remedied. It is not necessary for clause 36.1(b) to provide for situations where the default can not be remedied as submitted by Origin.
  
• 
  Under clause 36.4(a) the service provider is in default if it fails to provide services. Accordingly, it is necessary for an insolvency event to be specifically included as a default event in relation to the service provider because clause 36.4(a) would cover that event.
  
• 
  Under clause 36.1(c) a user is in default if it fails to pay an amount due. Currently, there is no corresponding provision where the service provider owes money to the user. It is appropriate that a reciprocal provision is added to clause 36.4.
  
• 
  It is reasonable for clause 36.1(c) to apply to amounts due which are the subject of a genuine dispute between the parties. Parties could use such a provision to avoid paying amounts due. Clause 32.4 provides for amounts overpaid to be repaid with interest.
  

Accordingly, the following amendments are required with respect to clause 36 of the access arrangement.

Amendment FDA3.

For the access arrangement to be approved, the Commission requires that Epic:

• 
  Amend clause 36.4 as follows:
  

The User may terminate the agreement and/or suspend its obligations under the agreement if the Service Provider…

• 
  Add, after clause 36(b) the following clause:
  

(c) fails to pay any amount due to the User and that amount, plus interest accrued at the Interest Rate plus 2 per cent per annum, is still outstanding 7 Days after the date of a notice of demand from the Service Provider.

Clause 37 Dispute Resolution and Independent Experts

Origin submits that the definition of ‘Technical Matter’ should explicitly include a number of additional factors, such as whether Epic has minimised its requirements for system use gas and whether Epic has maximised the capacity of the pipeline system.⁴¹⁹ It also considers that that the parties should not be denied access to appeal to a court if the independent expert makes a decision without a proper basis.⁴²⁰

Santos stated that clause 37 should provide a more prescriptive process. Santos argued that clause 37.2 should include more specific requirements to determine whether an expert is suitably qualified and should also require that the expert make a decision within a reasonable time, such as 60 days.⁴²¹

In response to proposed amendment A3.26 contained in the Draft Decision, in relation to the service provider being bound to take part in a dispute resolution process, Epic indicated that all parties should be bound to participate in the process rather than just Epic.⁴²²

In response to suggestions that a reasonable timeframe should be set for the Independent Expert to make a decision, Epic submitted that the independent expert should be able to extend the decision making period unilaterally.⁴²³

Commission’s considerations

Proposed amendment A3.26 of the Draft Decision also required Epic to include the grounds on which the service provider has issued a curtailment notice or an OFO in the definition of technical matter. This amendment has been incorporated into Epic’s access arrangement of 29 June 2001.

After considering submissions and information noted above, the Commission has formed the view that:

• 
  The definition of ‘Technical Matter’ in the access arrangement is broad enough to encompass most of the additional matters raised by Origin and therefore it is not necessary to make the alterations sought. Epic is not obligated under the access arrangement to maximise the capacity of the pipeline system, and therefore it is not appropriate to include this in the definition of a technical matter.
  
• 
  It would be unreasonable for a decision of an independent expert to be final and binding on the parties where it is erroneous.
  
• 
  In general a more prescriptive process is not necessary for clause 37, however, a requirement that the expert make a decision within a reasonable time should be incorporated. The Commission does not consider that it is necessary to specify a time period for this decision to be made. The requirement that the decision be made in a reasonable time will allow the parties recourse to terminate the process if it is not resolved within a reasonable time. Given that a time period is not specified, the Commission considers that it is not necessary for the independent expert to be able to extend the time period.
  
• 
  It is reasonable for all parties to the dispute to be bound to participate in the process rather than just the service provider as suggested in proposed amendment A3.26, and therefore the Commission requires Epic to amend the access arrangement in accordance with Amendment FDA 3.30.
  

Accordingly, the Commission requires a number of amendments to be made regarding dispute resolution and independent experts.

Amendment FDA3.

For the access arrangement to be approved, the Commission requires that Epic:

• 
  Amend clause 37.2(h) as follows:
  

The Independent Expert will make a determination on the Dispute within a reasonable period and will determine what, if any, adjustments may be necessary between the Parties. The determination of Independent Expert will be final and binding upon the parties.

• 
  Amend the second sentence in clause 37.2(h) as follows:
  

The determination of the Independent Expert will, in the absence of manifest error, be final and binding upon the parties.

• 
  Add, after clause 37.1(d), the following sentence:
  

A party must take part in a dispute resolution process that has been initiated by another Party on reasonable grounds.