GMRG advice to the COAG Energy Council on the retention of light regulation

Date: 
Friday, 23rd February 2018

On 23 February 2018, Dr Vertgian AC provided advice to the COAG Energy Council on whether light regulation should be retained as a regulatory option under the National Gas Law (NGL) and the National Gas Rules (NGR). This advice follows a request by the Chair of the Energy Council for Dr Vertigan’s view on this issue at the November 2017 COAG Energy Council meeting.

Dr Vertigan’s advice notes that while the objectives of light regulation and Part 23 are essentially the same, a number of elements of Part 23 are more rigorous than they are under light regulation. The advice also notes that if light regulation is retained in its current form, it could operate to the detriment of shippers because:  

  • the information disclosure requirements do not adequately address the information asymmetries shippers face and do not facilitate timely and effective negotiations;
  • insufficient guidance is provided on how an arbitration would be conducted, which could discourage users from having recourse to it; and
  • the regulatory-oriented arbitration mechanism does not provide for a timely and cost-effective process to resolve disputes.

While noting the potential for these shortcomings of light regulation to be addressed through amendments to the NGL and NGR, Dr Vertigan concluded that the differences that would remain after doing so were not sufficiently material to warrant the retention of light regulation.

Dr Vertigan therefore recommended that light regulation be removed and that refinements be made to Part 23 to:

  • adopt some of the safeguards that currently apply to light regulation pipelines (i.e. the prohibition on pipelines engaging in: conduct that would prevent or hinder access; inefficient price discrimination; other behaviour that could adversely affect competition in a related market by carrying on a related business, or conferring an advantage on an associate; and bundling of services unless it is reasonably necessary); and
  • allow for joint access dispute hearings to be held if two or more disputes about access arise at a particular time and there are one or more matters common to the dispute.