Work streams

There are four work streams that the GMRG is currently responsible for, which include:

  • the disclosure and arbitration framework work stream, which is responsible for the development of a new commercial arbitration mechanism, pricing principles and information disclosure requirements that will apply to unregulated pipelines operating on an open access basis;
  • the transportation (pipeline and hub services) capacity trading work stream, which is responsible for the development of: standardised contracts; a day-ahead auction for contracted but un-nominated capacity; a capacity trading platform(s); and a reporting framework for secondary trades;
  • the information and transparency reforms work stream, which is responsible for the development of terms of reference for the biennial review on the growth in liquidity in wholesale gas and pipeline capacity trading markets; and
  • the wholesale markets work stream, which will be responsible for progressing any reforms that the AEMC recommends in relation to the Southern Hub, the Victorian Declared Wholesale Gas Market (DWGM) and Short-Term Trading Markets.

Arbitration and transparency

Reform Measure 4 of the COAG Energy Council’s Gas Market Reform Package directed the Independent Chair of the GMRG to:

Examine the current regulatory test for the regulation of gas pipelines, in consultation with stakeholders, and provide recommendations on any further actions to the Energy Council, including potentially replacing the test.

Dr Vertigan undertook the Examination of the current test for the regulation of gas pipelines (Examination) between August and December 2016 and recommended: that the disclosure and transparency of pipeline service pricing and contract terms and conditions be enhanced; and that a framework for binding arbitration be introduced in the National Gas Law.

This work stream is responsible for developing the new commercial arbitration mechanism, pricing principles and information disclosure requirements that will apply to unregulated pipelines. At its December 2016 meeting, the Energy Council asked that this work be completed by 1 May 2017, subject to the passage of amendments to relevant laws. 

To implement the new arbitration framework and the information disclosure requirements, a new head of power is required to be introduced into the NGL. A draft Amendment Bill was released for consultation on 25 January and concluded on Wednesday 8 February 2017. Ministers agreed to the Amendment Bill on 17 February 2017.

In parallel to this legislative process, the GMRG is working on the detailed design of the arbitration mechanism, pricing principles and information disclosure requirements and the amendments that will need to be made to the National Gas Rules to give effect to the new framework.

Given the relatively short period of time available, this work is being carried out in a similar manner to the Examination, with an implementation options paper to be published in March and consultation with stakeholders to be carried out through industry sector roundtables and bilateral meetings.  Once the design of the new framework has been agreed, the rules that will be required to give effect to the new arrangements will be drafted, followed by stakeholder consultation on those rules.  The rules will then be finalised and considered by the COAG Energy Council.

Transportation (pipeline and hub services) capacity trading related reforms

The transportation capacity trading work stream will be responsible for progressing the capacity trading related reforms identified in the AEMC’s Eastern Australian Wholesale Gas Market and Pipelines Framework Review Stage 2 Final Report. These reforms, which have been endorsed by the COAG Energy Council, are expected to foster the development of a more liquid market for secondary capacity by:

  • enabling capacity to be allocated on a non-discriminatory basis to those that value it most highly through market based processes and, in so doing, improve the efficiency with which capacity is used on pipelines;
  • reducing search and transaction costs;
  • aiding the price discovery process by reducing information asymmetries and, in so doing reduce search and transaction costs and enable more informed decision making; and
  • providing capacity holders with a greater incentive to trade capacity.

The proposed reforms include the development of:

  • standards for key terms and conditions in primary, secondary, operational transfer and trading exchange agreements and a reporting framework for secondary capacity trades;
  • a day-ahead auction of contracted but un-nominated pipeline and hub services capacity; and
  • a capacity trading platform(s) that provides for exchange based trading of commonly traded transportation services and a listing facility for other services.

To progress these reforms, the GMRG has established the following project teams:

An Advisory Panel has also been established to provide the GMRG with additional strategic perspective and advice.

The GMRG will also be carrying out an extensive program of engagement with other stakeholders (including the AEMC, AEMO, AER and State and Territory Governments) on the recommendations emerging from the project teams, before making its final recommendations to the Standing Committee of Officials and the COAG Energy Council.

Market transparency reforms

The market transparency work stream will be responsible for the development of terms of reference for the biennial review on the growth in liquidity in wholesale gas and pipeline capacity trading markets that the AEMC will be responsible for carrying out.

The terms of reference for this review are to be completed by May 2017 at which time the GMRG’s role in this area will cease.

Wholesale gas market related reforms

The wholesale gas market reform work stream will be responsible for progressing any reforms to the Southern Hub and Declared Wholesale Gas Market (DWGM) that the AEMC recommends at the completion of its review into the DWGM and which are endorsed by the COAG Energy Council.  The AEMC is expected to present its final report to the COAG Energy Council and Victorian Government by the end of August 2017.

This work stream will also be responsible for progressing any simplification focused reforms to the Short Term Trading Markets (STTM) that the AEMC recommends through its biennial review on the growth in liquidity in wholesale gas and pipeline capacity trading markets. The first biennial review is due to be carried out in 2018.