Revocation of coverage of the Wagga Wagga natural gas distribution network

The Council received an application from Envestra Limited for revocation of coverage of the Wagga Wagga natural gas distribution system. The effect of such revocation would be to end regulation of the price and other terms of access to the Wagga Wagga gas distribution system under the National Gas Law.

A copy of the public notice advising of this application and calling for submissions, and the public version of the Envestra application are available under the Application tab (a small amount of commercially confidential information has been redacted from the public version of the application).

To assist interested parties the Council's Guide to Coverage, revocation and Classification of Pipelines is also available on this website.

The Council is undertaking a public consultation on the application in accordance with the standard consultative procedure (rule 8 of the National Gas Rules). Under this procedure, in normal circumstances, the Council has 4 months in which to make its recommendation. The Council invited interested parties to make written submissions on the application by Tuesday 28 May 2013. The Council received four submissions which are available for download under the Submissions on application tab.

After the closing date for submissions, Envestra emailed the Council comments on the submissions received. The Council requested Envestra formalise this material into a letter to enable the Council to publish it on the website. The Council also requested Energy Australia and Origin provide some additional material in relation to some issues raised in their submissions. The additional material received is available for download under the Submissions on application tab.

Having considered the submissions and the application, the Council's preliminary view is that all of the pipeline coverage criteria are satisfied. Accordingly, the Council proposes to recommend to the relevant Minister that he decide not to revoke coverage of the Wagga Wagga gas distribution network.

The Council's draft recommendation is available for download under the Draft recommendation tab.

Interested parties were invited to make written submissions on the draft recommendation by 15 July 2013. The Council received nine submissions (plus consultant's reports) in response to the draft recommendation. The public versions of the submissions are available for download under the Submissions on draft recommendation tab.

On the basis that the Wagga Wagga gas distribution system is a distribution pipeline system and located wholly within New South Wales, the relevant Minister will be the NSW Minister for Resources and Energy, Hon. Chris Hartcher MP.

On 8 August 2013 the Council sent its final recommendation to the relevant Minister, the Hon. Chris Hartcher MP, NSW Minister for Resources and Energy. The Council's recommendation is that the relevant Minister decide not to make a revocation of coverage determination in relation to the Wagga Wagga Gas Distribution Network, such that coverage would be maintained. In making this recommendation the Council is satisfied that all of the four pipeline coverage criteria are satisfied.

The National Gas Law requires the relevant Minister to use his best endeavours to make his decision within 20 business days after receiving the recommendation. The Council understands that the relevant Minister received the recommendation on 9 August 2013. The 20-day period therefore ended on 6 September 2013. The relevant Minister had written to the Council advising that he does not consider it reasonably practical to make a decision at the time given the Australian Energy Market Commission (AEMC) was still to provide its final report on its review of energy retail competition in NSW and the NSW Government had not made a decision in relation to price deregulation. The Minister had confirmed that he would make a decision as soon as is reasonably practicable after the NSW Government had considered the findings and recommendations of the AEMC report.

In its recommendation the Council noted that the NSW Government’s decision in relation to retail price regulation of gas was an important consideration in determining whether coverage should be continued.

The Council was of the view that the environment for competition in gas supply in NSW (including the area served by the Wagga Wagga distribution network) would be enhanced in the event that retail price regulation were removed and in that situation continued coverage of the network will promote a material increase in competition in the market for gas sales in the area serviced by the WWGDN. However the Council noted that:

Were the removal of retail gas price regulation not to be in prospect in at least the medium term, the Council considers that competition in the market for gas sales in the Wagga Wagga area is likely to remain stagnant irrespective of whether the WWGDN is covered. In such a circumstance criterion (a) could not be satisfied and coverage should be revoked.

On 7 April 2014 the NSW Minister for Resources and Energy wrote to the Council advising that the NSW Government had decided not to remove retail price regulation for gas. The Minister advised that based on the advice provided in the Council’s recommendation, he was not able to be satisfied that all the pipeline coverage criteria were satisfied in relation to the Wagga Wagga distribution network and therefore he must revoke coverage of the network.