Application for coverage of the Eastern Gas Pipeline

AGL Energy Sales and Marketing Ltd applied for coverage of the Eastern Gas Pipeline (EGP) on 7 January 2000. At that time, the following three companies were constructing the EGP between Longford (Victoria) and Horsley Park (Sydney, NSW) – Duke Eastern Gas Pipeline Pty Ltd, DEI Eastern Gas Pipeline Pty Ltd and Duke Australia Operations Pty Ltd. The service provider, Duke opposed coverage of the EGP, arguing that it should be covered under a voluntary undertaking it had lodged with the Australian Competition and Consumer Commission in November 1999.

Key to the Council’s recommendation was coverage criterion (a) – whether access would promote competition in a dependent market. In this case the Council examined whether access to the EGP would promote competition in the South East Australian gas sales market. The Council was satisfied that access would promote competition and also concluded that the other three coverage criteria were satisfied. Thus the Council recommended to the Commonwealth Minister for Industry, Science and Resources on 30 June 2000 that the EGP should be covered.

On 16 October 2000 the Minister determined that the EGP would be covered under the National Gas Code.

Review

The Duke Group of companies applied to the Australian Competition Tribunal for review of the Minister’s decision.

On 4 May 2001 the Competition Tribunal delivered its decision not to cover the EGP. The Tribunal concluded that criterion (a) was not satisfied – that access would not promote competition in a dependent market, notably the market for gas sales in South East Australia as the Competition Tribunal considered that Duke did not have the market power to restrict competition in gas sales. The key determinants of the Competition Tribunal in respect of criterion (a) included:

the commercial imperatives faced by Duke (such as to maximise the return on the pipeline by optimising use)
the countervailing power of other market participants
the existence of spare pipeline capacity serving the gas sales market; and
competitive pressure from other pipelines – the Interconnect and the Moomba to Sydney pipeline.

The application, issues paper, submissions, draft and final recommendation and the Minister’s decision and reasons are available below.

Decisions of the Competition Tribunal can be accessed at www.austlii.edu.au.