AE MC r e vie w of the DWGM APA pre limina ry c o mme nts 14 No v 2016
the c ar r ot is mightie r than the stic k thr oughout our c onsultation with the AE MC, we have • tr ie d to maintain a pr inc iple d appr oac h: 1. Artic ula te the po lic y o b je c tive s; 2. I de ntify the b e ha vio urs so ug ht b y the pipe line r tha t will de live r tho se po lic y o utc o me s; 3. Cre a te inc e ntive s fo r the pipe line r to e xhib it tho se b e ha vio urs. the dr aft Re por t appe ar s to be long on r e quir e me nts • and shor t on inc e ntive s T he mo re we try to a ntic ipa te future c irc umsta nc e s in a n • a tte mpt to c o dify b e ha vio ur, the mo re like ly we a re to g e t it wro ng a nd de live r uninte nde d c o nse q ue nc e s. I f we de sig n a syste m with inc e ntive s fo r the pipe line o wne r to • de live r the de sire d o utc o me s, we c a n a vo id hundre ds o f pa g e s o f Rule s ma nda ting b e ha vio ur the r e is no ne e d for the National Gas Rule s to • blow out like the National E le c tr ic ity Rule s. 2
the de vil is in the de tail muc h of the de ta il ha s be e n de fe rre d to the Ga s Ma rke t Re form Group “ho w the le ve l o f b a se line a nd a b o ve o f c a pa c ity wo uld b e d e te rmine d ; • “the c a pa c ity pro d uc ts to b e ma d e a va ila b le fo r sa le a t e a c h e ntry a nd e xit po int; • “ho w b a se line a nd a b o ve b a se line c a pa c ity wo uld b e a llo c a te d a mo ng st ma rke t • pa rtic ipa nts a nd ho w se c o nd a ry tra d ing wo uld b e e nc o ura g e d ; “ho w inve stme nt in ne w b a se line c a pa c ity wo uld b e sig na lle d a nd a llo c a te d ; a nd • “wha t, if a ny c ha ng e s, ne e d to b e ma d e to the e c o no mic re g ula to ry fra me wo rk to • a c c o mmo d a te the c ha ng e ” the GMRG ma y not be c onstitute d be fore the F ina l re port is issue d • this de ta il will a ffe c t the e c onomic inte re sts of both pipe line r a nd • shippe rs virtua l hub c o ntinuo us b a la nc ing vs time la g to d e live r g a s fro m L o ng fo rd • le ve l o f “Ba se line Ca pa c ity” a nd re mo va l o f “c o ng e stio n uplift” • we a re a lwa ys c onc e rne d a bout lifting mode ls from othe r pla c e s • the re ha s b e e n ve ry little priva te inve stme nt in the E uro pe a n g a s pipe line ne two rk • sinc e the e ntry-e xit mo d e l wa s intro d uc e d we c anno t be sur e if we suppo r t the pr o po se d mo de l • 3
alloc ation of institutional r ole s AE MC pro po sa l – AE MO a s Syste m Ope ra to r: APA pro po sa l – AE MO a s Ma rke t Ope ra to r: 4
have we ac c omplishe d what we se t out to ac c omplish? a “c le an” pric e of gas the propose d mode l doe s not appe ar to de live r this • the virtua l Hub with c o ntinuo us b a la nc ing d o e s no t c o pe with • d ispa tc h o f L NG to ma inta in syste m se c urity “surprise uplift” re ma ins a fe a ture o f the virtua l hub • Q: ho w “d irty” is the c urre nt g a s pric e ? Will it b e a ny “c le a ne r” • und e r the ne w mo d e l? de e p and liquid marke t the propose d mode l doe s not appe ar to de live r this • the upstre a m se c to r ha s la rg e ly b e e n le ft o ut o f this d isc ussio n • inc e ntive s for inve stme nt the propose d mode l doe s not appe ar to de live r this • the “fre e rid e r” pro b le m still e xists fo r d e e p a ug me nta tio n • this will still ne e d to b e d o ne thro ug h a re g ula to ry a ppro va l pro c e ss • - a ll shippe rs will b e a b le to a c c e ss ne w c a pa c ity inte ra c tio n with a uc tio n fo r e ntry a nd e xit rig hts? • 5
in summar y: the e ntr y- e xit mode l c ould wor k, but ne e ds mor e de ve lopme nt APA do e s no t o ppo se the e ntry-e xit mo de l, b ut is c o nc e rne d ab o ut so me o f the ke y de sig n fe ature s mo o te d ar e as that ne e d mo r e de ve lo pme nt: ar e as in whic h APA is c o nc e r ne d: • Alloc a tion of institutiona l role s • Propose d hig h le ve l of re g ula tory intrusion • Pa rtic ula rly Syste m Ope ra to r • How the AE R will de te rmine the le ve ls of • Re turn to be c urta ile d to ba se line e ntry a nd e xit c a pa c ity re g ula te d le ve ls • Me c ha nic s of the e ntry- e xit c a pa c ity • L a c k of sc ope for out- pe rforma nc e a uc tion • And c o nside ra b le sc o pe fo r unde r- pe rfo rma nc e • How APA c a n be a ssure d of re c e iving • Sig na ls for a nd c e rta inty of inve stme nt suffic ie nt re ve nue It is c le ar that the AE MC will no t have se ttle d the se issue s be fo r e de live r ing its F inal r e po r t to Co AG and the Vic to r ian Go ve r nme nt. 6
F o r furthe r info rma tio n c o nta c t: Sc ott Young Re g ula tory Ma na g e r (02) 9275 0031 sc ott.young @a pa .c om.a u Or visit the APA we bsite a t: www.a pa .c om.a u 7
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