The Australian Competition and Consumer Commission has issued its Final Decision on GasNet’s access arrangement, ACCC Chairman, Professor Allan Fels, announced today.
"The ACCC has decided to approve an increase in benchmark revenues for the next five years of 10 per cent, which is about three per cent in real terms", he said. "This increase reflects a substantial expansion in GasNet's regulated asset base. The ACCC has decided to approve total benchmark revenues over the next five years of $385 million, which compares with the $377 million it proposed in its Draft Decision.
"The moderate increase approved by the ACCC will allow GasNet to earn a reasonable return on its assets, including the recent addition of the Southwest Pipeline, and ensure a fair balance between the interests of GasNet and its users. GasNet proposed a larger increase in its benchmark revenues than the ACCC considers is justified.
"The ACCC has concluded that some of the cost increases proposed by GasNet are unwarranted. These include GasNet's proposal to redetermine the size of its initial capital base and increase it by $41 million and its proposed rate of return, which is inconsistent with current market evidence.
"The ACCC assessed GasNet's proposed capital expenditure of $87 million over the next five years. It considers that expenditure of $47 million is justified and should be included in GasNet's regulatory accounts. The balance, if undertaken, can also be included providing it passes the tests under the National Gas Code".
Professor Fels said that while the ACCC has decided to moderate GasNet's proposed revenue increase and capital expenditure program, it will accept a range of changes that lead to benefits for both GasNet and users of the pipeline system:
- merging GasNet's two access arrangements (for the Principal Transmission System and the Western Transmission System) into a single access arrangement
- including the Southwest Pipeline in GasNet's asset base
- allowing GasNet to choose whether new pipeline extensions will be regulated under its arrangement
- allowing GasNet to retain approximately $16 million in tax allowance provided in the initial access arrangement under the pre-tax framework.
The ACCC also issued its Final Decision on VENCorp’s access arrangement. It has decided to approve reduced natural gas transmission tariffs for VENCorp.
"The ACCC's final decisions under the National Gas Code are that it approves VENCorp's revised access arrangement but that it does not approve GasNet's revised access arrangement in its current form", Professor Fels said.
The ACCC has set out the amendments it considers are necessary to GasNet's revised access arrangement for it to be approved. The final decisions are available on the ACCC's website
The revised tariffs are due to commence on 1 January 2003.