The Australian Competition and Consumer Commission and Gasgo Pty Ltd have agreed to a settlement of the Federal Court proceedings instituted by the ACCC.
"The ACCC has accepted a court-enforceable undertaking from Gasgo, which achieves the market outcome sought by the ACCC when it commenced these proceedings," Acting ACCC Chairman, Mr Allan Asher, said today.
In May of this year the ACCC instituted proceedings against Gasgo, a company that buys natural gas and on-sells it, mostly to the Northern Territory Power and Water Authority. The ACCC alleged that, in January 1999, Gasgo had given or threatened to give effect to a pre-emptive right clause in a 1985 gas purchase agreement between Gasgo and the Mereenie Producers in respect of natural gas sought from the Mereenie Producers by NT Power Generation Pty Ltd.
The Mereenie Producers are collectively a group of companies that supply natural gas from the Mereenie gas field in the Amadeus Basin of the Northern Territory. NT Power is the owner of a gas powered electricity generation plant located at Mount Todd in the Northern Territory and wants to supply electricity to consumers in the Darwin/Katherine area of the Northern Territory.
The pre-emptive right requires the Mereenie Producers, prior to selling gas to third parties, to first offer that gas to Gasgo at the same price and for the same quantity. Gasgo has a limited time in which it may choose to accept the offer, or it may decline or waive its rights with respect to that gas, in which case the Mereenie Producers may then sell that gas to the third party.
The gas sold to Gasgo is predominantly used by PAWA for the generation of electricity for sale to industrial, commercial and domestic consumers in the Darwin/Katherine area.
The ACCC alleged that this conduct was in breach of section 45 of the Trade Practices Act 1974 which prohibits giving effect to a contract arrangement or understanding that has the purpose or likely effect of substantially lessening competition.
"The ACCCs primary objective in instituting these proceedings was to prevent Gasgo from exercising its pre-emptive right," Mr Asher said. "In settling these proceedings, the ACCC has achieved this objective. Gasgo has agreed, by way of a court enforceable undertaking, not to exercise its pre-emptive right in respect of gas sales by the Mereenie Producers to any third party wishing to use that gas for the commercial generation of electricity for supply to customers in the Darwin/Katherine area."
The ACCC views the pre-emptive right as a significant barrier to entry for any potential new entrant into the commercial electricity generation market in the Northern Territory. This undertaking will ensure that any potential new entrant will be able to secure a supply of natural gas from the Mereenie Producers, without Gasgo having a right of first refusal.
The ACCC acknowledges the cooperation of Gasgo and the Northern Territory Government in achieving this settlement.
"The ACCC has accepted a court-enforceable undertaking from Gasgo, which achieves the market outcome sought by the ACCC when it commenced these proceedings," Acting ACCC Chairman, Mr Allan Asher, said today.
In May of this year the ACCC instituted proceedings against Gasgo, a company that buys natural gas and on-sells it, mostly to the Northern Territory Power and Water Authority. The ACCC alleged that, in January 1999, Gasgo had given or threatened to give effect to a pre-emptive right clause in a 1985 gas purchase agreement between Gasgo and the Mereenie Producers in respect of natural gas sought from the Mereenie Producers by NT Power Generation Pty Ltd.
The Mereenie Producers are collectively a group of companies that supply natural gas from the Mereenie gas field in the Amadeus Basin of the Northern Territory. NT Power is the owner of a gas powered electricity generation plant located at Mount Todd in the Northern Territory and wants to supply electricity to consumers in the Darwin/Katherine area of the Northern Territory.
The pre-emptive right requires the Mereenie Producers, prior to selling gas to third parties, to first offer that gas to Gasgo at the same price and for the same quantity. Gasgo has a limited time in which it may choose to accept the offer, or it may decline or waive its rights with respect to that gas, in which case the Mereenie Producers may then sell that gas to the third party.
The gas sold to Gasgo is predominantly used by PAWA for the generation of electricity for sale to industrial, commercial and domestic consumers in the Darwin/Katherine area.
The ACCC alleged that this conduct was in breach of section 45 of the Trade Practices Act 1974 which prohibits giving effect to a contract arrangement or understanding that has the purpose or likely effect of substantially lessening competition.
"The ACCCs primary objective in instituting these proceedings was to prevent Gasgo from exercising its pre-emptive right," Mr Asher said. "In settling these proceedings, the ACCC has achieved this objective. Gasgo has agreed, by way of a court enforceable undertaking, not to exercise its pre-emptive right in respect of gas sales by the Mereenie Producers to any third party wishing to use that gas for the commercial generation of electricity for supply to customers in the Darwin/Katherine area."
The ACCC views the pre-emptive right as a significant barrier to entry for any potential new entrant into the commercial electricity generation market in the Northern Territory. This undertaking will ensure that any potential new entrant will be able to secure a supply of natural gas from the Mereenie Producers, without Gasgo having a right of first refusal.
The ACCC acknowledges the cooperation of Gasgo and the Northern Territory Government in achieving this settlement.