National Gas Law

The National Gas Law will transfer the administration and enforcement of existing gas access regimes from state-based regulators to the national bodies, the Australian Energy Market Commission and the Australian Energy Regulator (AER). The new National Gas Law is to be implemented this year, with the legislation expected to be introduced first into the South Australian Parliament in March with the other states to follow.

The Ministerial Council on Energy has stated that the Law is intended to provide consistency and harmonisation between electricity and gas access regimes such that investment in, and use of, energy is not distorted by differing regulatory regimes. The Law is intended to streamline the regulation of the four sectors of gas transmission, gas distribution, electricity transmission and electricity distribution.

The new legislation will see the establishment of a national regulator – the AER – within the Australian Competition and Consumer Commission (ACCC).

It must be remembered that the ACCC’s focus is on protecting consumers, which highlights why their regulatory practices are not always suited to gas transmission. Only a small proportion of natural gas goes to domestic consumers and gas transmission costs are a negligible part of the domestic energy bill.

In fact, the main ‘consumers’ at the end of the gas transmission pipeline are often companies that are larger than the owners of the pipelines – thus the ACCC can, perhaps inadvertently, make decisions that give more power to the larger

companies. The National Gas Law has provided increased powers and discretion to the regulator and National Gas Rules are being developed to direct appropriate application of those powers and discretions. The Rules are statutory and will sit under the National Gas Law.

The Rules are intended to be largely based on the current Gas Code and are being drafted in consultation with industry. The gas transmission industry will continue to provide input in an effort to ensure that the industry and investment in critical infrastructure are not adversely affected by the new system.

Gas market Bulletin Board

APIA has also been heavily involved in the proposed gas Bulletin Board being set up as part of the National Gas Law and National Gas Rules.

The Bulletin Board has been developed on the premise that it will facilitate trade in natural gas through the provision of system and market information to all users, potential users and other interested parties in the gas sector, and the management of gas emergencies through the provision of emergency-related information to industry and government.

Obviously, the benefits from a gas Bulletin Board would tend to flow to the major users, retailers and generators rather than to pipeliners, so the secretariat and APIA’s Regulatory Affairs Committee have been working intensively to ensure that the requirements of the Bulletin Board do not disadvantage the pipeline industry.

Climate change: greenhouse gas emissions and energy reporting

APIA has also been involved in consultations with the new Federal Department of Climate Change who are developing regulations for the National Greenhouse and Energy Reporting Scheme (NGERS). The NGERS will be operational from July this year and will require all companies or facilities which meet the reporting threshold to register and report greenhouse gas emissions as well as production and consumption of energy. APIA has provided technical and regulatory submissions covering the NGERS’s impact on pipeliners, particularly owners and operators of high pressure gas transmission pipelines, and we will continue to work with the Department to ensure industry concerns are heard.

The information gathered by the NGERS will eventually form part of an emissions trading scheme and APIA has been taking an active interest in the development of climate change policy under the new Labor Government, watching closely the progress of Professor Garnaut’s Climate Change Taskforce.

Professor Garnaut’s interim report suggests that climate change is occurring much faster than previously thought and he has urged the government to act faster and to cut emissions more heavily than proposed under current commitments.

The report has provided an opportunity to again demonstrate the benefits of natural gas in helping to reduce greenhouse gas emissions. The Rudd government is committed to a Mandatory Renewable Energy Target (MRET) where 20 per cent of energy must be from renewable sources by 2020. This target commits energy generators to source 20 per cent of energy from technologies such as wind power.

While the MRET will force a switch to ‘cleaner’ power, this comes at a cost because currently available renewable technologies are far more expensive, as well as less efficient, than fossil fuel energy sources.

This is where gas comes in – in electricity generation, combined-cycle gas turbine technology has approximately half the greenhouse emissions of coal and uses approximately half the water of coal fired turbines. In addition, gas fired plants are significantly cheaper to build with a shorter construction period. The technology is tested and available now.

To assist Australia in meeting the challenge of adapting to climate change, while encouraging renewable energy at a reasonable cost, APIA is of the view that the government’s proposed MRET needs to be expanded to include a clean energy target, thus allowing energy producers to use natural gas as part of their range of clean energy options.

Power generation by natural gas is generally around half the cost of power generation by renewable energy sources.

Professor Garnaut has acknowledged that the big adjustment costs to domestic energy companies, and therefore to consumers, will derive from an MRET. Therefore, to reduce emissions at the rate suggested by Professor Garnaut, at ‘least cost’ as promised by the government, the renewable energy target will need to include a clean energy target, or such an aim would be unachievable.

An MRET that includes a clean energy target would still encourage development and use of renewable energy, but would also allow for the increased use of natural gas – a cleaner burning fuel than coal, and substantially less expensive than renewable energies.

APIA will continue to strongly argue the case for natural gas, which is in the interests of the industry and APIA’s members.