The Australian Energy Regulator (AER) has issued a final decision to grant an exemption to Power and Water Corporation (Power and Water) from its ring-fencing obligations under sections 139, 140 and 141 of the National Gas Law.
This exemption relates to the ring fencing of Power and Water’s McArthur River Mining Pipeline in the Northern Territory from its gas supply business.
The AER considers that Power and Water has satisfied the relevant criteria for granting the exemption under rule 34 of the National Gas Rules.
The AER considers that, in the circumstances, the cost savings resulting from the exemption outweigh any potential benefits of complying with the ring-fencing obligations.
Power and Water is required under the National Gas Rules to notify the AER, without delay, if it no longer qualifies for the exemption.
In making the final decision, the AER considered additional information provided after the draft decision had been issued, including:
- a late submission from Empire Energy noting that it had signed a gas sale agreement with the NT Government to supply gas onto the McArthur River Mining Pipeline
- information from Power and Water detailing the capital works and time required to connect Empire Energy’s gas production facility to the McArthur River Mining Pipeline and to make the pipeline bi-directional
- information from the NT Government detailing aspects of its gas sale agreement with Empire Energy and how it is seeking to ensure Power and Water will meet its ring-fencing requirements over the longer term.
Having considered this new information, the final decision includes the following conditions:
- The exemptions expire when the McArthur River Mining Pipeline is made a bi-directional pipeline.
- Power and Water must notify the AER of any material change in circumstances with respect to pipeline capacity and/or configuration.
- Power and Water must notify the AER in advance of any change in contractual arrangements regarding access to the MRM Pipeline.
Background
Gas ring-fencing laws were extended under the March 2023 gas reforms to include non-scheme pipelines. Service providers of these pipelines are required to comply with the new laws from 2 March 2024.
The ring-fencing framework set out in Part 2 of Chapter 4 of the National Gas Law provides for the specific obligations applicable to gas pipeline service providers. The provisions ensure that related businesses do not gain a competitive advantage by virtue of their common ownership or operation with pipelines.
Service providers may apply to the AER for an exemption from the ring-fencing provisions under rule 34 of the National Gas Rules.
Learn more about ring-fencing
The AER has published a Compliance bulletin – new obligations on gas pipeline, compression and storage service providers and a Gas ring-fencing decision guide