Pipeline capacity trading reforms, introduced in March 2019, have improved access to pipeline capacity for wholesale gas customers. The AER has today published a report reviewing the implementation of these reforms, including the performance of the two new markets introduced through the reforms: the Capacity Trading Platform and the Day Ahead Auction.
The report found that the Day Ahead Auction has been a particular success, providing cheap access to more than 73 PJ of pipeline capacity over the past two years. Participants won the most capacity on routes south on the Moomba to Sydney Pipeline, totalling nearly 21 PJ of capacity. This additional capacity has supported increased trade in the east coast gas spot markets and allowed participants to respond flexibly to changing market conditions.
Over the past two years, the AER has actively refined its surveillance tools and surveyed participants’ compliance with the reforms’ new obligations. Through our ongoing monitoring and reporting, we have identified issues early and engaged with industry to communicate best practice expectations. However, there is additional work on the horizon to address some of the issues identified.
Background
The pipeline capacity trading reforms commenced on 1 March 2019. In addition to other rules and obligations, these reforms introduced two new markets, operated by AEMO:
- The Day Ahead Auction is a mandatory auction of any contracted, but unused capacity. Any shipper may bid at the auction, which is finalised a day in advance of the relevant gas day. The auctions have a minimum price of $0/GJ and any revenues go to the facility operator.
- The Capacity Trading Platform is a voluntary market where shippers can sell any capacity they do not expect to use. It includes an anonymous exchange for common transportation products, and a listing service for more bespoke arrangements. Sales revenues go to the selling shipper.
Shippers buy capacity on transmission pipelines to transport their gas purchased from gas production basins. Gas production companies and gas pipelines are separately owned, so a shipper must negotiate with multiple parties to buy its gas and then have it delivered. To reach its destination, gas may need to flow across multiple pipelines with different owners. The pipeline capacity trading reforms were designed to make the secondary trade of pipeline capacity easier for shippers.