APA Group’s plans to expand its east coast gas network given ‘clarity’ after regulator ruling
The energy regulator’s confirmation to maintain the current pricing regime for a major pipeline has paved the way for the further expansion of the east coast gas grid.
Energy infrastructure owner APA Group’s plans to expand its east coast gas network have been given “clarity” after the Australian Energy Regulator confirmed its October draft decision to maintain current pricing rules for one of its key pipelines.
The confirmation has given a boost to APA’s aim to improve delivery through its east coast gas grid to the overstretched Victorian and NSW markets, especially in the peak demand winter period.
The AER backed its earlier recommendation that the South West Queensland Pipeline’s existing light regulation regime should remain in place and not be subject to full price regulation, despite its concerns about the ASX-listed entity’s “market power”.
Earlier this year the AER used its newly legislated powers for regulating gas pipelines to announce a “form of regulation” review of the pipeline to consider whether continuing with light regulation of the pipeline remained in the best interests of consumers.
The SWQP, which transports gas in both directions between Wallumbilla pipeline hub in southeast Queensland and Moomba in South Australia, was chosen as the AER’s first self-initiated review because of its strategic importance to east coast gas operations.
The confirmation means the SWQP will remain a non-scheme pipeline.
APA – which is Australia’s largest gas transporter – previously had warned that imposing full price regulation on the SWQP would push up energy bills.
APA chief executive Adam Watson said the AER’s decision was now final and followed the end of a consultation process.
“This decision helps build confidence to continue making the necessary investment in our east coast gas grid to help meet gas demand on the east coast and support energy security for our customers and energy consumers,” he said.
“Now that we have clarity in our regulatory framework for our east coast gas grid, we will move at pace to bring to market opportunities to optimise high-capacity compressor infrastructure across the network, as well as add capacity either on existing pipeline infrastructure or through new pipeline construction and looping. We will confirm our expansion plans for the east coast gas grid in the coming months.”
APA shares rose 1.4 per cent to $7.27 on Friday.
Stages one and two of the expansion were completed in early 2023 and 2024 respectively, and added a combined 25 per cent per cent in north-south gas transportation capacity.
The stage three work is proposed to add a further 25 per cent in gas transportation capacity through three additional compressor stations on the Moomba-Wilton Pipeline.
The AER’s preliminary ruling comes months after APA announced in May it would delay expansion of the SWQP because of regulatory uncertainty tied to the government’s investigation into the pipeline sector.
AER board member Lynne Gallagher said an analysis suggested APA was able to exercise its market power over the supply of services in the SWQP including some users reporting that they had been unable to genuinely negotiate on terms and conditions of access to the SWQP.
“However, the decision also considers the potential constraints on this market power, including the countervailing power of major users and the potential for substitute gas transportation services to emerge in future,” Ms Gallagher said.
“Concerns about investment uncertainty came through loud and clear during the consultation on our draft decision. Very few stakeholders that participated in our consultation process, including users of the SWQP, were in favour of scheme regulation.”
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