APA Submission

71 Pages·2016·1.26 MB·English

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Examination of the current test for the regulation of gas pipelines
APA Submission to Dr Vertigan’s Consultation Paper
19 October 2016
APA Submission to Dr Vertigan’s Consultation Paper
Contents 5 Pricing of non-firm services are not too high 27
The ACCC claim 27
PART A – EXECUTIVE SUMMARY 4
ACCC’s examples of pricing services over the benchmarks 27
1 A critical consultation 4 Quantum of revenue from non-firm services is small 28
Shippers currently have access to non-firm services 28
The context 4
The ACCC’s evidence base has not been tested 4 6 ACCC assertions on capital cost recovery and subsequent
The ACCC has not established the benefits of a change 6 pricing 29
What are the costs of regulation? 7
The ACCC claim 29
Is the current coverage test fit for purpose? 9
Summary of APA position 29
The ACCC’s Proposed Test 9
Competitive industries charge based on new entrant costs 29
Case for change has not been made 11
Impact on investments in new pipelines 29
Structure of this submission and attached reports 13
Distortion of the efficient operation of existing pipelines 30
PART B – THE ACCC CLAIMS 14
PART C – IMPACT ON GAS PRICES 31
2 The broader context 14
7 CEG Pricing Report 31
The gas transmission pipeline industry 14
ACCC assertions 31
Pipeline operators have invested 15
CEG analysis 32
Pipeline tariffs have not increased in real terms 15
Why have pipeline charges not increased? 16 8 Independent analysts reports 34
What the ACCC says about this evidence 17
Morningstar analysis 34
3 How does the ACCC support its proposed changes? 18 J.P. Morgan analysis 35
The ACCC inquiry 18 PART D – COSTS OF REGULATION 36
How did the ACCC base its claim of monopoly pricing? 18
9 What are the costs of regulation? 36
4 RORs for incremental projects 20
Regulation has costs 36
ACCC claim 20 Adverse impact on investment 36
ACCC relies on selected projects 20 Adverse impact on innovation 40
ACCC has used the wrong comparator 20 Does the 15 year access holiday mitigate this risk? 43
IRRs are typically higher for incremental investments 21 Summary 43
The regulated return is not an appropriate benchmark 21
SWQP case study 25
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PART E – THE CURRENT COVERAGE TEST 45 14 Glossary 59
10 What does the coverage test need to do? 45 ATTACHMENT A – Responses to questions in consultation paper 61
What does the coverage test need to do? 45
ATTACHMENT B – ACCC comments relating to APA 69
How does the current test work? 45
ACCC’s Proposed Test 46
Current coverage test is sound 47
Current coverage criteria can apply to monopoly pricing 47
Current coverage criteria can be satisfied by non-vertically integrated
service providers 47
Competition and efficiency are inextricably linked 48
Coverage decisions do not support reform to criterion (a) 49
11 ACCC scenarios can satisfy criterion (a) 50
Criterion (a) can apply 50
Scenario A 50
Scenario B 51
Scenarios C and D 51
PART F – THE CASE FOR CHANGE 53
12 Case for change not made 53
Overview 53
Importance of consistency between NGL, Part IIIA and the CCA 53
Costs of adopting the ACCC’s Proposed Test 54
Benefits do not clearly outweigh the costs 56
13 Where to from here? 57
Improving efficiency 57
Industry has led change 58
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PART A – EXECUTIVE SUMMARY  an analysis of whether the changes will achieve the desired policy
objectives; and
1 A critical consultation
 having regard to the above, an independent assessment of whether the
The context case for change is established.
This submission responds to the Consultation Paper, “Examination of the
This submission considers each of these points. In Attachment A, we
current test for the regulation of gas pipelines”, dated 4 October 2016.
specifically answer the questions put by the consultation paper.
APA welcomes this consultation by Dr Vertigan on what are the appropriate
APA does not believe that the ACCC has established a case to justify such
settings for the coverage criteria under the National Gas Law (NGL). It
far reaching and bespoke regulation.
involves a critical policy decision on how the pipeline industry should be
regulated with implications for other infrastructure in Australia.
The ACCC’s evidence base has not been tested
The Australian Competition and Consumer Commission (ACCC) is seeking The background to this consultation is the ACCC’s report on the East Coast
the hurdle represented by the coverage criteria to be lowered. Further, it Gas Inquiry (ECGI Report). The ACCC asserts that a large number of
suggests consideration be given to having transmission pipelines deemed to pipeline operators have been engaging in monopoly pricing. This is critical
be regulated from the outset1 and the onus of proof reversed so that to this entire consultation and the case for change.
pipelines have to prove they should not be regulated.2
Much of the ECGI report is valuable and provides clarity on the issues
The change in coverage criteria would represent a fundamental change of involved. Unfortunately, the main findings of the report in relation to pipeline
the approach to regulation of pipelines which has been in place for 20 years pricing are based on misinterpreted evidence or findings that have been
and which has underpinned billions of dollars of investment. It would also be inferred from examples presented out of context. APA and other pipeline
a rejection of the approach to access regulation under Part IIIA and the operators were not informed of, or given an opportunity to respond to, these
recent Productivity Commission review and the “root and branch” Harper findings before publication. The ACCC’s evidence base needs to be tested
Review findings in the Competition Policy Review: Final Report released in as part of this consultation to determine if it supports the findings.
March 2015 (Harper Review). It would impose an untested bespoke regime
which is out of step with access regulation for other infrastructure. Specifically, the ACCC relies on three assertions to support its findings of
monopoly pricing. These are discussed below.
APA operates a mix of fully regulated, light regulated and unregulated
assets. It does not dispute the need for regulation or that full economic APA rejects ACCC’s assertion that rates of return on incremental
regulation of assets may be appropriate in certain circumstances. However, projects are excessive
a fundamental regulatory change must be based on:
Most of the projects cited involve small capital works projects to APA
 proper evidence; pipelines (representing less than 1.25% of APA’s enterprise value). Three of
the projects were developed as a competitive response and the other three
 an understanding of the benefits and costs of the change; involved making pipelines bi-directional. The ACCC cites rates of return
(RORs) from Board papers without providing context, namely that the ROR
of a small capital project which takes no account of the very large underlying

1 ECGI Report, p 140. 2 ECGI Report, p 139.
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capital investment in the pipeline itself will axiomatically give rise to a high earn revenue in excess of the regulated rate of return where they outperform
ROR. cost and demand benchmarks, or tariffs which are struck through
competitive processes to build pipelines or price services (such as occurred
To compound the perception issue, the ACCC makes an “apples v oranges” with the CGP).
comparison which has the effect of making the project returns appear to be
twice as high as they should be against their chosen comparator. Finally, the ACCC approach is inconsistent with how existing pipelines would
be valued if they became regulated. If the capital base of the CGP was
ACCC incorrectly finds pricing non-firm services are too high determined today for the purposes of regulated pricing under the NGL, it
would be hundreds of millions of dollars and certainly not zero. It is
The ACCC set out some arbitrary benchmarks for the pricing of non-firm misleading for the ACCC to suggest otherwise unless the ACCC also
services and then sought to compare pipeline prices to these. Even so, the intends to bring in a new approach which expropriates all revenue above a
ACCC identified only three instances of pricing of services that did not meet shadow regulated return on previously unregulated or light regulated
the ACCC’s benchmarks. Each relate to APA’s pipelines. Two are isolated pipelines. APA can say with some confidence that this approach would
instances of historical pricing. The other meets the benchmark as the ACCC devastate future pipeline investment.
used the wrong forward tariff to do its calculation. For context, and as
provided to the ACCC during its Inquiry, APA’s east coast pipeline revenue The evidence is weak
from all available and interruptible services (not just these 3 examples) in H1
FY16 is less than 0.5% of its total annual revenue in the East Coast. To provide context, the ACCC, under its information gathering powers, had
access to all APA documents and communications, and investigated over
APA rejects ACCC’s assertions on capital cost recovery and 300 contracts and variations from APA alone as part of its Inquiry. It also
subsequent pricing required APA to provide communications (including emails, board papers,
notes, reports and so on) between APA senior commercial staff and its
The ACCC makes the assertion that two pipelines are charging prices where executive over a two year period. The ACCC spent one year looking at the
the cost of construction of the pipeline has already been recovered and documents provided, interviewing pipeline operators and market participants
which are higher than those that would apply if those pipelines had been under oath, and investigating market pricing outcomes.
regulated. It claims this to be the case for the Carpentaria Gas Pipeline
(CGP). The ACCC appears to hold the belief that prices in any competitive Despite this degree of analysis, the ACCC ‘found’ very few examples on
market would be almost zero where capital was fully paid off. This is not the which to base its claims of monopoly pricing by pipeline operators. In most
case. In a workably competitive market, an income producing asset would cases the ACCC resorts to making claims, inferences and assertions based
not be charged at almost zero pricing. Just because the capital costs of an on marginal expansion projects, minor revenue items (non-firm services),
old office building have been recovered does not mean tenants are only and economically flawed claims in regard to “fully paid off” assets to support
charged outgoings. The ACCC’s incorrect belief leads it to undertake an a wholesale change to regulation of the pipeline sector.
analysis which effectively assumes monopoly pricing to make its finding that
pipeline operators are monopoly pricing. Part B of this Submission provides a detailed review of the material relied
upon by the ACCC and Attachment B provides a response to the specific
More concerning for APA is the way the ACCC calculated the prices if the issues raised by the ACCC in relation to APA’s pipelines.
asset were regulated. It assumes all revenue above what it considers to be
an appropriate regulated level of return must be monopoly profit and then APA has also included with this submission a report by Competition
uses that approach to show that there is monopoly profit. The ACCC does Economists Group (CEG), “Returns on Investment for Gas Pipelines”, which
not even attempt to reconcile this approach with the incentive regulation analyses the approach of the ACCC in reaching its findings on monopoly
approach that actually applies to covered pipelines which allows shippers to pricing (CEG Returns Report).
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The ACCC has not established the benefits of a change transport cost is reduced by half, it now means it has become economic for
Queensland LNG buyers to buy gas in the south at $7.50, thereby raising
The ACCC proposition is wrong the price for southern buyers to $7.50.
The ACCC asserts that high transport charges on some pipelines can affect The evidence shows that gas flows are increasingly flowing north. APA can
gas prices in the southern states even for users that don’t directly utilise confirm that it has signed a number of gas transportation agreements
those pipelines. In particular, it claims that (as illustrated by Table 6.2 of the (GTAs) to move gas north. It is also evident that the market is contracting
ECGI Report) reducing transportation charges by 10% to 50% could lead to for northern gas flows given that the Moomba to Adelaide Pipeline System
a $0.20 to $1.02 difference in the maximum price payable by domestic users (MAPS) has become bi-directional and can now flow north, the Eastern Gas
in the southern states. Pipeline (EGP) has expanded to allow greater northern flows and the
Moomba to Sydney Pipeline (MSP) has become bi-directional to allow flows
The ACCC does not provide a formal economic analysis for its conclusion. north. The ECGI Report itself noted that over $450M of pipeline investments
APA engaged CEG to prepare a formal economic model to test the ACCC’s had been made to enable more gas to flow from Victoria to New South
assertion. This is provided by CEG in its report, “Transport Costs and Wales and up to Queensland.3
Domestic Gas Prices” (CEG Pricing Report), and included with this
submission. Part C of this submission sets out that analysis. This highlights that there are real issues with the ACCC’s analysis and that it
is overly simplistic (as discussed below).
The crux of the ACCC’s claim is that gas prices in Queensland are set by
liquefied natural gas (LNG) netback prices and the prices in southern states Note that the two independent research analyst reports reached the same
are set by reference to Queensland prices with the difference in prices conclusion:
between the two dependent on transportation costs. The ACCC assumes
that prices in the southern states equal the LNG netback price plus the cost This represents an increase on what the customer was paying
of transporting gas from Queensland and therefore any reduction in previously, with the benefits of lower transmission costs accruing to
transport costs will lead to a “one for one” reduction in prices in southern the gas producer. While this is just one potential scenario, cutting
states. pipeline returns is not the clear-cut win for domestic gas customers
that it appears at first blush. (Morningstar Equity Research)4
ACCC analysis incomplete as with northward flows, southern prices
would increase …in the situation of the buyers alternative, reduction in tariffs can
switch the dominant pricing consideration to a netback price and
As CEG shows, the ACCC’s analysis is dependent on which way gas is create a spike in gas prices for Southern users. (J.P. Morgan)5
flowing. If gas is flowing north, then on the ACCC’s approach the price in
the southern states must be less than the LNG netback price less ACCC model requires GBJV market power or a cartel
transportation costs (or otherwise it is more profitable to sell in the south). In
this scenario, lowering transport costs would raise southern prices, e.g. if How then does the ACCC reach a conclusion that prices will reduce when
the LNG netback price is $8/GJ and the transport costs are $1/GJ and gas their own economic framework suggests they will increase? The ACCC
flows are northward, then the southern price for gas must be equal to or less
than $7/GJ or otherwise it would be more profitable to sell in the south. If

3 ECGI Report, p 93. 5 J.P. Morgan, Asia Pacific Equity Research, “Australian Domestic Gas, Cost inflation to drive
4 Morningstar Equity Research, “APA Group: Caught in the ACCC's Crossfire, Greater wholesale gas prices up in all Eastern States”, 10 May 2016, pp 62-64.
regulation is a headwind to longer-term returns”, 14 June 2016, pp 11-13.
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assumes that southern gas markets are not competitive and the Gippsland In its post-ECGI Report communications, the ACCC focuses on the 50%
Basin Joint Venture (GBJV) is charging: reduction in pipeline tariffs and the claimed $1/GJ price reduction.6 It
justifies this position on two points. First, it says older pipelines which have
 Queensland customers - the LNG netback price less transportation recovered its costs on the ACCC analysis should only be charging operating
costs to Queensland for northern flows; and costs (which is very low). However, neither the SWQP nor MSP is one of
the pipelines that the ACCC claims to be “fully recovered”. Second, it relies
 Southern customers – the LNG netback price plus an amount equal to on a one sentence comment in Appendix 3 of a 60 page Board presentation
the transportation costs to Queensland (as Queensland gas is their only to calculate that the SWQP is earning revenue 70% above what it would
alternative and they would have to pay transport costs to have it earn if it was regulated. To provide context, the particular page was
delivered). addressing regulatory risk and was highlighting that the long term contracts
mitigated against the future risk of regulation as represented by the “back of
This requires GBJV to have a high degree of market power. CEG consider the envelope” assessment included.
this question and finds this assumption questionable. Even if it did, a
strategy by GBJV to reduce output to increase prices is unlikely to be profit Importantly, given the context, the assessment was made was using the
maximising for GBJV and contrary to the evidence which shows GBJV sales regulated rate of return applying in 2015 (~6%), not that which was applying
to be at record levels. The other alternative is that the GBJV and the in 2008 and 2009 during the Global Financial Crisis (GFC) (~10.5%) and
southern producers are in a cartel or undertaking coordinated conduct in the used an 80 year depreciation profile rather than one linked to the remaining
southern market but there is no suggestion of this in the ECGI Report. life of the gas fields (which is significantly shorter). It also used rough
expenditure estimates with only notional allocation of corporate costs.
The ACCC model is simplistic and not reliable
The key point, however, is that it is not legitimate to compare revenue
In reality, the ACCC’s analysis is overly simplistic. It assumes that LNG calculations using today’s rate of return with contractual rates stuck at a
producers will switch gas to and from LNG exports depending on the different time (at the height of the GFC) and that were commensurate with
domestic prices in southern states. The LNG plants represent over $60B of what would have been the prevailing regulatory rates of return imposed at
infrastructure and with long term offtakes – they are designed to run as close the time.
as possible to capacity and will not be left idle for gas to be moved to the
domestic market. It is likely that there will be a wide range of differentials Further, the ECGI Report itself recognises that the SWQP tariffs were set in
between the Queensland price and LNG netback prices. a competitive process and the “prices and other terms and conditions in
these foundation contracts suggest AGL and Origin both benefited from this
The other fundamental issue is that the ACCC bases its $0.20 to $1.02 competition”.7
difference on average transport costs on the South West Queensland
Pipeline (SWQP) and MSP. However, the SWQP is under long term take or On what basis then should these tariffs be halved?
pay contracts – for contracted shippers transportation is a sunk cost. The
driver for those shippers is the marginal cost of transporting gas (i.e. the very What are the costs of regulation?
low variable, throughput cost) between Queensland and southern states, not
The ECGI Report recognises that the pipeline industry has made significant
the average cost. The transport differential is much less than the ACCC
investment ($900M in recent years) and offered more innovative services in
suggests.

6 Mr Rod Sims, Speech to the South East Asia Australia Offshore & Onshore Conference, 7 ECGI Report, page 97.
Darwin, 15 September 2016.
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response to changing demands.8 We have a regime that is providing the The above contrasts with recent unregulated builds for the Reedy Creek
right incentives in this regard – there is no question that any of the pipeline and Moomba bypass which have been agreed commercially in very
investments have been gold plated or unnecessary. short times to meet immediate demand.
The ACCC seeks to lower the threshold in the coverage criteria to provide An interesting case study is to compare the SWQP expansions with what
for more regulation of pipelines. It is well understood, including by the has happened in the coal industry. In APA’s view, the SWQP would not
ACCC,9 that regulation can impact on the incentives to invest and innovate. have been expanded in the timeframes which occurred if it was regulated
and would have left eastern Australia without an essential piece of
Adverse investment impacts infrastructure linking Queensland to the southern states during this critical
period in the lead-up to commissioning of the $60B LNG projects. It would
APA has undertaken investments in both unregulated and regulated also remove the incentive for APA to have created additional capacity from
pipelines. Part D of this submission provides a number of case studies and operating SWQP in conjunction with its other pipelines. The SWQP
examples of two key impacts of regulation, namely: expansion meant that there was capacity, availability, reliability and flexibility
to support the trebling of gas demand with no infrastructure bottlenecks. In
 delaying investment – an example includes the well documented contrast, the failure to expand coal terminals during the mining boom led to
inability for APA to get regulatory approval for the expansion of the an estimated $5.5B in lost coal exports.10
South West Pipeline from the regulator leading to it being delayed for
over 4 years until the next regulatory period, despite there being Adverse innovation impacts
demand for the expanded services well before that time.
APA has invested heavily to run its portfolio of assets as an integrated grid
 providing an incentive to size pipelines only to existing demand – an to enable it to gain efficiencies and provide new services. This has included
example includes the expansion to the Victorian Northern Interconnect significant IT investment and creating an Integrated Operations Centre
where the regulator sought to ‘optimise’ the investment by only thinking replacing 5 control rooms. This allows combined operations of its pipelines
about how to meet existing demand. Using this shorter term focus, it and the colocation of operations and commercial staff to integrate customer
reduced the requested capital for the project by substituting an services and demands into real time operations.
approach that would mean that future expansion of the pipeline would
make the optimised solution redundant. Demand for additional capacity The Brattle Group11 has quantified the following which could not have been
has since doubled within the regulatory period that the optimised achieved without taking a “grid” approach to planning and operations:
solution was approved. APA was left in a difficult position as to whether
it built the approved project in a staged approach that meant that later  efficiency savings of $110M in reduced capital expenditure and $7M in
expansion would make part of that investment redundant, or to pursue operations cost;
the more efficient (but more expensive for lower demand levels) project
and risk that the regulator considered this to be inefficient.  new park and loan services having an economic benefit of $7.5M and
$25M annually; and

8 ECGI Report, pp 94-95. APA alone has invested well over a $1B on capital projects in the 10 Brian Robins, NSW coal bottleneck costs $5b in exports (1 July 2008) Sydney Morning
last 5 years. Herald <http://www.smh.com.au/news/national/nsw-coal-bottleneck-costs-5b-in-
9 ECGI Report, p 137. exports/2008/06/30/1214677946060.html>.
11 The Brattle Group, Benefits and Costs of Integration in Transmission / Transportation
Networks: An Application to Eastern Australia Gas Markets (2016).
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 between $10.5M and $35M in avoided costs through storage services whether the service provider has an ability and incentive to exercise market
provided during LNG commissioning. power. This has been referred to by the NCC as a “…necessary (although
not sufficient) condition’ of satisfying the test.”12 The second limb is to
This does not include the benefits to customers in having one contract consider the effect of access or increased access on competition in a
covering multiple pipeline routes and the improved risk allocation for dependent market.
customers in not having to take pipeline-on-pipeline risks. In Part D, APA
provides some detail on why it would have had no incentive to do this, and This approach is reflected in the attached opinion of N J Young QC and C M
the above efficiency gains would not have materialised, if all its pipelines Dermody (Young QC Opinion) in which they conclude the inquiry under the
were regulated. current criterion (a) test involves an assessment of whether there is:
Is the current coverage test fit for purpose?  “an ability and incentive to exercise market power (by charging
monopoly prices)”; and
What is its purpose?
 “any use of that market power in [a] way [that is] likely to adversely
The objective for economic regulation of gas pipelines should be the affect competition in a dependent market” – such that access (or
enhancement of economic efficiency. Regulation should only occur where it increased access) would promote a material increase in competition in
maximises net benefits for the community as a whole. That is, where the that dependent market.”
total economic benefits of regulation exceed the costs.
Therefore, the ability and incentive to exercise market power and the
In the context of economic regulation of gas pipelines, that efficiency consequent impacts on competition in dependent markets are the critical
objective is embodied in the National Gas Objective (NGO). The focus of considerations in the application of criterion (a).
the coverage criteria and, in particular, criterion (a) on a material promotion
of competition in dependent markets, is consistent with the framework The ACCC’s Proposed Test
embodied in the Competition and Consumer Act and National Access
Regime, that competition is the vehicle through which efficiency objectives The ACCC’s Proposed Test
are achieved. The link between efficiency and competition is explored
further below. The new test proposed by the ACCC (ACCC’s Proposed Test) has two
limbs:
How does the current test work?
 does the pipeline have substantial market power and is it likely that the
Under the National Gas Law (NGL), all the coverage criteria must be
pipeline will continue to have substantial market power in the medium
satisfied for a pipeline to be subject to economic regulation. The issues term; and
raised by the ECGI Report relate to criterion (a) which requires “that access
(or increased access) to pipeline services provided by means of the pipeline
 coverage “will or is likely to contribute” to the National Gas Objective.
would promote a material increase in competition in at least one market”.
How then do the two limbs of the ACCC’s Proposed Test compare to the
It is well established by the National Competition Council (NCC), the
coverage criteria? In APA’s view, the ACCC’s Proposed Test is a
Competition Tribunal and the Courts that in applying criteria (a),
consideration must be had of two limbs. The first limb is consideration of

12 NCC, Declaration of Services: A Guide, February 2013 at para 3.43.
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reformulation of criterion (a) with the remainder of the coverage criteria Competition and efficiency are linked
effectively discarded.
The ACCC’s proposed test is based on replacing a competition assessment
The market power limb with one that focuses on the NGO (which focuses on efficiency) directly on
the basis that the former is not sufficient.
The first limb of the ACCC’s Proposed Test involve essentially the same
assessment as the first limb of the current criterion (a). APA notes that The ACCC considers criterion (a) uses competition as a proxy for efficiency
labelling the ACCC’s Proposed Test as the “Market Power Test” label may but competition and efficiency are not synonymous - the assessment of
incorrectly imply that the current test does not also consider market power. competition impacts in dependent markets does not necessarily capture
efficiency gains in those markets which are unrelated to competition. (It
The ACCC’s concern is that criterion (a) is not designed to address provides four scenarios to demonstrate this which we consider in more detail
monopoly pricing, particularly where the businesses involved are not below.)
vertically integrated.
However, as HoustonKemp explains it is a “fundamental underlying principle
However as noted above criterion (a) clearly takes into account market of economics that competition and efficiency are inextricably linked. The
power. The Young QC Opinion concludes on the basis of decided coverage incentives that encourage firms to compete with one another are the same
determinations by the NCC and judicial decisions in the Tribunal and Federal as those that encourage firms to operate and price efficiently. All else equal,
Court, “no difficulty arises in applying criterion (a) to monopoly pricing in a decision on whether or not to regulate the price of an input product cannot
either its present form or in the form set out in the Exposure Draft.”13 promote one in the absence of promoting the other.”14
It is also incorrect, both as a matter of law and economics, to suggest the Further, as noted in the Young QC Opinion, “[c]riterion (a) in Part IIIA is
current test cannot apply to non-vertically integrated operators – it has done directed at improving the conditions or environment for competition, in order
so in the past. The propositions are also inconsistent with the views of both to achieve the objects of Part IIIA which include the promotion of the
the Hilmer Committee and Productivity Commission. economically efficient operation of, use of an investment in the infrastructure
by which services are provided. That is, competition is not a proxy for
The NGO limb economic efficiency, rather economic efficiency is achieved through
improved conditions for competition…[The] same analysis applies to
There are two primary differences between this limb and criterion (a). First, criterion (a) in the NGL, i.e., criterion (a) treats the promotion of competition
it replaces a competition based assessment with a vague efficiency based as the relevant means of achieving the national gas objective.”15
test. Second, it lowers the threshold to be satisfied. Each of these points is
discussed below. The framework of relying on competition as the mechanism through which
efficiency objectives are achieved is embodied in well-established principles
consistent across the competition provisions in Part IV of the Competition
and Consumer Act 2010 (Cth) (CCA), the National Access Regime and the
current coverage test in National Gas Law. The ACCC’s proposed test

13 Young QC Opinion [26]. 15 Young QC Opinion [29 and 32].
14 HoustonKemp, Economic review of proposed amendments to the gas pipeline coverage
criteria: A report for APA (13 October 2016) p 5.
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