National Third Party Access Code for Natural Gas Pipeline Systems (WA)

Western Australia Gas Pipelines Access (Western Australia) Act 1998 2 National Third Party Access Code for Natural Gas Pipeline Systems Western Australia National Third Party Access Code for Natural Gas Pipeline Systems Contents 1.1 Pipelines in Schedule A are Covered 4 1.2 NCC to Recommend on an Application for Coverage 4 1.3 4 1.4 5 1.5 5 1.6 6 1.7 6 1.8 6 1.9 7 1.10 7 1.11 8 1.12 8 1.13 Relevant Minister to Decide on a Coverage Recommendation 8 1.14 8 1.15 9 1.16 9 1.17 9 1.18 9 1.19 9 1.20 Pipelines subject to Access Arrangements submitted under section 2.3 are Covered 10 1.21 New Pipelines the subject of an approved competitive tender are Covered 10 1.22 Opinion of NCC in respect of proposed Pipelines 10 1.23 10 1.24 Revocation of Coverage 11 1.25 11 1.26 11 1.27 12 1.28 12 1.29 12 1.30 13 1.31 13 1.32 13 1.33 13 1.34 Relevant Minister to Decide on a Revocation Recommendation 13 1.35 14 1.36 14 1.37 14 1.38 14 1.39 15 1.40 Extensions/Expansions of a Covered Pipeline 15 1.41 15 2.1 Submission of Access Arrangements 18 2.2 18 2.3 18 2.4 18 2.4A 19 2.5 19 2.6 20 2.7 20 2.8 20 2.9 Public Consultation and Approval 20 2.10 21 2.11 22 2.12 22 2.13 22 2.14 22 2.15 23 2.15A 23 2.16 23 2.16A 24 2.17 24 2.18 25 2.19 25 2.20 26 2.21 26 2.22 27 2.23 27 2.24 27 2.25 28 2.26 28 2.27 29 2.28 Review of an Access Arrangement 29 2.28A 29 2.28B 30 2.29 31 2.30 31 2.31 32 2.32 32 2.33 32 2.34 33 2.35 33 2.36 33 2.37 34 2.37A 34 2.38 34 2.38A 35 2.39 36 2.40 36 2.41 36 2.42 37 2.43 37 2.44 38 2.45 38 2.46 38 2.47 39 2.48 39 2.49. 39 2.50 Access Arrangement not to limit Access 40 2.51 Previous Access Arrangements 40 2.52 41 3.1 Services to be Offered 43 3.2 44 3.3 Reference Tariffs and Reference Tariff Policy 44 3.4 44 3.5 45 3.6 Terms and Conditions 45 3.7 Capacity Management Policy 45 3.8 45 3.9 Trading Policy 45 3.10 46 3.11 47 3.12. 47 3.13 48 3.14 48 3.15 48 3.16 Extensions/Expansions Policy 48 3.17 Review and Expiry of the Access Arrangement 49 3.18 50 3.19 51 3.20 51 3.21 Determining Reference Tariffs through a Competitive Tender Process 51 3.22 52 3.23 53 3.24 53 3.25 53 3.26 54 3.27 54 3.28 54 3.29 57 3.30 57 3.31 57 3.32 58 3.33 58 3.34 59 3.35 59 3.36 60 4.1 Ring Fencing Minimum Obligations 61 4.1A 63 4.2 63 4.3 Ring Fencing Obligations 64 4.4 64 4.5 Procedures for Adding Ring Fencing Obligations 65 4.6 65 4.7 66 4.8 66 4.9 66 4.10 66 4.11 66 4.12 Compliance Procedures and Compliance Reporting 67 4.13 67 4.14 67 4.15 Waiver of Ring Fencing Obligations 67 4.15A 69 4.16 Procedures for Waiving Ring Fencing Obligations 69 4.17 69 4.18 70 4.19 70 4.20 70 4.21 70 4.22 71 4.23 71 4.24 71 5.1 General Requests from Prospective Users 72 5.2 72 5.3 73 5.4 Specific Requests from Prospective Users 73 5.5 73 5.6 74 5.7 74 5.8 Information Provided by Users to the Market 74 5.9 75 6.1 Notification of a Dispute 79 6.2 79 6.3 79 6.4 80 6.5 Withdrawal and Termination of a Dispute 80 6.6 80 6.7 The Arbitration 80 6.8 81 6.9 81 6.10 81 6.11 82 6.12 82 6.13 82 6.14 83 6.15 Guidance for the Arbitrator 83 6.16 84 6.17 84 6.18 Restrictions on Decisions 84 6.19 Effect of a Surcharge 84 6.20 Prior Capital Contributions 85 6.21 Safe Operation of a Covered Pipeline 86 6.22 Obligation to Develop Capacity 86 6.23 87 6.24 Prospective User May Decide Not to Take a Service 88 6.25 Reservation of Capacity During an Access Dispute 88 6.26 Obligation to Reflect the Decision in a Draft Contract 88 6.27 89 7.1 Approval of Relevant Regulator Required for Associate Contracts 89 7.2 90 7.3 90 7.4 90 7.5 91 7.6 91 7.7 Decisions by the NCC, Relevant Minister, Relevant Regulator and Arbitrator 91 7.8 91 7.9 92 7.10 Public Register 94 7.11 Treatment of Confidential Information 94 7.12 95 7.13 95 7.14 96 7.15 Operational Guidelines 96 7.16 Extensions to Time Limits 96 7.17 97 7.18 97 7.19 97 7.20 97 7.21 98 7.22 98 8.1 General Principles 102 8.2 103 8.3 Form of Regulation and Variation of Reference Tariff 104 8.3A 104 8.3B 105 8.3C 105 8.3D 105 8.3E 106 8.3F 107 8.3G 107 8.3H 107 8.4 Total Revenue 108 8.5 109 8.5A. 109 8.6 110 8.7 110 8.8 Principles for Establishing the Capital Base 111 8.9 111 8.10 Initial Capital Base - Existing Pipelines 112 8.11 113 8.12 Initial Capital Base - New Pipelines 113 8.13 113 8.14 Initial Capital Base - After the Expiry of an Access Arrangement 114 8.15 New Facilities Investment 114 8.16 114 8.17 115 8.18 116 8.19 116 8.20 Forecast Capital Expenditure 117 8.21 117 8.22 117 8.23 Capital Contributions 118 8.24 118 8.25 Surcharges 118 8.26 119 8.27 Capital Redundancy 120 8.28 120 8.29 121 8.30 Rate of Return 121 8.31 121 8.32 Depreciation Schedule - Cost of Service 121 8.33 122 8.34 Application of Depreciation Principles to the IRR/NPV Methodology 122 8.35 123 8.36 Non Capital Costs 123 8.37 124 8.38 Allocation of Revenue (Costs) between Services 124 8.39 124 8.40 125 8.41 125 8.42 Allocation of Revenue (Costs) between Users 125 8.43 Prudent Discounts 126 8.44 Use of Incentive Mechanisms 127 8.45 127 8.46 128 8.47 Certain Reference Tariff Principles Not Subject to Periodic Review 129 8.48 129 8.49 Assessment of Compliance with Section 8 129 9.1 130 9.2 130 9.3 131 9.4 131 10.1 How this Code applies to Multiple Service Providers 132 10.2 133 10.3 How this Code applies to successor Service Providers 133 10.4 Overviews 134 10.5 134 10.6 Notices 134 10.7 Regulatory and Conduct Provisions 134 10.8 Definitions 135 10.9 148 SCHEDULE A — PIPELINES TO BE COVERED FROM COMMENCEMENT OF THE CODE Notes Compilation table 188 Defined terms Western Australia Gas Pipelines Access (Western Australia) Act 1998 2 [This is a copy of Schedule 2 to the Gas Pipelines Access (Western Australia) Act 1998 in its amended form.] National Third Party Access Code for Natural Gas Pipeline Systems [s. 3(1), 11, Sched. 1 cl. 1] National Third Party Access Code for Natural Gas Pipeline Systems INTRODUCTION This Code establishes a national access regime for natural gas pipeline systems. The objective of this Code is to establish a framework for third party access to gas pipelines that: (a) facilitates the development and operation of a national market for natural gas; and (b) prevents abuse of monopoly power; and (c) promotes a competitive market for natural gas in which customers may choose suppliers, including producers, retailers and traders; and (d) provides rights of access to natural gas pipelines on conditions that are fair and reasonable for both Service Providers and Users; and (e) provides for resolution of disputes. Under the Code, the owner or operator of a Pipeline that is Covered under the Code is required to lodge an Access Arrangement with the Relevant Regulator. The Access Arrangement is similar in many respects to an undertaking under Part IIIA of the Trade Practices Act and is designed to allow the owner or operator of the Covered Pipeline to develop its own Tariffs and other terms and conditions under which access will be made available, subject to the requirements of the Code. The Relevant Regulator will seek comments on the Access Arrangement and then may either accept it or reject it and specify amendments it requires to be made to the Access Arrangement. If rejected, the Access Arrangement must be modified and resubmitted. Under certain circumstances, the Relevant Regulator may draft and approve its own Access Arrangement. The legislation which implements the Code provides for administrative review of certain regulatory decisions made under the Code. Important features of the Code are: · Coverage - the mechanism by which Pipelines (including distribution systems) become subject to the Code; · reliance on an up-front Access Arrangement outlining Services and Reference Tariffs applicable to a Covered Pipeline; · pricing principles; · ring fencing; · information disclosure requirements; · binding arbitration where there is a dispute; and · specific timelines for all processes. The aim of the Code is to provide sufficient prescription so as to reduce substantially the number of likely arbitrations, while at the same time incorporating enough flexibility for the parties to negotiate contracts within an appropriate framework. The Code has also been designed to provide a clear national access regime, with consistency between different jurisdictions. This introduction to the Code and the overview in italics at the beginning of each section of the Code do not form part of the Code but in certain circumstances regard may be had to them in interpreting the Code (see Sections 10.4 and 10.5). 1. COVERAGE This section of the Code describes the kinds of gas infrastructure which are subject to the Code and the basis on which particular infrastructure is or may become subject to the Code. In relation to the first issue, the scope of the Code is limited to Pipelines used for the haulage of Natural Gas. The definition of Pipeline includes gas transmission pipelines and distribution networks and related facilities, but excludes upstream facilities. In relation to the second issue, a Pipeline may become Covered in one of four ways. · Schedule A lists the Pipelines which are automatically Covered by the Code (section 1.1). · In relation to other Pipelines, a case by case approach applies under which specific criteria are applied to individual Pipelines to determine whether they are Covered (sections 1.2-1.19). · In addition, where a Pipeline is not Covered a Service Provider may itself request Coverage by proposing an Access Arrangement for the Pipeline to the Relevant Regulator for approval (sections 1.20 and 2.3). · Finally, if a competitive tender process approved by the Relevant Regulator is used to select the Service Provider for a new Pipeline, that new Pipeline will be Covered from the time the Relevant Regulator approves the outcome of the competitive tender (section 1.21). The Code accordingly provides a high degree of certainty for the Pipelines identified in Schedule A, while retaining the flexibility to bring in other or new Pipelines on a case-by-case basis. Additional flexibility to respond to changing circumstances exists as a result of the potential for Coverage to be Revoked where the criteria for Coverage cease to be satisfied. In simple terms, the process for case by case Coverage is as follows: · any person may seek Coverage of a Pipeline by applying to the National Competition Council (the NCC); · the NCC publishes a public notice on the application and seeks submissions, including from the Service Provider; · the NCC considers the submissions and makes a recommendation to the Relevant Minister, applying specified criteria; and · the Relevant Minister considers the recommendation and decides on Coverage. The term "Pipeline" is defined in the Gas Pipelines Access Law to include part of a Pipeline. Consequently, an application can be made for the Coverage of the whole or any part of a Pipeline provided the Pipeline or the relevant part of the Pipeline is owned or operated by the same Service Provider or group of Service Providers. The process for Revocation is similar to the process for Coverage. As a decision to Cover a Pipeline or revoke Coverage of a Pipeline can have major commercial implications for the Service Provider and Prospective Users, the Gas Pipelines Access Law provides a mechanism for review of the decision by the Relevant Appeals Body. An extensions/expansions policy in the Access Arrangement for a Covered Pipeline will define when an extension to, or expansion of the Capacity of, a Covered Pipeline will be treated as part of the same Covered Pipeline and when that extension or expansion is to be regarded as a separate Pipeline which may be the subject of a separate Coverage application.