The legislation is expected to be introduced into the South Australian Parliament in March 2008, with other states, such as Victoria and New South Wales, requiring amendments to existing Acts to move their gas access regimes from state-based regulation to the national system.

The Law is designed to streamline the four energy sectors: gas transmission, electricity transmission, gas distribution and electricity distribution. The Ministerial Council on Energy has stated that the purpose of this streamlining is to provide consistency and harmonisation between electricity and gas access regimes such that investment in, and use of, energy is not distorted by differing regulatory regimes.

The new legislation will see the establishment of a national regulator – the Australian Energy Regulator – within the Australian Competition and Consumer Commission (ACCC) to streamline the regulation of the four sectors.

While the eastern states are, or will soon be, linked to a range of natural gas sources, the ACCC is very much aware of the perceived monopoly power of point-to-point transport. However, the impact of the ACCC’s intervention can have a detrimental impact on the companies it regulates if an appropriate return on capital investment is not allowed.

In this process, it is gas transmission that will ultimately face more intrusive regulation than it has previously as this sector is brought closer to the regulatory regimes of the other sectors.

By their nature, some pipeline companies could be deemed to have monopoly powers, given that there are often no alternative sources of natural gas. However, many transmission pipelines provide gas on contract with large manufacturing companies or power generators, which, because of their size, have countervailing market power.

There is an appropriate role for regulation of natural monopoly infrastructure, where there is insufficient competitive pressure to constrain market power. However, it is well recognised that Australia is an emerging energy market. An appropriate balance has been sought by the gas transmission industry so that regulation is only applied where it is needed and to the extent it is needed in order that the market operates effectively and efficiently.

It must be remembered that the ACCC’s focus is on protecting consumers, which highlights why their regulatory practices are not always suited to gas transmission. Only a small proportion of natural gas goes to domestic consumers and gas transmission costs are a negligible part of the domestic energy bill.

In fact, the main ‘consumers’ at the end of the gas transmission pipeline are often larger companies than the owners of the pipelines – thus the ACCC often, perhaps inadvertently, gives more power to the larger companies.

In an attempt to ease the impact on the gas transmission industry of the expanded regulatory requirements, an option of ‘light-handed’ regulation is being provided in the legislation, although this option will be restricted in some states.

The National Gas Law has provided increased powers and discretion to the regulator and National Gas Rules are being developed to direct appropriate application of those powers and discretions. The Rules are statutory and will sit under the National Gas Law.

While the Rules are intended to be largely based on the current Gas Code, the Rules are being drafted in consultation with industry. The gas transmission industry will continue to provide input in an effort to ensure that the industry and investment in critical infrastructure are not adversely affected by the new system.