ORIGIN and Red Energy are both considering entering the Wimmera Grampians gas market in a move that would break EnergyAustralia's ongoing monopoly in the region.
An Origin spokesman said the following in a statement:
"I can confirm that we are currently exploring the possibility of retailing natural gas in the towns of Ararat, Horsham and Stawell later this year. However we are still at the stage of looking into this and are not in a position to confirm anything yet."
Origin and Red Energy had previously considered entering the market, but said there had been too many barriers to doing so.
In the case of Red Energy, it previously believed there was no option to negotiate.
“Red Energy supplies electricity to customers in Ararat, but unfortunately does not have any access rights to the gas transmission pipeline which would enable us to sell gas in this area,” a Red Energy spokeswoman said.
“We strongly believe in competition, so should things change we would definitely consider supplying gas and providing a choice of retailer for gas customers in Ararat and the nearby towns.”
Since learning EnergyAustralia was open to discussion, Red Energy says it will consider expanding into the area.
“In the past, the region was considered challenging given the small size of the market and the fact that Red Energy was new,” the spokeswoman said.
“But we welcome opening negotiations with EnergyAustralia and hope that we can start serving customers in the region with both electricity and gas in the coming months."
Origin had previously approached EnergyAustralia but both retailers said the conversation had not progressed. They believe that might now change.
“We currently don’t sell natural gas to homes and small business in Stawell, Horsham and Ararat as we have no agreement with the private gas pipeline operators in the region,” an Origin spokesman said.
EnergyAustralia has been the only retailer in the region since the gas market was privatised in the 1990s.
Only one pipeline serves the area – the Carisbrook to Horsham pipeline. It is a 182-kilometre pipeline privately owned by Gas Pipelines Victoria, who has an agreement solely with Energy Australia.
Any other retailer wanting to break into the market would need to negotiate with EnergyAustralia for access to the pipeline.
However, an EnergyAustralia spokesman said the market was open and other retailers had always been free to negotiate for capacity in the pipeline.
“Other energy retailers may set up arrangements to provide gas, but have decided not to,” he said.
The arrangement has come under fire from multiple politicians.
"This has been raised repeatedly by constituents and by me on their behalf to the Minister who initially told people to shop around and when it was pointed out to her that was the problem she then said nothing could be done,” Member for Ripon Louise Staley said.
“Labor has been in power for most of the past 20 years and it’s well past due that they did something about this so Western Victorians can gain the same energy deals as those available in Melbourne.”
EnergyAustralia had also previously attracted the criticism of Member for Lowan Emma Kealy.
Ms Kealy said she was concerned that the retailer was “taking advantage of their supply monopoly since the order that constrained gas tariff increases to no more than CPI expired in 2013.”
How did it happen?
To understand why it has taken so long for another retailer to consider breaking into the market, it's vital to understand how the market is set up across the region.
Gas was privatised in the 1990s under Jeff Kennett’s Project Victoria initiative.
The Victorian government created the arrangement with Gas Pipeline Victoria in 1998.
Soon after that, the government separated its energy business into three entities - Kinetik, Ikon and Energy 21.
EnergyAustralia, at the time called TRUenergy, acquired Kinetik in 1999.
Kinetik held the arrangement with Gas Pipelines Victoria and that is still in place today.
Additionally, gas was not considered an essential service until recent years, so it was not considered necessary to develop fully-fleshed regulatory frameworks in the same way that has been done for electricity.
As such, gas has slowly been changing from isolated point to point pipelines to an interconnected network.
The industry is regulated under the National Gas Rules, which has two separate frameworks which provide regulatory oversight to pipeline operators.
The Carisbrook to Horsham pipeline falls under the second framework, called Part 23, which means it is subject to the lightest possible regulations.
Some of the aspects that define a non-scheme pipeline are how many gas shippers use the pipeline, how much regulation and transparency is needed for that pipeline which may have only two bodies using it, and how much the commercial operations of those two bodies are of concern to the broader public.
Part 23 states that its regulations aim to "reflect the outcomes of a workably competitive market".
However, Gas Pipelines Victoria is actually subject to an even lighter set of regulations, as it submitted an application to the Australian Energy Regulator in December 2017 requesting an exemption to those regulations.
That exemption was granted, though it is unclear what grounds the exemption was based on.
As a result, it is not obligated to publish information including:
- Service and access information;
- Standing terms;
- Financial information; and
- Weighted average price information.
Gas Pipelines Victoria only own and operate the Carisbrook to Horsham pipeline and is itself wholly owned by a group called the Energy Infrastructure Trust.
Energy Infrastructure Trust’s website describes itself as an "unlisted unit trust that invests in assets in the infrastructure sector to provide institutional investors with stable and attractive risk-adjusted returns".
In other words, the pipeline was constructed as a part of a market portfolio consisting of infrastructure projects designed to give low-risk returns to investors.
Energy Infrastructure Trust own or part-own several other energy facilities across Australia too, including wind farms, power stations and an airport in Western Australia.
Energy Infrastructure Trust did not respond to requests for comment.
Other changes are afoot in the market besides Origin's recent decision to consider entering the market.
In mid-2018 the Australian Energy Market Commission released a number of recommendations for the stronger regulation of pipelines after the Council of Australian Government's Energy Council requested a review of Parts 8 to 12 of the National Gas Rules.
A media release from July stated that the review was requested: "To address concerns that customers may be paying more than necessary for gas pipeline services."
"This work is another step in the ongoing redesign of Australia’s gas markets," it said.
The review does not include Part 23 - the part that concerns the Wimmera Grampians arrangement.
Nonetheless, it seems like the market is slowly catching up.
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