Distribution, Gas, Markets, Technology

The right framework for gas distributors

In April, the Ministerial Council on Energy, Standing Committee of Officials (MCE-SCO) released the first exposure draft of the National Energy Customer Framework (NECF).

The NECF is part of a wider package of reforms aimed at establishing an open and competitive national energy market, in order to improve economic and environmental performance and deliver benefits to households, small business and industry. These reforms are part of an evolutionary process that commenced in the early 1990s as part of the Australian Energy Market Agreement.

Once implemented, it is intended that the NECF will regulate the relationships between distributors, retailers and customers in both gas and electricity. At this stage the first exposure draft imposes much the same obligations on gas distributors as it does on electricity distributors.

Gas distribution businesses are concerned that, if inappropriately designed, the NECF will result in significant additional costs. As drafted, many of the NECF’s obligations duplicate those already existing under the gas access regimes. Under the current arrangements, gas distributors provide a haulage service to “˜users’ (such as gas retailers), whereas under the proposed framework, gas distributors will have a direct relationship with end-users. Where gas distributors have a direct relationship with end-users, they may also have additional costs such as the establishment of costly call centres imposed as a result of the NECF’s new obligations.

The Energy Networks Association (ENA) considers that in implementing the NECF:

  • Ministers should be encouraged to adopt a model that imposes a framework resulting in the least costs to the industry as a whole, since those costs are ultimately borne by consumers.
  • The framework should facilitate change, not impede it.
  • The framework should be flexible rather than overly prescriptive.

The framework should also take into account the Federal Government’s climate change policy and its desire for a greater penetration of natural gas for domestic use. Gas distribution businesses are rightly concerned that industry may not be able to effectively facilitate climate change policies if additional costs are imposed on gas distribution businesses.

ENA considers that given these policy drivers, it is more important that the framework looks to facilitate industry’s response to the climate challenge through flexible and forward looking reforms.

ENA’s submission to MCE-SCO in response to the first exposure draft of the National Energy Customer Framework can be downloaded from: www.ena.asn.au

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