Eastern States – Final decisions gas networks (2016-21)

Access Arrangements & Price Determinations

May 26
Eastern States – Final decisions gas networks (2016-21)

Gas distribution networks

On 26 May 2016, the Australian Energy Regulator (AER) issued final decisions for two gas distribution network service providers:

A significant element of the allowed revenue for each of the network service providers is the estimated cost of financing investments.  The AER notes the improved financial market conditions since its last decisions were made and that the expected cost of capital has fallen leading to lower network prices.

The revenue approved by the AER for ActewAGL equates to approximately 34% of an average ACT household’s annual gas bill.  If other bill components remained unchanged and the lower network charges are passed onto customers then the average annual gas bill for a residential customer in the ACT could decrease by approximately $107 in 2016–17 and then rise on average by 1.2 per cent per year for the next four years.

The revenue the AER has approved for AGN accounts for approximately 56% of an average South Australian annual gas bill.  If other elements the bill stayed the same and the lower network charges are passed on to customers, then the average annual gas bill for a residential customer in SA could decrease by approximately $144 in 2016-17, with annual average rises of 3.4% for the next four years.

Company Allowable revenue Cost of Capital
Proposed ($m) Final Decision ($m) Variance (%) Proposed (%) Final Decision (%)
ActewAGL 382.6 301.4 -21.1 8.64 6.01
AGN 1228.4 985.5 -19.8 8.66 6.15

Gas transmission network

Also on 26 May 2016, the AER released its final decision for the Amadeus Gas Pipeline in the Northern Territory.  The AER’s main focus for the determination was on the proposed cost of capital and estimated capital expenditure.  The AER accepted Amadeus’ operating cost forecast.

The AER noted that the main differences in forecast capital between the original forecast and the final decision relate to two discrete projects, the below-ground station pipework re-coating project and the Channel Island spurline piggability project.  Key features of the final decision are shown below.

Company Allowable Revenue Cost of capital Forecast Capital Expenditure
Proposed ($m) Final Decision ($m) Variance (%) Proposed (%) Final Decision (%) Proposed ($m) Final Decision ($m) Variance (%)
Amadeus Gas Pipeline 134.6 112.8 -16.2 8.58 6.18 29.0 16.8 -42