On 30th June, the Economic Regulation Authority (ERA) published its final decision not to approve Goldfields Gas Transmission’s (GGT) access arrangement for the Goldfields Gas pipeline. Instead the ERA has published its own revised Access Arrangement and Access Arrangement Information for the GGP.
The ERA has approximately halved GGT’s reference service revenue from $393.764 million for the five year regulatory period (2016-2021) to $234.398 million over the five years. This reduction in forecast revenue results from:
- rate of return reduction from 9.64% initially proposed by GGT to a nominal rate of return of 5.84 per cent;
- applying straight-line depreciation to the forecast capital base using a Current Cost Accounting approach rather than the Historical Cost Accounting approach as proposed by GGT;
- reducing forecast capital expenditure from GGT’s initial proposed capital expenditure of $13.997 million to $9.414 million (-32.7%); and
- reducing operating expenditure from a proposed $132.019 million to $99.978 million (-24%).
In its final decision, the ERA states that it accepted GGT’s ‘standalone cost’ methodology for the covered pipeline but disagreed with how GGT had applied the methodology. The ERA’ own application is reflected in its access arrangement. The ERA has also not accepted GGT’s proposal to align its terms and conditions with the APA Group’s national terms and conditions. Instead, the ERA considered that its required amendments to GGT’s proposed terms and conditions better promote the long term interests of consumers.
The GGP is a transmission pipeline that enables gas to be transported from the Carnarvon Basin, via either the Dampier to Bunbury Natural Gas Pipeline or the Varanus Island gas processing facilities, to the Pilbara, Mid-west and Goldfields mining regions.