Tribunal decision on AER gas distribution access arrangements for SA & Qld

The Australian Competition Tribunal on 12 January 2012 made a decision on the review of the AER’s July 2011 gas access arrangement decisions for the South Australian and Queensland gas distribution network operators, Envestra and APT Allgas.

Envestra and APT Allgas both applied for a review of the AER’s decision on the cost of debt. Envestra also applied for a review of the return on equity and aspects of the AER’s decision in relation to its operating expenditure allowance for its South Australian network.

The tribunal’s decision allows APT Allgas to recover an additional $11 million for its Queensland network, and Envestra and extra $10 million for its Queensland network and $71 million for its South Australian network.

Distribution network charges make up around 50-60 per cent of the typical residential customer’s gas bill. The impact of the decision on the customer's bill over the access arrangement period, assuming a typical residential customer bill of $570 in SA and $460 in Qld, is:

• Envestra SA - an increase of $190, compared to the AER’s Final Decision of $185
• Envestra Qld - an increase of $125, compared to the AER’s Final Decision of $120
• APT Allgas - an increase of $140, compared to the AER’s Final Decision of $125.

The tribunal rejected the AER’s approach to calculating the allowance for the cost of debt. Further, it overturned the AER’s decision to not allow Envestra to recover the costs of a ‘network management fee’ margin included in the charges paid to APA, a related party which provides network services to Envestra.

“The tribunal has however affirmed the AER’s decisions on the allowance for a return on equity and the allowance for the cost of gas losses in the network. It has also clarified the scope of matters which may be subject to review,” AER chairman Andrew Reeves said.