Gas pipeline regulatory determination role

The AER regulates gas pipelines in all Australian jurisdictions except for Western Australia.

Our role

All gas pipelines in Australia are classified as either scheme pipelines (which are subject to full regulation), or non-scheme pipelines (which are subject to light regulation). 

There are many common regulatory requirements that apply to both scheme and non-scheme pipelines, such as information disclosure requirements, access dispute resolution obligations, and various prohibitions/competitive safeguards (e.g. prohibition on preventing or hindering access and ring-fencing provisions). 

The key difference between these forms of regulation is that scheme pipelines are subject to full price regulation and must submit access arrangements to the AER for approval.

The AER is responsible for determining whether the form of regulation of a pipeline should change and does this through making one of two types of form of regulation determinations. The first type is a scheme pipeline determination, which has the effect of making a non-scheme pipeline a scheme pipeline. The second type is a scheme pipeline revocation determination, which has the effect of making a scheme pipeline a non-scheme pipeline.

The AER has a related responsibility for greenfields incentive determinations. These determinations provide an exemption from scheme pipeline regulation. They may encourage efficient investment in pipeline infrastructure by improving investment certainty, but these benefits need to be weighed against the potential risks of being exempt from full regulation. 

Conducting a form of regulation review

In deciding whether to make a form of regulation determination (i.e. whether the level of regulation applying to a gas pipeline should change), the AER will conduct a process referred to as a ‘form of regulation review’. As part of a form of regulation review, there will be a public consultation process through which the AER will seek stakeholder comment and views on whether the current form of regulation applying to a pipeline should change.

The AER will conduct a form of regulation review in two circumstances:

• First, if the AER receives an application from any person to make a form of regulation determination for a pipeline, it will assess the application and then conduct a review to decide whether to make the determination. There are some limited circumstances where the AER is not required to conduct a review in response to an application, such as where the application is misconceived or lacking in substance.
• Second, the AER may conduct a form of regulation review for a pipeline without receiving an application. That is, the AER may decide whether to make a form of regulation determination of its own initiative (self-initiated form of regulation reviews).

Form of regulation review program

An objective of the 2023 gas reforms was to address the risk that the previous regime may have resulted in under-regulation of gas pipelines. It is a responsibility of the AER, therefore, to assess whether the level of regulation applying to each pipeline is appropriate and that the long-term interests of consumers are promoted.

We have previously found evidence to suggest that service providers of non-scheme pipelines may have some degree of market power, the ability and incentive to exercise that market power and may currently be exercising such market power in the supply of gas pipeline services.

In 2024 we completed our first form of regulation review for the South West Queensland Pipeline. Our final decision was to not make a scheme pipeline determination. While we do not currently have a set program of self-initiated form of regulation reviews, we may undertake further reviews if we consider they are warranted.

We are using our powers to monitor the behaviour of service providers in 2025 and beyond. We see our monitoring powers as a critical tool to inform our power to initiate form of regulation reviews to ensure that the appropriate level of regulation is applied to pipelines to promote access.

We regularly report on the gas pipeline sector through our gas pipeline monitoring and transparency reports. This reporting provides transparency on evolving trends in the gas pipeline sector and supports our responsibility for evaluating what forms of regulation should apply to individual pipelines. 

Applying the form of regulation test

When conducting a form of regulation review, the AER must apply the statutory ‘form of regulation test’ under section 112 of the National Gas Law. Under the form of regulation test, the AER must consider the effect that full or light regulation will have on:

• the promotion of access to pipeline services
• the costs that are likely to be incurred by an efficient service provider, efficient users and efficient prospective users of the pipeline service, and the likely costs to end users.

In doing this, the AER must have regard to the National Gas Objective and the form of regulation factors. The form of regulation factors help the AER to assess a service provider’s market power, and the ability of that service provider to exercise that market power. In summary, the factors are:

• the presence and extent of barriers to entry
• the presence and extent of network externalities, between the pipeline services and other services provided by the service provider
• countervailing market power of users or prospective users
• the extent of substitutes, and elasticity of demand, for the pipeline service and gas.

Following a form of regulation review, the AER will either make a form of regulation determination (i.e. a decision to change the form of regulation) or decide not to make a form of regulation determination.

If the AER decides to make a scheme pipeline determination, the relevant pipeline will become a scheme pipeline. If the AER decides to make a scheme pipeline revocation determination, the relevant pipeline will become a non-scheme pipeline. If the AER decides not to make a determination, the pipeline will retain its current classification as a scheme or non-scheme pipeline.

Greenfields Incentive Determination

When conducting a greenfields incentive review, the AER also must apply the statutory ‘form of regulation test’ described above. The National Gas Law includes an additional criterion for greenfields incentive determinations, being:

• the extent to which the form of regulation factors or competition to develop the pipeline (whether formal or informal) between 2 or more unrelated prospective service providers will, or is likely to, pose an effective constraint on the exercise of market power in respect of services provided by means of the pipeline for the period the determination is in operation.

If the AER decides to make a greenfields incentive determination, the pipeline will remain a non-scheme pipeline for the duration of the determination (up to 15 years) and cannot be made a scheme pipeline. It will still be subject to the regulatory obligations applying to non-scheme pipelines.

If the AER decides to not make a determination, the pipeline will become a non-scheme pipeline upon commissioning. However, the AER may conduct a form of regulation review if we consider this is warranted, which may result in the pipeline becoming a scheme pipeline.

Regulatory determination and elections guide

Further information on the AER’s powers and functions in relation to regulatory determinations, processes for making applications for regulatory determinations, and how the AER will assess applications can be found in the regulatory determinations and elections guide.