Review of Standard OTSAs and Standardisation Costs and Charges

  • Accepting submissions
Sector: 
Status: 
Date initiated: 
1 March 2019
Effective date: 
1 March 2020
Contact: 
AER General inquiries AERInquiry@aer.gov.au

Overview

The AER is conducting a review of facility operator compliance with the rules relating to standard Operational Transportation Service Agreements (OTSAs). The report is to be issued within 12 months of the capacity auction start date, i.e. by 1 March 2020.

Standard OTSAs are standardised agreements for gas transportation facilities subject to the day ahead auction and the capacity trading platform. OTSAs are intended to support capacity trading by making gas transportation products more generic and tradeable.

Under the National Gas Law and National Gas Rules, facility operators must publish a standard OTSA which meets the rule requirements, and offer to enter such an agreement with eligible shippers. Any charges imposed by facility operators to recover the costs of implementing the capacity trading reforms must comply with the National Gas Rules.

Invitation for submissions

The AER is seeking submissions from market participants and interested parties on their views and experiences concerning Operational Transportation Service Agreements. Written submissions should be provided by Friday 26 July 2019.

The OTSA rules

Standard OTSAs must comply with Part 24 of the National Gas Rules and the Operational Transportation Service Code.

Facility operators must publish an OTSA

A facility operator for a Part 24 facility must prepare and publish a standard OTSA for the facility no later than 40 business days after the date the facility became subject to Part 24. The facility operator must notify the AER without delay when it publishes standard OTSA or amended standard OTSA.

Terms and conditions of an OTSA

A standard OTSA must incorporate the standard operational and commercial terms set out in Part 3 of the Operational Transportation Service Code with no alterations, other than those permitted or required by the rules.

A standard OTSA must also incorporate facility specific terms applicable to the facility, which must be consistent with the rules and give effect to the relevant requirements in the Operational Transportation Service Code.

The facility specific terms must give effect to the auction service priority principles in the National Gas Rules. The priority principles set out the relative priority of auction services, firm services and other services with regard to scheduling or curtailing transportation capacity.

Standardisation charges

A facility operator for a Part 24 facility may impose a charge to recover the reasonable costs of establishing and maintaining standard OTSAs, as well as systems and processes to comply with its obligations under the capacity trading framework.

The standardisation costs which may be recovered are the incremental costs incurred exclusively to establish and maintain those arrangements, and a proportionate share of any incremental costs reasonably attributable to those arrangements.

A facility operator must not seek to recover standardisation costs more than once, and must treat any proceeds of the capacity auction as a contribution to the recovery of its standardisation costs.

Any charge for the recovery of standardisation costs must be separately identified, and not included as an unidentifiable component of another charge.

A facility operator must publish and keep current a schedule of charges under which standardisation costs are sought to be recovered under standard OTSAs and other agreements, together with information in reasonable detail explaining how the costs were incurred, how the proceeds of the capacity auction have been taken into account and how the schedule of charges has been calculated.

A facility operator make a record of how its standardisation costs were incurred and the fees or charges imposed to recover those costs. The records must be kept for 5 years.

Charges generally

The Operational Transportation Service Code envisages that facility operators may levy charges in addition to standardisation charges. These charges include imbalance charges, unauthorised overrun charges, hourly overrun charges, odorisation charges and receipt and delivery point charges.

The rules for facility specific terms in Part 5 of the Operational Transportation Service Code specify the circumstances in which charges may be levied, and the permissible level of the charges. The general approach under Part 5 of the Code is to require consistency with relevant Access Arrangements or Primary Facility Agreements in relation to these charges.

The National Gas Law prohibits a service provider from engaging in inefficient price discrimination in relation to operational transportation services.

Compliance and enforcement

The AER may review a standard OTSA at any time at its own initiative or following a request from a transportation facility user or prospective shipper, and may require a facility operator to amend a non-compliant OTSA.

The AER may institute civil proceedings for a breach of any rule classified as a civil penalty provision. This includes the requirement to publish a standard OTSA that complies with the National Gas Rules and the Operational Transportation Service Code, and to enter into such agreement with an eligible shipper. It also includes the rules concerning standardisation costs and charges.

A person other than the AER may institute civil proceedings for a breach of a rule classified as a conduct provision. All of the rules concerning standard OTSAs are classified as conduct provisions – in many cases in addition to being classified as civil penalty provisions – except for the obligation to publish a compliant OTSA.

The classification of the OTSA rules as either civil penalty provisions or conduct provisions is set out in Schedule 3 and Schedule 4 of the National Gas Regulations.