Access arrangement final decision: APT Allgas gas distribution network

The Australian Energy Regulator has issued its final decision on APT Allgas’s access arrangement proposal for its Queensland gas distribution network for 1 July 2011 to 30 June 2016. The access arrangement sets out the tariffs and terms and conditions for access to APT Allgas’s pipeline.

The AER has not accepted APT Allgas’s access arrangement which proposed an average increase in network charges of 13.2 per cent per year.

A typical residential customer’s annual bill is $460 in Queensland. The increases approved by the AER would result in such a customer’s annual bill increasing on average by $25 each year. The increases would have been $42 each year if the AER had accepted APT Allgas’s revised proposal in full.

Overall, the AER’s final decision will lead to an increase in network charges as at 1 July 2011 of 13.3 per cent, and an average increase of around 6.9 per cent per annum in subsequent years. These increases are driven by the rising cost of unaccounted for gas, higher financing costs compared with the previous five year period and an increase in the allowance for depreciation.

The effect on retail tariffs, of which distribution network charges make up approximately 60 per cent, is an increase of around 8.0 per cent as at 1 July 2011. Increases in subsequent years would average around 4.1 per cent per annum.

AER chairman Andrew Reeves said the AER does not consider that the higher rate of return proposed by APT Allgas is justified.

“The 11.38 per cent rate of return proposed by APT Allgas would contribute to higher than efficient tariffs. The AER has decided that a rate of return of 9.50 per cent is more appropriate in the prevailing market conditions, which includes consideration of the markets for debt and equity,” Mr Reeves said.

In its draft decision the AER had agreed with APT Allgas that a capital expenditure program of $129 million was efficient, and this position has been maintained for the final decision. In regards to APT Allgas’s operating expenditure, the AER has accepted $105 million over the five year access arrangement period, after APT Allgas submitted further justification of its costs relating to unaccounted for gas.

“In approving this expenditure the AER has considered what APT Allgas will need to do to ensure the continued delivery of safe and reliable gas network services to Queensland consumers,” Mr Reeves said.

In making this final decision, the AER took into account advice from independent experts and submissions from interested parties.

The APT Allgas network delivers gas to approximately 79 000 residential customers in Brisbane (south of the river) and a number of regional centres including Toowoomba and the Gold Coast. The network also supplies around 5 000 commercial and industrial customers.

An inflation rate of 2.55 per cent per annum was assumed in the calculation of the nominal price impacts above.

Issued date: 
17 June 2011
AER reference: 
NR 008/11
Brent Rebecca, Media 02 6213 1317 0408 995 408
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Andrew Reeves, Acting AER Chairman 03 9290 1419 0419 397 956