APA fined over alleged gas breaches

A subsidiary of gas infrastructure company APA Group has paid $40,000 in infringement penalties, issued by the Australian Energy Regulator (AER), for allegedly failing to provide accurate information while participating in the East Coast gas day-ahead auction during 2019 and 2020.

The penalties relate to its pipeline operator APA (SWQP) Pty Ltd for allegedly failing to prepare and submit auction quantity limits (AQLs) to the Australian Energy Market Operator and perform AQL calculations in accordance with the National Gas Rules.

The day-ahead auction is a mandatory auction of any contracted, but unnominated capacity in the gas pipeline. Any shipper (the energy companies that use the pipeline to transport gas) may bid at the auction, which is finalised a day in advance of the relevant gas day.

AQLs determine the available auction capacity that participants can win. Accurate AQLs are therefore essential to inform shippers of the gas that is available.

An AER investigation found that APA’s conduct for seven days between April and September 2019 and April and July 2020 limited the amount of gas available at the auction on the South West Queensland (SWQ) Pipeline and the Moomba-Sydney Pipeline.

APA’s conduct also increased gas auction prices on the SWQ Pipeline and resulted in APA overcharging users on the SWQ Pipeline on each of the seven days.

APA subsequently refunded those overcharged users as a result of the AER’s investigation.

AER Board Chair Clare Savage stressed the importance of the regulator’s work in investigating the matter and identifying the harm that was done to gas shippers.

“The auction can only be run once on a particular day and participants have one chance to get it right,” Ms Savage said.

“If inaccurate AQLs are submitted, it could detrimentally affect the effectiveness and operation of the auction, and as occurred in this case, it’s the pipeline users who unfairly wear the cost.

“The day ahead auction is not new. It’s been running since 2019 and can be an effective way to provide access to contracted but unused capacity on the pipelines.

“But pipeline operators, such as APA, help determine the auction capacity that gas pipeline users can win in the day-ahead auction through their AQL calculations and if these calculations are incorrect, it undermines the efficient operation of the auction.

“One of the AER’s current compliance and enforcement priorities is to focus on gas auction reporting. Stronger enforcement action may result if we see that there are further breaches of the rules,” she said.

Notes to editors

The Day-Ahead Auction commenced on 1 March 2019 and operates across multiple parts of the East Coast gas grid. The auction is designed to improve competition in the gas market and increase gas pipeline transportation capacity for pipeline users. 

Pipeline operators own the physical pipeline while pipeline users (shippers) own or purchase the gas and the right to transport it from the operators.

The total capacity of a pipeline is often contracted to one or more users but is not fully utilised. The Day-Ahead Auction applies to this unused capacity.

The operators calculate auction quantity limits (AQLs), which help determine the auction capacity that gas pipeline users can win in the auction. Inaccurate AQLs can undermine the efficient operation of the Day-Ahead Auction and reduce the availability of gas transport on pipelines.

Under the National Gas Rules, a pipeline operator breaches a civil penalty provision if it fails to meet the relevant standard in relation to preparing and submitting AQLs to AEMO and performing the AQL calculations.

The payment of these infringement notices does not constitute an admission of liability by APA Group.

The AER can issue an infringement notice where it has reasonable grounds to believe a business has contravened a civil penalty provision of the Gas Rules. In this matter, the AER decided to issue two infringement notices.

Issued date: 
6 December 2021
AER reference: 
NR 38/21
AER Media 0466 409 921 media@aer.gov.au