Issue date
AER reference
NR 09/23

The Australian Energy Regulator (AER) has instituted proceedings in the Federal Court against four Jemena subsidiaries relating to alleged large scale breaches of their obligations surrounding the natural gas Day Ahead Auction (DAA) of pipeline capacity.

The AER alleges the Jemena subsidiaries failed to submit accurate Auction Quantity Limits (AQLs) to the Australian Energy Market Operator (AEMO) for four pipelines and failed to ensure auction services were correctly scheduled for three pipelines over a nearly three-year period, breaching four separate National Gas Rules (NGR).

Established in 2019, the DAA is a central platform facilitated by AEMO that allows companies that move gas to bid for available pipeline and compression capacity. The auction is mandatory and is finalised a day in advance.

The AQL for a facility determines how much capacity is available to be won at auction. The AER will allege that the Jemena subsidiaries, by failing to submit accurate AQLs, understated their available capacity on numerous occasions. In several instances, incorrect AQLs resulted in ‘lower tier’ services, such as interruptible services, being scheduled ahead of services that could have been won through the auction.

AER Chair Ms Clare Savage said that the DAA is vital to moving gas between markets on the east coast and reducing the cost of transportation.

“We are sending a clear message to market participants – you must have the appropriate checks and systems in place to ensure the information you provide to AEMO is accurate,” Ms Savage said.

“Alleged breaches of this nature and scale fundamentally undermine the integrity and confidence in the Day Ahead Auction – a process designed to improve gas market competition and increase gas pipeline transportation capacity for pipeline users.

“Inaccurate Auction Quantity Limits have the capacity to disrupt the Day Ahead Auction process and impact the cost, efficient operation and use of natural gas services for the long-term interest of customers.”

The proceedings fall within the AER’s wider compliance and enforcement priorities for wholesale gas markets across 2022 – 2023.

The AER is seeking pecuniary penalties, declarations, an order requiring the implementation of a compliance program and costs. The four Jemena subsidiaries who are respondents in the proceedings are Jemena Eastern Gas Pipeline (1) Pty Ltd, Jemena Queensland Gas Pipeline (1) Pty Ltd, Jemena VicHub Pipeline Pty Ltd, and Jemena Darling Downs Pipeline (3) Pty Ltd.