Final
Approval

Access Arrangement by Transmission Pipelines
Australia Pty Ltd and Transmission Pipelines Australia
(Assets) Pty Ltd for the Principal Transmission System

Access Arrangement by Transmission Pipelines
Australia Pty Ltd and Transmission Pipelines Australia
(Assets) Pty Ltd for the Western Transmission System

Access Arrangement by Victorian Energy Networks
Corporation for the Principal Transmission System

Date: 16 December 1998

	File No:	Commissioners:
	CR97/159	Fels
		Asher
		Shogren
		Bhojani

1.	Background
On 3 November 1997 the Energy Projects Division of the Victorian Department of Treasury and Finance (EPD) submitted proposed access arrangements and access arrangement information for the Victorian natural gas transmission system to the Australian Competition and Consumer Commission (the Commission) for approval under the Victorian Third Party Access Code for Natural Gas Pipeline Systems (the Victorian Access Code).  
The access arrangements submitted by EPD set out the policies and terms and conditions on which the service providers will make access to the transmission pipelines available to third parties.
Three separate gas transmission access arrangements were submitted by EPD to the Commission for approval on behalf of: 
•	Transmission Pipelines Australia Pty Ltd (TPA) and Transmission Pipelines Australia (Assets) Pty Ltd (TPAA) for the Principal Transmission System (PTS);
•	TPA and TPAA for the Western Transmission System (WTS); and 
•	Victorian Energy Networks Corporation (VENCorp) for the PTS.
Although the three access arrangements constitute separate applications for approval, each stage of the Commission’s assessment of the access arrangements has been reported within a single document.  In view of the degree of commonality between the assessment of TPA’s Access Arrangements for the PTS and WTS, the discussion of the Commission’s assessment of these access arrangements has been reported collectively, with the exception of those areas in which divergence has necessitated separate considerations.
The Commission’s assessment of the access arrangements has been conducted in accordance with the requirements set out in the Victorian Access Code and has been based on information provided by EPD, consultants and interested parties.  The consultation and assessment process undertaken by the Commission has included:
•	the release of the Draft Decision (pursuant to section 2.13(b) of the Victorian Access Code) on the access arrangements on 28 May 1998 in which the Commission proposed a number of changes to the access arrangements in order for them to be approved;
•	public forums held on 3 and 7 July 1998 to discuss the weighted average cost of capital and other issues raised in the access arrangements; and
•	the release of the Final Decision (pursuant to section 2.16(b) of the Victorian Access Code) on 6 October 1998 in which the Commission set out 31 amendments (or nature of the amendments) which would have to be made to the access arrangements for them to gain approval, and the Commission’s reasons for requiring those amendments.
2.	Final approval
EPD, on behalf of the applicants, submitted the formal revised access arrangements (pursuant to section 2.18 of the Victorian Access Code) to the Commission by the specified date, on 30 November 1998.  
The Commission is satisfied that the revised access arrangements incorporate the amendments specified in the Final Decision.  Compliance with these amendments in outlined in Section 5 below. 
The revised access arrangements also incorporate a number of changes which were not specified in the Final Decision.  The Commission is satisfied that these changes are not material, and that the revised access arrangements comply with the requirements of the Victorian Access Code.
Pursuant to section 2.19 of the Victorian Access Code, the Commission approves:
•	TPA’s Access Arrangement for the PTS;
•	TPA’s Access Arrangement for the WTS; and
•	VENCorp’s Access Arrangement for the PTS.
TPA’s Access Arrangement for the PTS and VENCorp’s Access Arrangement for the PTS will come into effect on 1 January 1999 or the date on which the Market and System Operations Rules (MSOR) commence, whichever is later.  TPA’s Access Arrangement for the WTS will come into effect on 1 January 1999. 
3.	Access arrangement information
EPD also submitted further access arrangement information on 30 November 1998 with respect to TPA’s Access Arrangements for the PTS and WTS.  EPD advised that this access arrangement information updates all relevant tables contained in access arrangement information previously submitted on 3 November 1997, 13 March 1998 and 16 March 1998, and is consistent with the revised access arrangements.  EPD also advised that the additional access arrangement information must be read in conjunction with the earlier access arrangement information.
The Commission determined on 29 April 1998 that the access arrangement information provided up to that time satisfied the requirements of the Victorian Access Code with respect to the proposed access arrangements as they then stood, but noted that a final assessment would depend on any subsequent amendments to the proposed access arrangements.
The Commission has now assessed the full set of access arrangement information submitted, and concluded that it satisfies the requirements of the Victorian Access Code with respect to the revised access arrangements.
4.	Documents
The Final Decision, released on 6 October 1998, detailed the Commission’s analysis of the access arrangements as originally proposed, the amendments required in order for approval to be granted, and its reasons for requiring those amendments.  This Final Approval sets out the Commission’s assessment of the revised access arrangements submitted by EPD in response to the Final Decision.  Consequently the two documents should be read together.  
Copies of the Commission’s decision documents and the revised access arrangements are available on the internet site (http://www.accc.gov.au) under 'gas'. 
Any requests for hard copies of the approved access arrangements and any inquiries regarding access to the transmission system should be addressed to: 
General Counsel and Regulatory Manager	Company Secretary	
Transmission Pipelines Australia	VENCorp	
180 Greens Road	433 Smith Street	
DANDENONG   VIC   3175	NORTH FITZROY   VIC   3068	
Telephone:	03 9797 5222	Telephone:	03 9481 9222	
Facsimile:	03 9797 5189	Facsimile:	03 9481 9269	
5.	Compliance with amendments required pursuant to section 2.16(b) of the Victorian Access Code
Listed below are each of the required amendments set out by the Commission in the Final Decision.  Under each, the Commission identifies the implementation of the amendment in the revised access arrangement(s) and provides an assessment of whether the revised access arrangement(s) satisfactorily incorporated the required amendment.
Existing contractual rights
Required Amendment 2.1
In order for TPA’s Access Arrangements for the PTS and WTS and VENCorp’s Access Arrangement for the PTS to be approved, the following provision must be included in the access arrangements: 
Notwithstanding anything to the contrary contained in this Access Arrangement, no provision in this Access Arrangement deprives any person of a contractual right in existence prior to 3 November 1997 other than an exclusivity right which arose on or after 30 March 1995. 

Implementation of amendment in revised access arrangement
The following clause 4, Prior contractual rights, is included in the revised PTS, WTS and VENCorp access arrangements:
Notwithstanding anything to the contrary contained in this Access Arrangement, no provision in this Access Arrangement deprives any person of a contractual right which was in existence prior to 3 November 1997 (being the date on which this Access Arrangement was first submitted to the Regulator) other than an exclusivity right which arose on or after 30 March 1995.
Commission’s assessment of revision for compliance with required amendment
The Commission is satisfied that the revised PTS, WTS and VENCorp access arrangements incorporate Amendment 2.1.
Overall reference tariff methodology
In addition to the revised access arrangement information, EPD provided the Commission with an updated electronic model (consisting of over a dozen spreadsheets) used to calculate the tariffs.  These provided the source of the data referred to in the following sections.
Required Amendment 3.1
In order for TPA’s Access Arrangements for PTS and WTS to be approved, the inflation index referred to throughout the Access Arrangements must be based on the CPI (All Groups - weighted average of eight capital cities). 

Implementation of amendment in revised access arrangement
TPA’s Access Arrangements for PTS and WTS refer to the CPI as the relevant inflation index.  For the purposes of TPA’s Access Arrangements for PTS, chapter 10 of the Tariff Order defines ‘CPI’ in terms of ‘the All Groups Consumer Price Index for the eight State capitals published by the Australian Bureau of Statistics’.  Section 2 of the TPA’s Access Arrangements for the WTS uses the same definition.
EPD employed the following escalators to adjust asset values and depreciation for annual inflation:
Escalation	1997 (1/2 yr)	1998	1999	2000	2001	2002	
Original AA	1.0124	1.0275	1.0300	1.0300	1.0300	1.0300	
Revised AA	1.0000	1.0200	1.0250	1.0250	1.0250	1.0250	
Commission’s assessment of revision for compliance with required amendment
The Commission notes that, consistent with Amendment 3.1, the revised access arrangements refer to the CPI (All Groups - weighted average of eight capital cities), and that index values were 120.2, 119.7 and 120.0 respectively for the June, September and December quarters in 1997.  The Commission considers that the escalator (of 1.0000) incorporated in the revised access arrangements is materially consistent with the marginal decrease in inflation over that initial period.  
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS incorporate Amendment 3.1.
The initial capital base
Required Amendment 3.2
In order for TPA’s Access Arrangements for the PTS and WTS to be approved, the adjustment of the initial capital base valuation for the period 1 July 1997 to 1 January 1998 (or, if appropriate, the commencement of Access Arrangements) must be based on actual changes in the CPI over the period rather than the 3 per cent per annum rate in the proposed Access Arrangements. 

Implementation of amendment in revised access arrangement
EPD adjusted the initial capital base for the period 1 July 1997 to 1 January 1998 using the escalators shown above for the revised arrangement.  These escalators have been applied in the determination of depreciation and Depreciated Optimised Replacement Cost (DORC). 
Commission’s assessment of revision for compliance with required amendment
While a factor of 1.0 has been used to adjust the initial capital base for the period 1 July 1997 to 1 January 1998 (in spite of a marginal decrease in inflation over the period) the method employed to forecast capex data over the five year regulatory period implied an effective annual escalation of capex of approximately 2 per cent.  This impacts on the DORC and depreciation figures over the period.   
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS incorporate Amendment 3.2.
New facilities investment and capital redundancy
Required Amendment 3.3
In order for the TPA’s Access Arrangements for the PTS and WTS to be approved, clause 9.2(d) of the Tariff Order must be amended to allow the Commission, at the commencement of the subsequent regulatory period, to review, and if necessary to adjust, the asset base for wholly or partially redundant assets.  

Implementation of amendment in revised access arrangement
Clause 9.2 of the Tariff Order has been amended to provide fixed principles to be used by the Regulator to decide price regulation arrangements for the subsequent access arrangement period, including:
(a)	In making a price determination in relation to tariffed transmission services for the subsequent access arrangement period, the Regulator is to adopt the following fixed principles:
(3)	use the capital base for TPA at the start of the initial regulatory period, adjusted to take account of inflation since 1 January 1998, depreciation, wholly or partially redundant assets and additions and disposals in the ordinary course of business since 1 January 1998, other than a disposal of:
(A)	all of the assets and liabilities of TPA;
(B)	assets interdependent with a transaction pursuant to which all of the issued shares in or the assets and business of TPA cease to be held by or on behalf of the State of Victoria or a statutory authority; or
(C)	assets pursuant to which the assets of TPA are sold and leased back to TPA;
Schedule 4 of TPA’s revised access arrangement for the WTS sets out the fixed principles applying to that access arrangement, including:
(3)	use the Capital Base for TPA at the start of the initial access arrangement period, adjusted to take account of inflation since 1 January 1998, depreciation, wholly or partially redundant assets and additions and disposals in the ordinary course of business since 1 January 1998, other than a disposal of:
(A)	all of the assets and liabilities of TPA;
(B)	assets interdependent with a transaction pursuant to which all of the issued shares in or the assets and business of TPA cease to be held by or on behalf of the State of Victoria or a statutory authority; or
(C)	assets pursuant to which the assets of TPA are sold and leased back to TPA;
Commission’s assessment of revision for compliance with required amendment
Clause 9.2(a)(3) of the revised Tariff Order and clause 3 of Schedule 4 of TPA’s revised access arrangement for the WTS provide that the Regulator may make adjustments to the asset base at the commencement of the subsequent regulatory period for wholly or partially redundant assets.
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS incorporate Amendment 3.3.
Rate of return
Required Amendment 3.4
In order for the TPA’s Access Arrangements for the PTS and WTS to be approved: 
(i)	the WACC estimates and associated parameters forming part of the Access Arrangements should be amended to more accurately reflect the current financial market settings.  In particular, the pre-tax real WACC should be set at 7.75 per cent and the associated inflation assumption set at 2.5 per cent; and 
(ii)	the target revenues and forecast revenues should be based on these new parameters, including the X factor, and applied in the derivation of individual tariffs. 

Implementation of amendment in revised access arrangement
The applicant has used the following WACC estimate and associated parameters: 
WACC parameters	Original AA	Revised AA	
Expected inflation rate	3.0%	2.5%	
X factor	3.4%	2.7%	
Adjusted indexation rate	-0.4%	-0.2%	
Pre-tax real WACC	9.73%	7.75%	
Pre-tax nominal WACC	13.02%	10.7%	
Discount rate	13.02%	10.7%	
Target revenues derived using these parameters and total volumes used to derive the X factor are:
Target revenues and volumes	1998	1999	2000	2001	2002	
Target revenues - original AA   ($m)	70.2	72.2	74.8	77.1	77.3	
Target revenues – revised AA   ($m)	61.1	62.7	64.5	66.1	66.0	
Total volumes – original AA        TJ	204.1	213.4	217.6	224.9	228.8	
Total volumes – revised AA         TJ	204.7	211.6	216.1	223.4	227.3	
These figures include revenues and volumes for the Murray Valley pipeline.
Commission’s assessment of revision for compliance with required amendment
Target revenues are the sum of the following:
•	Return on direct assets;
•	Return on indirect assets;
•	Depreciation of direct assets;
•	Depreciation of indirect assets;
•	Working capital; and
•	Operating and maintenance costs.
Return on direct and indirect assets and depreciation
Direct assets are the principal and western pipelines, compressor stations, the Dandenong terminal, and odorising plants at Longford and Paaratte. 
Indirect assets are all land, buildings and ‘other’ categories.
The return on these assets has been determined by multiplying the WACC value by the sum of
a)	written down value of assets of the previous year after adjusting for inflation; and
b)	half of any capital expenditure in the current year. 
Depreciation of these assets has been determined by dividing an asset’s initial (June 1997) value by its asset life (which varies) and indexing the result for inflation.  New additions such as the Clonbinane regulator in 1998, are being depreciated from the year they are commissioned with half the normal depreciation value in the year of commissioning. 
The written down value of the asset has been determined by indexing the prior year’s value for inflation, adding current year values for any new capital expenditure, and subtracting current year values for depreciation. 
Total annual gas volume forecasts have been revised since the original application, with a slight decline in total system volumes from 1999.  Volumes have generally increased for all areas except Carisbrook, Chiltern Valley and Barnawatha. 
Annual target revenue and volumes are allocated to various tariff categories and customer classes, and divided into geographical zones identified on the transmission system to produce target revenues and volumes for each zone and tariff category.  The output of this allocation process provides the input for the tariff determinations. 
The following table provides a summary of the revised tariffs for 1998. 
	DM Customers	NDM Customers	All Customers	Longford Injection	

Tariffs $/GJ
     1998	Peak demand charge	Peak volume charge	Anytime volume charge	P factors Longf. Inj
Nth Hume/Chiltern
Valley withdrawal	
	Original	Revised	Original	Revised	Original	Revised	Original	Revised	
Injection charge							2.703	2.260	
									
Latrobe	1.793	1.407	0.127	0.079	0.057	0.053	31.4%	29.3%	
Lurgi	5.365	4.018	0.348	0.259	0.139	0.131	34.4%	32.4%	
Metro	4.827	3.765	0.282	0.215	0.085	0.079			
Calder	25.625	23.716	1.496	1.367	0.256	0.262			
South Hume	9.030	8.624	0.410	0.390	0.099	0.106			
Echuca	25.201	22.967	1.454	1.307	0.243	0.254			
North Hume	26.502	25.121	1.618	1.502	0.201	0.229	50.0%	50.0%	
Coast	13.026	3.940	0.728	NA	0.329	0.312			
									
Transm. Offtake									
Carisbrook	20.459	19.495	-	-	0.279	0.286			
Chiltern Valley	22.252	21.728	-	-	0.182	0.214	50.0%	50.0%	
Barnawartha	20.444	20.618	-	-	0.190	0.225			
									
Incremental 									
Murray Valley	56.194	55.428	-	-	0.117	0.115			
									
The Commission has audited the Applicant’s determination of target revenue and subsequent derivation of Reference Tariffs and is satisfied that these calculations are based on the required WACC parameters and inflation indices.
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS incorporate Amendment 3.4.
Operations and maintenance costs and working capital
Required Amendment 3.5
In order for the TPA’s Access Arrangements for the PTS and WTS to be approved, the operational costs component of the target revenues contained in the Access Arrangements must be reduced by an amount equal to 0.5 per cent per year (cumulative) for years two to five of the initial regulatory period.  

Implementation of amendment in revised access arrangement
In the revised calculations, this reduction has been applied to the financial year budget forecasts, which are converted to calendar year figures and then carried forward to where the original application productivity reductions are applied to those reduced figures. 
A comparison of operating cost estimates (including Murray Valley) is shown in the table below. 
Operating cost ($m)	1998	1999	2000	2001	2002	
Original application	19.5	19.6	19.4	19.1	19.2	
Revised application	19.3	19.4	19.1	18.7	18.7	

Commission’s assessment of revision for compliance with required amendment
The required reduction in the operational costs component has been incorporated in the revised access arrangements.
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS incorporate Amendment 3.5.
Required Amendment 3.6
In order for the TPA’s Access Arrangements for the PTS and WTS to be approved, the forecast return on working capital, for each year of the initial regulatory period, must be recalculated using the WACC consistent with amendment 3.4. 

Implementation of amendment in revised access arrangement
The table below provides a comparison of the allowances for return on working capital in the original and revised application. 
Return on working capital ($m)	1998	1999	2000	2001	2002	
Original application	0.520	0.530	0.544	0.570	0.580	
Revised application	0.673	0.599	0.630	0.640	0.658	
Without further changes, a reduction in the applicable nominal WACC (from 13.02 per cent to 10.7 per cent) would have resulted in a commensurate reduction in return on working capital.  However, the Applicant has changed the method for determining total return on working capital by including interest on an additional amount of working capital required due to cyclical timing differences affecting TPA's cash flow.  While TPA has a relatively flat profile for costs, its revenues build to a seasonal peak.  The revised application calculations include annual amounts for this interest ranging from $184,000 to $194,000. 
Commission’s assessment of revision for compliance with required amendment
The Commission notes the revised methodology adopted to determine the level of working capital and considers the revision appropriate.  The Commission is satisfied that the forecast return on working capital has been recalculated using the revised WACC.
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS incorporate Amendment 3.6.
Cost allocation and tariff setting
Required Amendment 3.7
In order for the TPA’s Access Arrangements for the PTS and WTS to be approved, the return on, and of, TPA’s indirect assets must be apportioned between reference and excluded services on the basis of the forecast revenue for those services or on some other basis agreed with the Commission.  

Implementation of amendment in revised access arrangement
The June 1997 asset values provided in the original application have been adjusted for land and buildings at the two major sites, Greens Road (adjacent to the LNG facility) and the Longford receipt point.  All other land and buildings are considered to be wholly devoted to the provision of reference services.
For the Greens Road site, 86.5 per cent of the value of land (not directly attributed to LNG) and buildings is allocated to reference services.  This proportion is based on the proportion of total assets which relate to the provision of reference services.
For the Longford site, 75 per cent of the previously used value for land and buildings has been allocated to the transmission system. 
The proportion of other indirect assets allocated to reference services is 86.5 per cent.
Commission’s assessment of revision for compliance with required amendment
The overall result is that indirect asset values allocated to the transmission system have been reduced by approximately nine per cent over those shown in the November 1997 application.  The Commission considers that the basis for apportionment is appropriate. 
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS incorporate Amendment 3.7.
Required Amendment 3.8
In order for the TPA’s Access Arrangements for the PTS and WTS to be approved, either: 
(i)	the service envelope agreement must incorporate an obligation on TPA to provide the Corio loop and the Brooklyn compressor upgrade (or equivalent); or 
(ii)	the Corio loop and Brooklyn compressor capital expenditure must be removed from the capital base and the tariff calculations.  

Implementation of amendment in revised access arrangement
Clause 3.1(e) has been inserted in the TPA Service Envelope Agreement as follows:
(e)	TPA must do all things necessary to ensure that: 
(A)	the Corio loop; and
(B)	the Brooklyn compressors, 
are developed and included in the Gas Transmission System in accordance with clause 3.1(a)(3) within the initial regulatory period ending on 31 December 2002 and if: 
(C)	the Corio loop does not become part of the Gas Transmission System in accordance with clause 3.1(a)(3) by 31 December 2002, TPA acknowledges and agrees that the capital expenditure that would be attributable to the Corio loop may be removed from the capital base of TPA and the tariffs applicable to TPA under the Tariff Order may be adjusted accordingly; and
(D)	the Brooklyn compressors do not become part of the Gas Transmission System in accordance with clause 3.1(a)(3) by 31 December 2002, TPA acknowledges and agrees that the capital expenditure that would be attributable to the Brooklyn compressors may be removed from the capital base of TPA and the tariffs applicable to TPA under the Tariff Order may be adjusted accordingly. 
Commission’s assessment of revision for compliance with required amendment
Amendment 3.8 requires that either TPA be obliged to provide the Corio loop and Brooklyn compressor upgrade, or that related capital expenditure be removed from the capital base and the tariff calculations.  Clause 3.1 of the revised TPA Service Envelope Agreement obliges TPA to do all things necessary within the initial regulatory period to ensure that the Corio loop and Brooklyn compressor upgrade are developed and included in the Gas Transmission System.  It also provides that TPA acknowledges and agrees that the capital expenditure attributable to these developments may be removed from the capital base of TPA and the Tariff Order adjusted accordingly if those developments do not become part of the Gas Transmission System by 31 December 2002.
The Commission is satisfied that TPA’s revised access arrangement for the PTS incorporates Amendment 3.8.
Required Amendment 3.9
In order for the TPA’s Access Arrangements for the PTS and WTS to be approved, TPA must amend the forecast injection at Longford in the tariff model from 970 TJ/day to 990 TJ/day.  

Implementation of amendment in revised access arrangement
The forecast injection at Longford has been updated from 970 TJ/day to 990 TJ/day for the years 1998 to 2000.  It has been left unchanged at 853TJ/day for 2001 and 2002, reflecting the assumed sourcing of 250 TJ/day from the underground storage facility from 2001.  The revised values have been used to determine the injection tariff. 
Commission’s assessment of revision for compliance with required amendment
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS incorporate Amendment 3.9.
Required Amendment 3.10
In order for the TPA’s Access Arrangements for the PTS and WTS to be approved, the Murray Valley tariff must be calculated using a proportion of yearly costs similar to the proportion of the year for which the pipeline was commissioned. 

Implementation of amendment in revised access arrangement
Forecast Murray Valley gas volumes have been significantly reduced by comparison with those shown in the original application.  The tariff as calculated using the amended WACC parameters and volumes would have increased by over 15 per cent.  However, the applicant proposes not to apply any increase.  The reference tariffs have instead been slightly reduced.
Commission’s assessment of revision for compliance with required amendment
The Commission is satisfied that the appropriate proportion of costs has been used in the tariff calculations.  It also notes the revised volume forecasts and accepts the proposed tariffs for the Murray Valley pipeline. 
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS incorporate Amendment 3.10.
Tariff path and incentive structure
Required Amendment 3.11
In order for the TPA’s Access Arrangements for the PTS and WTS to be approved, clauses 5.2.2(a)(2) and 5.2.3(a)(2) of the MSOR must be amended by inserting the words ‘and the Regulator’ after ‘Participant’.  

Implementation of amendment in revised access arrangement
Clause 5.2.2 of the revised MSOR have been amended as follows: 
(a)	By no later than 30 November each year, VENCorp must: 
(1)	prepare an annual planning review in accordance with this clause 5.2.2; and
(2)	provide to each Participant and the Regulator a copy of that annual planning review.
Clause 5.2.3 of the revised MSOR have been amended as follows: 
(a)	By no later than 15 February, 15 May, 15 August and 15 November each year, VENCorp must: 
(1)	prepare a quarterly planning review in accordance with this clause 5.2.3; and
(2)	provide each Participant and the Regulator with a copy of that quarterly planning review. 
Commission’s assessment of revision for compliance with required amendment
Amendment 3.11 required that the MSOR be amended to provide that VENCorp must provide copies of its annual and quarterly planning reviews each year to the Commission by designated dates.  Clause 5.2.2(a)(2) obliges VENCorp to provide a copy of its annual planning review each year to the Commission by designated date.  Clause 5.2.3(a)(2) provides a similar obligation regarding quarterly planning reviews.
The Commission is satisfied that the revised MSOR incorporate Amendment 3.11.
Required Amendment 3.12
In order for the TPA’s Access Arrangements for the PTS and WTS to be approved, the price control formula must be amended so that: 
(i)	the average transmission tariff (ATT) calculation and the K factor adjustment use the volumes forecast in the Access Arrangements (rather than those revised forecasts given to the Commission with an application for altered tariffs prior to the start of each new regulatory year); and
(ii)	the MATT allows, for volumes in the previous year resulting from augmentation not forecast in this Access Arrangement, the recovery of revenue based on the relevant zones’ tariffs rather than the MATT for that previous year.

Implementation of amendment in revised access arrangement
Part A of Schedule 5 of the Tariff Order sets out the transmission price control formulae for the PTS.  This has been revised to specify that the ATT for the PTS is to be calculated using the volumes forecast in the access arrangement (rather than those revised forecasts given to the Commission with an application for altered tariffs prior to the start of each new regulatory year).  The ATT then feeds into the maximum average transmission tariff (MATT) and the K factor calculations.
The K factor has been adjusted to incorporate an expansion allowance for unanticipated system expansion.  This allowance provides, for volumes in the previous year resulting from augmentation not forecast in this Access Arrangement, for the recovery of revenue based on the relevant zones’ tariffs, rather than the MATT.
Schedule 3 of TPA’s revised access arrangement for the WTS sets out a simple CPI-X price path approach formula that applies to that access arrangement.
Commission’s assessment of revision for compliance with required amendment
Prior to lodgement of the revised Tariff Order, the Commission worked with EPD in the development of these formulae.  The revisions to the Tariff Order implement the required changes with respect to TPA’s revised access arrangement for the PTS.  The Tariff Order transmission price control formulae are not applicable to TPA’s revised access arrangement for the WTS.
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS incorporate Amendment 3.12.
Required Amendment 3.13
In order for the TPA’s Access Arrangements for the PTS and WTS to be approved, the Tariff Order must be adjusted so that it is clear that clause 9.2(i) does not apply to TPA.  

Implementation of amendment in revised access arrangement
Clause 9.2 of the proposed Tariff Order set out a number of procedures and methodologies for the regulator to adopt when making a price determination for the subsequent regulatory period, including clause 9.2(i) below:
to the extent that a tariff is not cost reflective at the end of the initial regulatory period, facilitate a smooth transition of the tariff to cost reflectivity over time. 
While the Commission understands that this provision was only intended to apply to the distribution companies, the wording of the Tariff Order was ambiguous.  Amendment 3.13 required that the ambiguity be removed.
Clause 9.2(a), the equivalent clause applying to TPA in the revised Tariff Order, does not include the requirement previously included in clause 9.2(i).
Commission’s assessment of revision for compliance with required amendment
The Commission is satisfied that TPA’s revised access arrangements incorporate Amendment 3.13.
Required Amendment 3.14
In order for VENCorp’s Access Arrangement for the PTS to be approved, clause 2.5 of the MSOR must be amended to the following effect:
(1)	Consultation on proposed market fees:
(i)	VENCorp, before submitting a statement to the Regulator in accordance with clause 6.1(a)(2) of the Tariff Order, must prepare a report setting out:
(a)	for that regulatory year:
-	the budgeted expenditures and revenues; 
-	the services for which a market fee is proposed; and
-	in respect of each service, the proposed market fees;
(b)	how the proposed market fees were derived, including:
-	the method used to determine each fee; and
-	VENCorp’s estimated cost to provide each service;
(c)	other fees in existence which are appropriate for comparison purposes; and
(d)	an assessment of the extent to which the proposed market fees comply with the principles set out in section 8.1 of the Victorian Access Code.
(ii)	A copy of the report must be provided to:
(a)	the Regulator upon completion of the report; and
(b)	participants and other interested persons upon request.
(iii)	Interested persons must have at least 10 business days after the release of the report to make submissions to VENCorp.
(iv)	VENCorp must consider any submissions received by the specified date.
(v)	VENCorp must compile a second report which summarises:
(a)	the consultation process; and
(b)	any oral or written submissions received by VENCorp. 
(vi)	A copy of the second report must be provided to the Regulator when VENCorp submits its annual statement to the Regulator. 
(2)	Financial Statements:
(i)	Two months after the end of each financial year, VENCorp must publish a report setting out: 
(a)	its budgeted and actual expenditures and revenues for the previous financial year; 
(b)	its budgeted and actual expenditures and revenues for the previous financial year in respect of each of VENCorp’s activities/functions, including:
-	system security; 
-	collection, storage and processing of metering data and billing and settlement of market transactions; 
-	costs of operating the dispute resolution function; and 
-	the funding requirements of the participant compensation fund; and 
(c)	an explanation of any significant variations between budgeted and actual expenditures and revenues.
(ii)	A copy of the report must be provided to:
(a)	the Regulator upon completion of the report; and
(b)	participants and other interested persons upon request.

Implementation of amendment in revised access arrangement
Clauses 2.6(d)-(h) and 2.7 (below) of the revised MSOR relate respectively to consultation on proposed market fees and financial statements.
2.6	Market fees
(d)	VENCorp must, before submitting its annual statement to the Regulator for approval in accordance with clause 6.1(a)(2) of the Tariff Order, produce an initial report setting out:
(1)	VENCorp’s budgeted expenditures and budgeted revenues for that regulatory year; 
(2)	the amount of proposed market fees in respect of each of the tariffed VENCorp services in respect of which market fees are proposed to be charged for the next financial year; 
(3)	the method used in determining the amount of proposed market fees in respect of each of VENCorp’s activities referred to in clause 2.6(d)(2) including but not limited to VENCorp’s estimated costs and expenses associated with those activities; 
(4)	other fee structures and fee amounts which are appropriate for comparison purposes; and
(5)	an assessment of the extent to which the proposed market fees comply with the principles set out in clause 8.1 of the Access Code. 
(e)	VENCorp must provide a copy of the initial report to: 
(1)	the Regulator on completion of the report; and
(2)	Participants and interested persons on request. 
(f)	VENCorp must invite Participants and interested persons to make submissions in relation to the initial report and must consider any such submissions received up to ten business days after the initial report is made available to Participants and interested persons under clause 2.6(e)(2). 
(g)	VENCorp must prepare a final report which summarises: 
(1)	submissions received under clause 2.6(f); and
(2)	the process of consultation undertaken by VENCorp in relation to preparation of the final report. 
(h)	VENCorp must provide a copy of the final report to the Regulator at the time of submitting its annual statement to the Regulator for approval in accordance with clause 6.1(a)(2) of the Tariff Order. 
2.7	Previous Financial Year Report
(a)	VENCorp must, by no later than two months after the end of each financial year, prepare a report setting out: 
(1)	VENCorp’s budgeted and actual expenditures and budgeted and actual revenues in respect of each of the tariffed VENCorp services, including, but not limited to: 
(A)	system security;
(B)	collection, storage and processing of metering data and billing and settlement of market transactions; and
(C)	costs of operating the dispute resolution process under clause 7.2;
(2)	an explanation of any significant variation between budgeted and actual expenditures and budgeted and actual revenues; and
(3)	contributions made to and payments made from the participant compensation fund, 
in respect of the previous financial year. 
(b)	VENCorp must provide a copy of the report prepared under clause 2.7(a) to: 
(1)	the Regulator on completion; and
(2)	Participants and interested persons on request. 
Commission’s assessment of revision for compliance with required amendment
The changes required by Amendment 3.14(1)(i), (ii), (iii), (iv), (v) and (vi) are respectively incorporated in clauses 2.6(d), (e), (f), (f), (g) and (h), (ie. both (iii) and (iv) are met by (f)).
The changes required by Amendment 3.14(2)(i) and (ii) are respectively incorporated in clauses 2.7(a) and (b).
The Commission is satisfied that VENCorp’s revised access arrangement for the PTS incorporates Amendment 3.14.
Reference tariffs and reference tariff policy
Required Amendment 3.15
In order for TPA’s Access Arrangements for the PTS and WTS to be approved, TPA must develop and include in the Access Arrangements a reference tariff policy as required in section 3.7 of the Victorian Access Code. 

Implementation of amendment in revised access arrangement
TPA’s revised access arrangements for the PTS and WTS each incorporate a reference tariff policy, set out in clauses 5.3.2 to 5.3.8, which respectively set out CPI-X Price Path, New Facilities Investment, Speculative Investment Fund, Capital redundancy, Fixed principles, Incentive mechanism and Tax pass-through.  
Commission’s assessment of revision for compliance with required amendment
The Commission has assessed TPA’s reference tariff policies for compliance with the reference tariff principles described in section 8 of the Victorian Access Code.  The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS each incorporate a reference tariff policy consistent with section 3.7 of the Victorian Access Code.
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS incorporate the requirements of Amendment 3.15.
Required Amendment 3.16
In order for VENCorp’s Access Arrangement for the PTS to be approved, VENCorp must develop and include in the Access Arrangement a reference tariff policy as required in section 3.7 of the Victorian Access Code.

Implementation of amendment in revised access arrangement
Clauses 5.3.5 and 5.3.6 (below) of VENCorp’s revised access arrangement for the PTS set out the reference tariff policy.
5.3.5	The Reference Tariff Policy applying to the VENCorp tariffs, as set out in clause 6.1(a)(2) of the Tariff Order, provides for tariffs for tariffed VENCorp services to be adjusted in the light of actual outcomes to ensure that the tariffs recover the actual costs of providing the tariffed VENCorp service.   
5.3.6 	Pursuant to the allocation of obligations between TPA and VENCorp under section 9.2 of the Victorian Access Code, a description of the reference tariff policy applying to transmission tariffs is set out in clauses 5.3.2 to 5.3.8 of TPA’s Access Arrangement. 
Commission’s assessment of revision for compliance with required amendment
The Commission has assessed VENCorp’s reference tariff policy for compliance with the reference tariff principles described in section 8 of the Victorian Access Code.  The Commission is satisfied that VENCorp’s revised access arrangement for the PTS incorporates a reference tariff policy consistent with section 3.7 of the Victorian Access Code.
The Commission is satisfied that VENCorp’s revised access arrangements for the PTS incorporates the requirements of Amendment 3.16.
Terms and conditions
Required Amendment 4.1
In order for TPA’s Access Arrangements for the PTS and WTS to be approved, TPA must clearly specify the terms and conditions of access to the PTS and WTS in a guide for users and in the Access Arrangement.  

Implementation of amendment in revised access arrangement
EPD has produced two publications, Guide for Users: Principal Transmission System – Victoria and Guide for Users: Western Transmission System – Victoria.  These documents are described as guides in relation to the tariffs, terms and conditions for third parties to access the PTS and WTS respectively.  
Clauses 5.4.1 to 5.4.3 (below) of TPA’s Access Arrangement for the PTS set out the terms and conditions on which TPA will provide reference services.
5.4.1	TPA will make the Principal Transmission System available to VENCorp as User in accordance with its obligations under the TPA Service Envelope Agreement. VENCorp will then provide services to Users of the Principal Transmission System in accordance with the MSO Rules. In order to access the Principal Transmission System, Prospective Users will register as Market Participants under the MSO Rules. Users will be required to enter into a Gas Transportation Deed with VENCorp, under which they will agree to pay certain market fees to VENCorp, as well as transmission charges which VENCorp will direct Users to pay directly to TPA.
5.4.2	Details of the terms and conditions on which TPA will supply each Reference Service are contained in clauses 2.1 and 2.2 and Schedule 1, paragraph 1 of the Tariff Order which set out the initial Reference Tariffs, and Part A of Schedule 5 of the Tariff Order, which outlines the tariff control formula applicable to the Reference Tariffs. 
5.4.3	No part of the Gas Transmission System is situated outside of Victoria, except the Interconnect more particularly described in clause 5.7.1(f) of this Access Arrangement.
Clauses 5.4.1 and 5.4.2 below of TPA’s Access Arrangement for the WTS set out the terms and conditions on which TPA will provide reference services.
5.4.1	Details of the terms and conditions on which TPA will supply the Tariffed Transmission Services are contained in:
(a)	schedule 1 which sets out the initial Reference Tariffs and schedule 4, which outlines the tariff control formula applicable to the Reference Tariffs.
(b)	the pro-forma Western Transmission System Agreement contained in Appendix 2.
5.4.2	No part of the Western Transmission System is situated outside of Victoria. 
Commission’s assessment of revision for compliance with required amendment
The Commission was concerned that TPA’s Access Arrangements as originally proposed did not clearly identify relevant terms and conditions.  In particular, it was not clear which elements of external documents listed in the Access Arrangements were terms and conditions applicable to TPA in relation to the PTS and WTS, or of the allocation of responsibilities between TPA and VENCorp regarding the provision of services on the PTS.
The Commission is satisfied that relevant terms and conditions are clearly specified in TPA’s revised access arrangements for the PTS and WTS and in the two users’ guides.
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS incorporate Amendment 4.1. 
Required Amendment 4.2
In order for TPA’s Access Arrangement for the PTS to be approved, amendments must be made to the following effect: 
(i)	The references to the pipeline operating agreement (clause 5.4.1(d)), TUoS agreement (clause 5.4.1(e)) and transmission connection agreement (clause 5.4.1(f)) must be deleted.
(ii)	TPA must undertake to make the PTS (including any extensions or expansions that are to be treated as part of the PTS) available to VENCorp in accordance with its obligations under the TPA Service Envelope Agreement.

Implementation of amendment in revised access arrangement
(i)	The references to the pipeline operating agreement, TUoS agreement and transmission connection agreement (clauses 5.4.1(d), (e) and (f) respectively of TPA’s Access Arrangement for the PTS as originally proposed) have been excluded from the revised access arrangement.
(ii)	Clause 5.4.1 of TPA’s revised access arrangement for the PTS states that it will make the Principal Transmission System available to VENCorp as User in accordance with its obligations under the TPA Service Envelope Agreement (refer Terms and Conditions above).
Commission’s assessment of revision for compliance with required amendment
The Commission is satisfied that relevant references have been excluded from TPA’s revised access arrangement for the PTS, and that TPA has committed itself to make the PTS available to VENCorp.
The Commission is satisfied that TPA’s revised access arrangement for the PTS incorporates Amendment 4.2. 
Required Amendment 4.3
In order for TPA’s Access Arrangement for the WTS to be approved, amendments must be made to the following effect:
(i)	The references to the transmission services agreement (clause 5.4.1(c)) and the transmission connection agreement (clause 5.4.1(d)) must be deleted and replaced by pro-forma agreements attached, as an appendix, to the access arrangement.
(ii)	The pro-forma agreements can only be changed by following the procedure in section 2 of the Victorian Access Code.
(iii)	Any transmission service or connection agreement entered into between TPA and a user or prospective user must be consistent with the pro-forma transmission service or connection agreement (as amended in accordance with section 2 of the Victorian Access Code).

Implementation of amendment in revised access arrangement
(i)	The references to the transmission services agreement and transmission connection agreement (clauses 5.4.1(c) and (d) respectively of TPA’s Access Arrangement for the WTS as originally proposed) have been excluded from the revised access arrangement, and replaced by a pro-forma Western Transmission System Agreement which is included as an appendix.  An Approved Connection Deed is included as Annexure A to the Agreement.  
(ii)	Clause 1.2 of the Access Arrangement states that the Agreement forms part of the Access Arrangement.
(iii)	Pursuant to clause 5.4.1(b) of TPA’s Access Arrangement for the WTS, TPA will supply Tariffed Transmission Services on the terms and conditions contained in the Agreement.
Commission’s assessment of revision for compliance with required amendment
The Commission understands that, as the pro-forma Western Transmission System Agreement constitutes part of the Access Arrangement, it can only be changed by following the procedure in section 2 of the Victorian Access Code.
The Commission is satisfied that relevant references have been excluded from TPA’s revised access arrangement for the WTS, and that TPA will supply Tariffed Transmission Services on the terms and conditions contained in the Agreement.
The Commission is satisfied that TPA’s revised access arrangement for the WTS incorporates Amendment 4.3.  
Required Amendment 4.4
In order for TPA’s Access Arrangement for the PTS to be approved, amendments must be made to the following effect:
(i)	Subject to paragraph (ii) below, a reference to the MSOR in the access arrangement is a reference to the MSOR as amended from time to time.
(ii)	In the event that the MSOR become subject to an exemption under section 51(1) of the Trade Practices Act 1974 (Cth), any amendment to, or supplementation or replacement of, the MSOR will, to the extent to which the MSOR are part of the access arrangement, constitute a change for the purposes of the Victorian Access Code and will not be effective to change the access arrangement unless and until the procedure in section 2 of the Victorian Access Code is followed.

Implementation of amendment in revised access arrangement
(i)	Clause 2 of TPA’s Access Arrangement for the PTS defines MSOR as ‘the Market and System Operations Rules (as amended from time to time) made under section 48N of the Gas Industry Act 1994’.
(ii)	Clause 5.1.3 (below) of TPA’s Access Arrangement for the PTS incorporates Amendment 4.4(ii):
5.1.3	In the event that the MSO Rules become subject to an exemption under section 51(1) of the Trade Practices Act 1974, any amendment to, or supplementation or replacement of, the MSO Rules will, to the extent to which the MSO Rules are part of this Access Arrangement, constitute a change for the purposes of the Victorian Access Code and will not be effective to change this Access Arrangement unless and until the procedure in section 2 of the Victorian Access Code is followed. 
Commission’s assessment of revision for compliance with required amendment
(i)	The Commission is satisfied that TPA’s revised access arrangement for the PTS complies with Amendment 4.4(i) as it incorporates the required definition of MSOR.
(ii)	The Commission is satisfied that TPA’s revised access arrangement for the PTS complies with Amendment 4.4(ii) as it specifies that, in the event that the MSOR become subject to an exemption under section 51(1) of the Trade Practices Act 1974,  any changes to the MSOR must be effected through the procedure in section 2 of the Victorian Access Code, as required by Amendment 4.4(ii).  
Required Amendment 4.5
In order for TPA’s Access Arrangements for the PTS and WTS to be approved, amendments must be made to the following effect:
(i)	For the purposes of the access arrangement, a reference to the ‘Tariff Order’ is a reference to the Tariff Order as in force from time to time subject to paragraph (ii) below.
(ii)	Any change to reference tariffs will not be incorporated in the access arrangement unless and until the procedure in section 2 of the Victorian Access Code is followed.
(iii)	If the access arrangement specifies a charge for connection to, and the use of, the transmission pipeline, that is inconsistent with the Tariff Order, then the access arrangement prevails to the extent of the inconsistency.

Implementation of amendment in revised access arrangement
(i)	Clause 2 of TPA’s revised access arrangement for the PTS provides the following relevant definition:
‘Tariff Order’ means the Order in Council (Victorian Gas Industry Tariff Order 1998 as amended from time to time) made under section 48A of the Gas Industry Act 1994. 
Clause 2.2 of TPA’s revised access arrangement for the WTS provides the following relevant definition:
For the purposes of this Access Arrangement, the interpretation rules contained in clause 10.2 of the Victorian Gas Industry Tariff Order 1998 (as amended from time to time) made under section 48A of the Gas Industry Act 1994, shall mutatis mutandis apply.
(ii)	Clause 5.3.1(b) (below) of TPA’s revised access arrangement for the PTS provides that any change to reference tariffs will not be incorporated in the access arrangement unless and until the procedure in section 2 of the Victorian Access Code is followed.
5.3.1	Reference Tariffs
(b)	Any change to the Reference Tariffs will not be incorporated in this Access Arrangement unless and until the procedure in section 2 of the Victorian Access Code is followed. 
	TPA’s Access Arrangement for the WTS has been substantially rewritten so that the Tariff Order no longer constitutes part of the Access Arrangement.
(iii)	Clause 48A(5) (below) of the Gas Industry Act 1994 (Vic) provides that, in the event of inconsistency relating to charges, the access arrangement prevails over the Tariff Order to the extent of the inconsistency. 
48A(5)	If the provisions of an Order relating to charges under sub-section(1)(b) or (c) are inconsistent with charges specified in an access arrangement approved under the Access Code, the provisions do not apply to the extent of the inconsistency.
Commission’s assessment of revision for compliance with required amendment
(i)	As required by Amendment 4.5(i), references to the ‘Tariff Order’ in the revised TPA Access Arrangements for the PTS and WTS have been defined in terms of a reference to the Tariff Order as in force from time to time.  The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS comply with Amendment 4.5(i). 
(ii)	The Commission is satisfied that TPA’s revised access arrangement for the PTS complies with Amendment 4.5(ii) as it explicitly provides that any change to reference tariffs will not be incorporated in the access arrangement unless and until the procedure in section 2 of the Victorian Access Code is followed.
The Commission notes that the Tariff Order does not constitute part of TPA’s revised access arrangement for the WTS, and that the procedure in section 2 of the Victorian Access Code must be followed in order for reference tariffs to be amended.  The Commission is satisfied that TPA’s revised access arrangement for the WTS complies with Amendment 4.5(ii).
(iii)	The Commission notes that Clause 48A(5) of the Gas Industry Act provides that, in the event of inconsistency relating to charges, the access arrangement prevails over the Tariff Order to the extent of the inconsistency.  The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS comply with Amendment 4.5(iii).
Required Amendment 4.6
In order for VENCorp’s Access Arrangement for the PTS to be approved, VENCorp must clearly specify the terms and conditions of access to the PTS in a guide for users and in the Access Arrangement.  

Implementation of amendment in revised access arrangement
EPD has produced a Guide for Users: Principal Transmission System – Victoria which is described as a guide in relation to the tariffs, terms and conditions for third parties to access the PTS.
Clauses 5.4.1 to 5.4.3 (below) of VENCorp’s Access Arrangement for the PTS set out the terms and conditions on which TPA will provide reference services.
5.4.1	VENCorp will operate the Principal Transmission System made available to it by TPA (pursuant to TPA’s Access Arrangement), for Users in accordance with the MSO Rules. In order to access the Principal Transmission System, Users will register as Market Participants under the MSO Rules. Users will be required to enter into a Gas Transportation Deed (in the form of Appendix 2) with VENCorp, under which they agree to pay certain market fees to VENCorp, and VENCorp directs them to pay directly to TPA the transmission charges charged by TPA to VENCorp in return for the services performed by VENCorp for the Users.
5.4.2	Details of the terms and conditions on which VENCorp will supply each Reference Service are contained in:
(a)	at entry into the Market as a Participant (or Market Participant) the registration provisions of the MSO Rules and thereafter, the entirety of the MSO Rules;
(b)	Chapter 5 and paragraph 4 of schedule 1 of the Tariff Order, which sets out the initial VENCorp tariffs, and clause 6.1(a)(2) of the Tariff Order, which sets out the way in which the VENCorp Tariffs will be calculated for each year of the Access Arrangement Period; and
(c)	the pro-forma Gas Transportation Deed attached as Appendix 2.
5.4.3	No part of the Principal Transmission System is situated in another State, except the Interconnect more particularly described in clause 5.7.1(f) of TPA’s Access Arrangement. 
Commission’s assessment of revision for compliance with required amendment
The Commission was concerned that VENCorp’s Access Arrangement as originally proposed did not clearly identify relevant terms and conditions.  In particular, it was not clear which elements of external documents listed in the access arrangements were terms and conditions applicable to VENCorp in relation to the PTS, or of the allocation of responsibilities between the two services providers.
The Commission is satisfied that relevant terms and conditions are clearly specified in VENCorp’s revised access arrangements for the PTS and in the users’ guides.  The Commission is satisfied that VENCorp’s revised access arrangement for the PTS incorporates Amendment 4.6.
Required Amendment 4.7
In order for VENCorp’s Access Arrangement for the PTS to be approved, amendments must be made to the following effect:
(i)	A pro-forma gas transportation agreement must be attached, as an appendix, to the access arrangement.
(ii)	The pro-forma gas transportation agreement can only be changed by following the procedure in section 2 of the Victorian Access Code.
(iii)	Any gas transportation agreement entered into between VENCorp and a User must be consistent with the pro-forma gas transportation agreement (as amended in accordance with section 2 of the Victorian Access Code).

Implementation of amendment in revised access arrangement
(i)	A pro-forma Gas Transportation Deed is included as Appendix 2 to VENCorp’s revised access arrangement for the PTS.
(ii)	Clause 1.2 of the access arrangement states that the pro-forma Gas Transportation Deed comprises part of the access arrangement.
(iii)	Pursuant to clause 5.4.2(c) of VENCorp’s Access Arrangement for the PTS, VENCorp will supply each reference service on the terms and conditions contained in the pro-forma Gas Transportation Deed.
Commission’s assessment of revision for compliance with required amendment
(i)	The Commission is satisfied that Amendment 4.7(i) has been incorporated in VENCorp’s revised access arrangement for the PTS as a pro-forma Gas Transportation Deed is included as Appendix 2.
(ii)	The Commission understands that, as the pro-forma Gas Transportation Deed constitutes part of the Access Arrangement, it can only be changed by following the procedure in section 2 of the Victorian Access Code.  The Commission is satisfied that Amendment 4.7(ii) has been incorporated in VENCorp’s revised access arrangement for the PTS.
(iii)	The Commission is satisfied that any gas transportation agreement entered into between VENCorp and a User must be consistent with the pro-forma Gas Transportation Deed, and that it can only be changed by following the procedure in section 2 of the Victorian Access Code.  The Commission is satisfied that Amendment 4.7(iii) has been incorporated in VENCorp’s revised access arrangement for the PTS.
Required Amendment 4.8
In order for VENCorp’s Access Arrangement for the PTS to be approved, amendments must be made to the following effect:
(i)	Subject to paragraph (ii) below, a reference to the MSOR in the access arrangement is a reference to the MSOR as amended from time to time.
(ii)	If the MSOR become subject to an exemption under section 51(1) of the Trade Practices Act 1974 (Cth), any amendment to, or supplementation or replacement of, the MSOR will constitute a change for the purposes of the Victorian Access Code and will not be effective to change the access arrangement unless and until the procedure in section 2 of the Victorian Access Code is followed.

Implementation of amendment in revised access arrangement
(i)	Clause 2 of VENCorp’s Access Arrangement for the PTS defines MSOR as ‘the Market and System Operations Rules (as amended from time to time) made under section 48N of the Gas Industry Act 1994’.
(ii)	Clause 5.1.2 (below) of VENCorp’s Access Arrangement for the PTS incorporates Amendment 4.8(ii):
5.1.2	In the event that the MSO Rules become subject to an exemption under section 51(1) of the Trade Practices Act 1974, any amendment to, or supplementation or replacement of, the MSO Rules will, to the extent to which the MSO Rules are part of this Access Arrangement, constitute a change for the purposes of the Victorian Access Code and will not be effective to change this Access Arrangement unless and until the procedure in section 2 of the Victorian Access Code is followed. 
Commission’s assessment of revision for compliance with required amendment
(i)	The Commission is satisfied that VENCorp’s revised access arrangement for the PTS complies with Amendment 4.8(i) as it incorporates the required definition of MSOR.
(ii)	The Commission is satisfied that VENCorp’s revised access arrangement for the PTS complies with Amendment 4.8(ii) as it specifies that, in the event that the MSOR become subject to an exemption under section 51(1) of the Trade Practices Act 1974,  any changes to the MSOR must be effected through the procedure in section 2 of the Victorian Access Code, as required by Amendment 4.8.  
Required Amendment 4.9
In order for VENCorp’s Access Arrangement for the PTS to be approved, amendments must be made to the following effect:
(i)	For the purposes of the access arrangements, a reference to the ‘Tariff Order’ is a reference to the Tariff Order as in force from time to time subject to paragraph (ii) below.
(ii)	Any change to reference tariffs will not be incorporated in the access arrangement unless and until the procedure in section 2 of the Victorian Access Code is followed.
(iii)	If the access arrangement specifies a charge for connection to, and the use of, the transmission pipeline, that is inconsistent with the Tariff Order, then the access arrangement prevails to the extent of the inconsistency.

Implementation of amendment in revised access arrangement
(i)	Clause 2 of VENCorp’s revised access arrangement for the PTS provides the following relevant definition:
‘Tariff Order’ means the Order in Council (Victorian Gas Industry Tariff Order 1998 as amended from time to time) made under section 48A of the Gas Industry Act 1994. 
(ii)	Clause 5.3.4 (below) of VENCorp’s revised access arrangement for the PTS provides that any change to reference tariffs will not be incorporated in the access arrangement unless and until the procedure in section 2 of the Victorian Access Code is followed.
5.3.4	Any change to the Reference Tariffs will not be incorporated in this Access Arrangement unless and until the procedure in section 2 of the Victorian Access Code is followed. 
(iii)	Clause 48A(5) (below) of the Gas Industry Act 1994 (Vic)  provides that, in the event of inconsistency relating to charges, the access arrangement prevails over the Tariff Order to the extent of the inconsistency. 
48A(5)	If the provisions of an Order relating to charges under sub-section(1)(b) or (c) are inconsistent with charges specified in an access arrangement approved under the Access Code, the provisions do not apply to the extent of the inconsistency. 
Commission’s assessment of revision for compliance with required amendment
(i)	The Commission is satisfied that VENCorp’s revised access arrangement for the PTS complies with Amendment 4.9(i) as references to the ‘Tariff Order’ in the revised VENCorp Access Arrangement for the PTS have been defined in terms of a reference to the Tariff Order as in force from time to time.
(ii)	The Commission is satisfied that VENCorp’s revised access arrangement for the PTS complies with Amendment 4.9(ii) as it explicitly provides that any change to reference tariffs will not be incorporated in the access arrangement unless and until the procedure in section 2 of the Victorian Access Code is followed. 
(iii)	The Commission notes that Clause 48A(5) of the Gas Industry Act provides that, in the event of inconsistency relating to charges, the access arrangement prevails over the Tariff Order to the extent of the inconsistency.  The Commission is satisfied that VENCorp’s revised access arrangements for the PTS complies with Amendment 4.9(iii).
Required Amendment 4.10
In order for VENCorp’s Access Arrangement for the PTS to be approved, the procedures for the initial allocation of authorised MDQ must be attached, as an appendix, to VENCorp’s Access Arrangement.  

Implementation of amendment in revised access arrangement
Appendix 3 of VENCorp’s revised access arrangement for the PTS comprises the Initial Authorised MDQ allocation procedures.
Commission’s assessment of revision for compliance with required amendment
The Commission is satisfied that VENCorp’s revised access arrangement for the PTS complies with Amendment 4.10 as it includes the Initial Authorised MDQ allocation procedures as an appendix. 
Queuing policy
Required Amendment 4.11
In order for VENCorp’s Access Arrangement for the PTS to be approved, the finalised queuing policy for the PTS must be incorporated in VENCorp’s Access Arrangement.  

Implementation of amendment in revised access arrangement
Clause 5.6 of VENCorp’s revised access arrangement for the PTS sets out its finalised queuing policy.
Commission’s assessment of revision for compliance with required amendment
The Commission is satisfied that VENCorp’s revised access arrangement for the PTS complies with Amendment 4.11 as it includes its finalised queuing policy.
Extensions and expansions policy
Required Amendment 4.12
In order for TPA’s Access Arrangements for the PTS and WTS to be approved, amendments to the extensions/expansions policies must be made to the following effect:
Coverage
1.	If the extension or expansion to the PTS/WTS is to come into service on or after the commencement of the access arrangement:
(i)	Prior to the extension or expansion coming into service, the service provider must notify the Commission of the extension or expansion.
(ii)	Subject to paragraph (1)(iii) below, the extension or expansion will automatically be treated as part of the covered pipeline upon the extension or expansion coming into service.
(iii)	An extension will not be treated as part of the covered pipeline through the operation of the extensions/expansions policy if:
(a)	the extension is a ‘significant extension’;
(b)	the service provider elects not to treat the extension as part of the covered pipeline; and
(c)	the service provider notifies the Commission of its election prior to the extension coming into service.
(iv)	A ‘significant extension’ means an extension that:
(a)	is at least 10 kilometres in length; or
(b)	costs at least $5 million.
2.	If the extension or expansion to the PTS/WTS comes into service prior to the commencement of the access arrangement, the extension or expansion is to be treated as part of the covered pipeline upon the commencement of the access arrangement.
Note:	Under paragraph 2 above, the natural gas pipeline, owned by TPA, extending from Barnawatha (Vic) to Culcairn (NSW) is to be treated as part of the PTS upon commencement of the access arrangement.
Effect of extension/expansion on reference tariffs
3.	The extensions/expansions policy, insofar as it specifies how the extension or expansion will affect reference tariffs, must be consistent with Chapter 8 of the Victorian Access Code.  In particular:
(i)	The amount of the cost of the new facility that can be included in the capital base must be determined in accordance with section 8.16 of the Victorian Access Code.
(ii)	The portion of the new facilities investment that cannot be included in the capital base may be:
(a)	included in a speculative investment fund in accordance with section 8.19 of the Victorian Access Code;
(b)	recovered by a capital contribution a user agrees to pay TPA which may be assumed to be a surcharge; and
(c)	recovered by a surcharge approved by the Commission in accordance with section 8.25 of the Victorian Access Code.
Submissions to vary an access arrangement
4.	The treatment of an extension or expansion as part of the PTS/WTS as a consequence of the operation of the extensions/expansions policy is not a change to the access arrangement.
5.	Reference tariffs cannot be changed unless the procedure in section 2 of the Victorian Access Code is followed.
6.	A surcharge is not a change to the access arrangement.  However, in accordance with section 8.25 of the Victorian Access Code, for the purposes of public consultation, a notice to impose a surcharge is to be treated as if it were a proposed revision to the access arrangement submitted under section 2.28.

Implementation of amendment in revised access arrangement
1.	Clauses 5.7.1(a)-(e) and 5.8.1(a)-(e) (below) respectively of the TPA’s revised access arrangements for the PTS and WTS address the coverage issues raised in Amendment 4.12.1.
2.	Clause 5.7.1(f) addresses issues relating to the Interconnect raised in Amendment 4.12.2.
5.7.1	Coverage [PTS]
(a)	Subject to clause 5.7.1(c), an extension or expansion to the Principal Transmission System is covered by this Access Arrangement.
(b)	Prior to an extension or expansion coming into service, TPA will give notice to the Regulator specifying:
(1)	the location of the extension or expansion;
(2)	its costs;
(3)	its length;
(4)	any other matter TPA considers relevant.
(c)	Subject to clause 5.7.1(d), a significant extension will not be covered by this Access Arrangement if TPA gives written notice to the Regulator (which notice may be given together with a notice under clause 5.7.1(b)) before the extension comes into service that the extension will not form part of this Access Arrangement. 
(d)	Clause 5.7.1(c) does not apply where: 
(1)	a party successfully seeks coverage of the extension under section 1 of the Victorian Access Code; or
(2)	the extension was assumed and included in the calculation of the Reference Tariffs. 
(e)	For the purposes of clause 5.7.1(c), a significant extension is an extension where: 
(1)	the cost of the New Facility which comprises the extension is greater than $5 million; or
(2)	the extension exceeds 10 kilometres in length. 
(f)	Notwithstanding any of the preceding provisions of this clause 5.7.1, the extension representing the natural gas pipeline extending from Barnawartha (Vic) to Culcairn (NSW) (‘the Interconnect’) shall be dealt with in the following way: 
(1)	a notice under paragraph 5.7.1(b) shall be deemed to have been given; 
(2)	no notice under paragraph 5.7.1(c) shall be given. 
5.8.1	Coverage [WTS]
(a)	Subject to clause 5.8.1(c), an extension or expansion to the Western Transmission System is covered by this Access Arrangement. 
(b)	Prior to an extension or expansion coming into service, TPA will give notice to the Regulator specifying: 
(1)	the location of the extension or expansion; 
(2)	its cost; 
(3)	its length; 
(4)	any other matter TPA considers relevant. 
(c)	Subject to clause 5.8.1(d), a significant extension will not be covered by this Access Arrangement if TPA gives written notice to the Regulator (which notice may be given together with the notice under clause 5.8.1(b)) before the extension comes into service that the extension will not form part of this Access Arrangement. 
(d)	Clause 5.8.1(c) does not apply where: 
(1)	a party successfully seeks coverage of the extension under section 1 of the Victorian Access Code; or
(2)	the extension was assumed and included in the calculation of the Reference Tariffs. 
(e)	For the purposes of clause 5.8.1(c), a significant extension is an extension where: 
(1)	the cost of the New Facility which comprises the extension is greater than $5 million; or
(2)	the extension exceeds 10 kilometres in length. 
3.	Clauses 5.7.2 and 5.8.2 (below) respectively of the TPA’s revised access arrangements for the PTS and WTS address the issues related to the effect of extensions and expansions on reference tariffs raised in Amendment 4.12.3.  In addition, the definitions contained in clause 2 of both arrangements for Economic Feasibility Test and System-Wide Benefits Test explicitly state that they are subject to section 8.16(a) of the Victorian Access Code.
Further, the PTS and WTS are defined in terms of the provisions of the Gas Industry Act 1994, but excluding any significant extensions in respect of which a notice has been given under clause 5.7 or 5.8 respectively of the TPA Access Arrangements for the PTS and WTS.
5.7.2	Effect of Extension/Expansion on Reference Tariffs [PTS]
(a)	Where the New Facilities Investment passes the Economic Feasibility Test, the New Facility is included in the Capital Base and is charged the Reference Tariffs. 
(b)	Where the New Facilities Investment does not pass the Economic Feasibility Test, the standard procedure is that: 
(1)	a proportion of the New Facility corresponding to the proportion of the New Facilities Investment that passes the Economic Feasibility Test is included in the Capital Base and is charged the Reference Tariffs; and
(2)	the proportion of the New Facilities Investment that does not pass the Economic Feasibility Test may, at TPA’s election, be -
(A)	recovered by a Surcharge approved by the Regulator under section 8.25 of the Victorian Access Code and levied on Users  of Incremental Capacity; 
(B)	recovered by a Capital Contribution a User agrees to pay TPA which may be assumed to be a Surcharge;
(C)	included in a Speculative Investment Fund under clause 5.3.4 of the Reference Tariff Policy; or
(D)	recovered by a combination of these options.
(c)	New Facilities Investment that does not pass the Economic Feasibility Test may be recovered outside the standard procedure in clause 5.7.2(b) where: 
(1)	TPA and/or Users satisfy the Regulator that the New Facilities Investment passes the System-Wide Benefits Test, in which case the Regulator may approve higher Reference Tariffs for all Users and the New Facility may be included in the Capital Base; or
(2)	the New Facility is able to be included in the Capital Base on grounds that it is necessary to maintain the safety, integrity or contracted capacity of the Reference Services. 
5.8.2	Effect of Extension/Expansion on Reference Tariffs [WTS]
(a)	Where the New Facilities Investment passes the Economic Feasibility Test, the New Facility is included in the Capital Base and is charged the Reference Tariffs. 
(b)	Where the New Facilities Investment does not pass the Economic Feasibility Test, the standard procedure is that: 
(1)	a proportion of the New Facility corresponding to the proportion of the New Facilities Investment that passes the Economic Feasibility Test is included in the Capital Base and is charged the Reference Tariffs; and
(2)	the proportion of the New Facilities Investment that does not pass the Economic Feasibility Test may, at TPA’s election, be: 
(A)	recovered by a Surcharge approved by the Regulator under section 8.25 of the Victorian Access Code and levied on Users of Incremental Capacity; 
(B)	recovered by a Capital Contribution a User agrees to pay TPA, which may be assumed to be a Surcharge; 
(C)	included in a Speculative Investment Fund under clause 5.3.3 of the Reference Tariff Policy; or
(D)	recovered by a combination of these options. 
(c)	New Facilities Investment that does not pass the Economic Feasibility Test may be recovered outside the standard procedure in clause 5.8.2(b) where: 
(1)	TPA and/or Users satisfy the Regulator that the New Facilities Investment passes the System-Wide Benefits Test, in which case the Regulator may approve higher Reference Tariffs for all Users and the New Facility may be included in the Capital Base; or
(2)	the New Facility is able to be included in the Capital Base on grounds that it is necessary to maintain the safety, integrity or contracted capacity of the Reference Services. 
4-6.	Clauses 5.7.3 and 5.8.3 (below) respectively of the TPA’s revised access arrangements for the PTS and WTS address the issues related to submissions to vary an access arrangement raised in Amendment 4.12.4-6.
5.7.3	Submissions to vary an Access Arrangement [PTS]
For the avoidance of doubt: 
(a)	if, pursuant to the Extension/Expansion Policy set out in the clauses above, an extension or expansion becomes covered by this Access Arrangement, that coverage shall not be deemed to be a change to this Access Arrangement; 
(b)	if pursuant to this clause or to the Extension/Expansion Policy  set out in the clauses above, a Surcharge is to be applied, the application of that Surcharge shall not be deemed to be a change to this Access Arrangement; 
(c)	notwithstanding clause 5.7.3(b) above, solely for the purposes of public consultation, a notice given under section 8.25 of the Victorian Access Code, shall be treated with as if it were the submission of a revision under section 2.28 of that Code; and
(d)	where any submission to vary this Access Arrangement has the consequence that Reference Tariffs will be changed, section 2 of the Victorian Access Code shall apply. 
5.8.3	Submissions to vary an Access Arrangement [WTS]
For the avoidance of doubt: 
(a)	if, pursuant to the Extensions/Expansions Policy set out in the clauses above, an extension or expansion becomes covered by this Access Arrangement, that coverage should not be deemed to be a change to this Access Arrangement; 
(b)	if, pursuant to this clause or to the Extensions/Expansions Policy set out in the clauses above, a Surcharge is to be applied, the application of that Surcharge shall not be deemed to be a change to this Access Arrangement; 
(c)	notwithstanding clause 5.8.3(b) above, solely for the purposes of public consultation, a notice given under section 8.25 of the Victorian Access Code, shall be treated with as if it were the submission of a revision under section 2.28 of that Code; 
(d)	where any submission to vary an Access Arrangement has the consequence that Reference Tariffs will be changed, section 2 of the Victorian Access Code shall apply. 
Commission’s assessment of revision for compliance with required amendment
Required Amendment	Clause of revised Access Arrangement	
	PTS	WTS	
4.12.1(i)	5.7.1(b)	5.8.1(b)	
4.12.1(ii)	5.7.1(a)	5.8.1(a)	
4.12.1(iii)	5.7.1(c)	5.8.1(c)	
4.12.1(iv)	5.7.1(e)	5.8.1(e)	
4.12.2	5.7.1(f)	NA	
4.12.3	2	2	
4.12.3(i)	5.7.2(a), 2	5.8.2(a), 2	
4.12.3(ii)	5.7.2(b)	5.8.2(b)	
4.12.4	5.7.3(a)	5.8.3(a)	
4.12.5	5.7.3(d)	5.8.3(d)	
4.12.6	5.7.3(b), (c)	5.8.3(b), (c)	
The above table lists the components of Amendment 4.12 and identifies the relevant clauses of TPA’s revised access arrangements for the PTS and WTS for assessing compliance.  The Commission has assessed the revised access arrangements for compliance with each requirement of Amendment 4.12, and has concluded that, other than with regard to Amendment 4.12.2, all requirements are explicitly satisfied by the revised access arrangements.
Clause 5.7.1(f) of TPA’s revised access arrangement for the PTS meets the obligation under Amendment 4.12.2 for the Interconnect between Barnawartha and Culcairn to be treated as part of the PTS upon commencement of the access arrangement.  However, neither access arrangement explicitly provides for other extensions or expansions that might come into service prior to commencement of the access arrangements to be treated as part of the covered pipeline upon commencement of the access arrangement.  As noted above, the PTS and WTS are defined in terms of the provisions of the Gas Industry Act 1994, but excluding any significant extensions in respect of which a notice has been given under clause 5.7 or 5.8 respectively of the TPA Access Arrangements for the PTS and WTS.  EPD has advised that, as no other significant extensions have or will come into service prior to commencement of the access arrangements, no specific provision was needed in the access arrangements.
The Commission is satisfied that TPA’s revised access arrangement for the PTS and WTS comply with Amendment 4.12.
Review and expiry of the Access Arrangement
Required Amendment 4.13
In order for TPA’s Access Arrangements for the PTS and WTS to be approved, the revisions submission date must be amended to 31 March 2002.  

Implementation of amendment in revised access arrangement
Clause 5.8.1 of TPA’s revised access arrangement for the PTS states that the revisions submission date will be 31 March 2002.
Clause 5.9.1 of TPA’s revised access arrangement for the WTS states that the revisions submission date will be 31 March 2002.
Commission’s assessment of revision for compliance with required amendment
The Commission is satisfied that TPA’s revised access arrangements for the PTS and WTS comply with Amendment 4.13 as they state that the revisions submission date will be 31 March 2002.
Required Amendment 4.14
In order for VENCorp’s Access Arrangement for the PTS to be approved, the revisions submission date must be amended to 31 March 2002.  

Implementation of amendment in revised access arrangement
Clause 5.8.1 of VENCorp’s revised access arrangement for the PTS states that the revisions submission date will be 31 March 2002.
Commission’s assessment of revision for compliance with required amendment
The Commission is satisfied that VENCorp’s revised access arrangement for the PTS complies with Amendment 4.14 as it states that the revisions submission date will be 31 March 2002.