Love the following "In a fiery submission to an inquiry into gas pipeline regulation,
Central accuses pipeline owners of abusing their market power, intimidating customers and of hiking up tariffs to levels that bear no relation to the cost of services supplied"
I am starting to like this man (RC) pitty about the central share price though
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Gas pipeliners accused of reaping 'super-profits'
Gas pipeline owners are reaping "super-profits" from assets that have long since delivered their investors a reasonable return, preventing the higher prices being seen for gas from encouraging new supply, according to junior producer
Central Petroleum.
In a fiery submission to an inquiry into gas pipeline regulation,
Central accuses pipeline owners of abusing their market power, intimidating customers and of hiking up tariffs to levels that bear no relation to the cost of services supplied.
The arguments back the junior gas producer's call for "urgent" reform of economic regulations that apply to pipelines to avoid also destroying demand in the east coast because competitive gas is no longer available.
The appeal comes in
Central's submission to the inquiry being led by
Dr Michael Vertigan, who has been tasked by state and federal energy ministers with examining whether tougher rules are needed for gas pipelines to help achieve more competitive supply.
It sets the scene for a major clash with the country's biggest pipeline owner,
APA Group, which is due to make its own submission public early Thursday when it is expected to argue that heavier regulation would kill investment in new lines.
Central chief executive
Richard Cottee tells Dr Vertigan in a letter accompanying the submission that the current regulatory system for gas pipelines "was designed for last century". He says that in an advanced market it would not have taken an inquiry by the national competition regulator to establish the problem as the market would have given off the price signals in time for new supply to come on.
Mature assets
Mr Cottee said the present system allows those companies that have acquired gas pipelines from their original developers "to charge as if they were greenfield investments well past the time the capital has been repaid".
"Mature pipeline assets in particular need to be subject to economic regulation to ensure they do not become a source of market dysfunction,"
Central says in its submission to Dr Vertigan's task force, which was set up after an Australian Competition and Consumer Commission inquiry found some gas pipelines were exercising "market power".
Central's attack on pipeline regulation comes as it seeks a better deal for gas transportation tariffs to supply gas from its fields in central Australia to customers on the east coast. Its criticism does not relate to tariffs charged on the new Northern Gas Pipeline between the Northern Territory and Queensland that is being built by Jemena, but on tariffs charged on existing pipelines that would deliver the gas further south, to Brisbane or Sydney.
In an example cited in the submission,
Central points out that more than half the $4.80 a gigajoule transportation and processing costs to get its gas to the east coast would be collected by existing and mature pipelines that require no new investment.
Central's submission paints a picture of a market where gas pipeline owners hike up tariffs for services such as storage to whatever the market can bear instead of basing them on actual costs, resulting in one case to a 400 per cent increase.
It says gas customers are very hesitant to publicly challenge prices for pipeline services in fear that pipeline owners would "retaliate" when existing contracts came up for renewal.
'Unchecked power'
"Businesses with unchecked market power often intimidate the market even if it is just on the subliminal level,"
Central says. "This appears to be the case in the east coast."
The existing test used to decide whether a gas pipeline has its tariffs regulated depends on its impact on competition upstream or downstream of the line.
But the ACCC proposed instead a test that focuses on whether a pipeline has substantial market power. New pipelines would still escape coverage for their first 15 years of operation, and foundation contracts wouldn't be affected.
Gas pipeline companies argue that the real problem with the east coast market is the inability to get gas out of the ground due to onshore drilling moratoria and other restrictions, and that transportation tariffs, which only make up a small part of gas prices, have not increased in real terms since 2002.
Central notes that the average "citygate" gas price has nearly doubled in the past two years to $8 a gigajoule and yet the higher price has not driven suppliers to increase investment. It says pipeline tariffs are masking the price signal that would otherwise have driven new investment.
http://www.copyright link/business/energy/gas/gas-pipeliners-accused-of-reaping-superprofits-20161018-gs5e3h#ixzz4NZddOplf
