As RC Once Put It, Another Train Leaves The Harbour, page-4

Somehow I think this guy is fighting a losing battle. We are now talking about something that is in the national interest. He can yap all he wants about regulation, but when legislation goes through parliament, game over. My money is on RC.

APA climbs off the floor

Mick McCormack has emerged from two months in medical room to immediately rejoin the battle to defend the integrity of his largely unregulated national gas pipeline network.
A nasty back injury has seen the APA Group chief executive of very long standing missing in action while a potential new customer, the competition regulator and a competitor have had their say on whether our mature pipelines networks need to be regulated because they are extracting monopoly rents that have constrained the supply-side response to surging gas demand.
Over the coming days McCormack will be briefing media and investors on the pitch APA will take to the Gas Law Reform Review ordered by COAG and led by Michael Vertigan.

McCormack has welcomed the Vertigan review as an opportunity for the industry generally and APA particularly to redress the misunderstandings and myths that he figures shaped the recent East Coast Gas Market review by the Australian Competition and Consumer Commission.
He will arrive at each meeting armed with more than his earthy wit and 11 years of experience leading Australia's most powerful gas piper. He plans as well to talk liberally to a cost-benefit analysis of APA's uniquely integrated gas network prepared by The Brattle Group.
As you might imagine, the assessment finds much to like about McCormack's network.
"We find that integrated ownership has resulted in cost savings of over $110 million as the otherwise wasteful duplication of facilities has been avoided," the report concludes.

Brattle also reckons a further $40 million savings will be revealed "if expectations of demand increases are borne out".
"In addition, operating APA's pipelines centrally saves around $7 million per annum in operating costs relative to independent operation of APA's main Eastern Australia pipelines," the report found.
While identifying the risks of network integration the report finds that APA network has generated efficiencies and improved services for both gas suppliers and end users.
"By combining the ownership of previously separate assets, mergers and acquisitions can give rise to benefits from economies of scale and scope," Battle said. "But they also may raise competitive concerns that stem from the potential exercise of market power. If integration combines ownership of network assets offering substitute services, competition may be harmed."
Instead, by Battle's assessment, APA's eastern grid has generated a host of service improvements that have increasingly been reflected in direct savings to gas producers that have been able to take advantage of new form contracts that set single access fees for the use of multiple pipelines.
This, it has to be said, is not a view shared by at least one of APA's future customers, Central Petroleum, nor the ACCC, for that matter. But McCormack is having none of that. He describes the approach of both driller and regulator as "disappointing".
"You have Richard Cottee over there at Central talking about wanting to save the east coast gas market," McCormack says. "That is all well and good but that is a bit of a stretch. He is talking bugger all gas in terms of moving the national dial.
"And, look, the facts are the facts. For all the yapping on about wanting to regulate APA's pipelines, Central is in the middle of Australia, let's call it Alice Springs. The pipeline he needs to get the gas north to Tenent Creek is owned by us and it is regulated. Central says that brings the best results, right. The tariff to get it to the pipeline Jemena is going to build is 60 cents a gigajoule [gj]. Let's say Jemena charges $1.30gj to get the gas to Mt Isa. From there we will get it anywhere in the east coast. All up it will cost Richard no more than $4 to get to market.

"But Central is on the record saying its cost of production is $1-$2gj. Fantastic. Low cost. But that means his cost to get to market is something like $5-6gj. That is economical today."
And the ACCC? Well, McCormack is disappointed it has "jumped on a bandwagon" that says gas should be landing into east coast markets at up to 50 per cent less cost than it is. McCormack rightly assesses that this is because the regulator would have it that a pipeline that may have paid for itself through foundation contracts should be regulated as those deals retire.
"That is a flat nonsense," he said. "There is an example outside my window, the gas reticulation in Sydney. AGL put them together 180 years ago. How many times has that been paid off? The ACCC tried to pull this sort of stuff on us 10 years ago and we took it all the way to the High Court and it got dropkicked out of it."
It is great to have him back!