Australia's gas markets are changing rapidly and undergoing significant structural change. Australia is on the cusp of becoming the world's largest liquefied natural gas exporter, having seen investment of more than $200 billion in the past decade.
The appointment became effective on 1 August 2017 with the proclamation of the National Gas (South Australia) (Pipelines Access-Arbitration) Amendment Bill 2017. The amendment establishes a new information disclosure and arbitration framework within the National Gas Law and provided for the detail associated with the framework.
The arbitration mechanism is intended to provide a credible threat of intervention to constrain the exercise of market power during negotiations. If a dispute is referred to arbitration, the aim is to provide for final resolution in a cost-effective and efficient manner. The new Part 23 (Division 4) of the National Gas Rules outlines the pricing and other principles that the arbitrator must have regard to when determining access disputes. These principles are designed to provide for access at prices and on other terms and conditions that, so far as practical, reflect the outcomes of a workably competitive market.
The design of the arbitration mechanism draws on both general commercial arbitration principles and negotiate-arbitrate infrastructure access regimes. The design is intended to provide greater certainty about the duration and the cost of arbitration, principally by requiring exchange of all information that might be relied on in arbitration during negotiations (including expert reports) and through short time frames for conduct of the arbitration. Arbitrators will be required to make a determination within 50 business days (with possible extension to 90 days).
In making determinations, arbitrators will be required to have regard to guidelines and principles in the NGR. The overriding principle is that terms of access should be consistent with outcomes reasonably to be expected in a workably competitive market. The pricing principles require prices to be cost reflective. Arbitration is therefore likely to focus on these issues.
This new approach to focusing on negotiated outcomes between pipeline owners and shippers represents an alternative to the economic regulatory approach with which the gas industry is familiar. Parties have the opportunity to reach a commercial outcome without the need for third party intervention. Where parties are unable to reach agreement a commercial arbitrator may be called upon. In short the approach aspires to promote commercial outcomes and resolve disputes in a commercial, timely and cost effective manner.
Arbitration enquiries should be directed to AERschemeadministrator@aer.gov.au (link sends e-mail).