Testing the bounds of regulation, submission in response to the Examination of the current test for the regulation of gas pipelines

Gas supply is an essential service that is provided by monopoly businesses. There is a strong case that such services should be regulated. The cost of gas is increasing in Australia for both residential and business consumers. Given there is evidence of monopoly pricing and an opaque gas market, PIACconsiders that consumers will benefit from the greater transparency and accountability that would come from improvements in regulation and amendments to the test for pipeline coverage. PIAC appreciates that compliance with economic regulation has a cost for businesses, and has the potential to pose risks to investment. PIAC considers that the risks and costs are not as extreme as claimed by the pipeline owners, and that there are sufficient protections, including 15-years of no coverage for the construction of a pipeline, to ensure that risks are manageable. PIAC supports the conclusions of the ACCC in the recent review of the east coast gas market. Recent changes in the market, in particular the reduction in vertical integration accompanied by an increase in horizontal integration, mean the current test is no longer fit for purpose. PIAC recommends that the test for determining if a pipeline should be covered by economic regulation be changed in line with the ACCC’s recommendation.