A number of pipeline operators are engaging in monopoly pricing, resulting in higher gas prices, the costs of which will ultimately be borne by consumers, the Australian Competition and Consumer Commission said.
“The regime regulating gas pipelines is not fit for purpose and pipeline pricing is largely unconstrained by either the threat of regulation or effective competition,” ACCC chairman Rod Sims said.
The Federal Government ordered the inquiry in 2014 to investigate whether insufficient competition in the wholesale gas market was driving up prices.
While enough gas is forecast to be produced to meet domestic demand and existing LNG contracts until at least 2025, the fall in oil prices has created uncertainty over the timing of some developments, the ACCC said.
Gas suppliers are taking advantage of this uncertainty to increase prices and implement more restrictive non-price terms and conditions, it said.
“While the pipeline sector is responding to changing market dynamics and offering new services, pricing based on significant pipeline market power is prevalent,” Sims said.
“There are currently very few constraints on monopoly pricing by pipeline operators.”
The ACCC has asked the Federal and State governments to revisit the regulatory coverage of pipelines, increasing the ability for pipelines with market power to be regulated.
It has also asked for the easing of rules to allow more gas supplies in south eastern Australia.
The ACCC report was immediately slammed by APA Group, Australia’s largest gas pipeline operator.
“The challenges of developing new gas supplies have been obvious for a number of years. It is a perverse approach for the ACCC to consider that more regulation of the pipeline industry will contribute to solving this issue,” APA managing director Mick McCormack said.
APA, which dominates the gas transmission pipeline business with a near 50 per cent interest in the sector, has long complained against the regulatory scrutiny.
“To increase regulation of pipelines will stymie further investment and innovation,” the company said.
“It will result in pipelines being built for current demand, not future supply. This can only adversely affect future gas supply.”
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