Capacity Trading Reform Package Legal and Regulatory Framework

Publication date: Tuesday, 03rd July 2018.

The COAG Energy Council has approved the legal and regulatory framework that will implement the capacity trading reform package.

The Gas Market Reform Group has published an Information Paper summarising the final design of the capacity trading reforms and the next steps for the implementation of the legal and regulatory framework. The Information Paper is provided below and further information on the capacity trading reforms can be found on the Gas Market Reform Group website.

Background

The capacity trading reform package was originally recommended by the Australian Energy Market Commission in its Eastern Australian Wholesale Gas Market and Pipelines Framework Review and endorsed by the COAG Energy Council at its August 2016 meeting.

The Gas Market Reform Group was given responsibility for leading the design and development of this reform package.

On 29 June 2018, the COAG Energy Council agreed to the final legal and regulatory framework to implement the capacity trading reform package. The reform package will initially apply in the Australian Capital Territory, New South Wales, Queensland, South Australia, Tasmania and in Victoria (outside the Declared Transmission System).

The reforms include the implementation of:

  1. A capacity trading platform that will form part of the gas trading exchange (Gas Supply Hub) and provide for exchange-based trading of commonly traded transportation products and a listing service for more bespoke products

  2. A day-ahead auction of contracted but un-nominated capacity, which will be conducted each day on non-exempt transportation facilities shortly after nomination cut-off time and subject to a reserve price of zero

  3. A range of measures to facilitate capacity trading and the auction, including the development of standard operational transportation service agreements that will establish the standard contract terms between service providers and shippers for capacity procured through the capacity trading platform and day-ahead auction.

  4. A reporting framework for secondary capacity trades and a number of other transparency measures that are designed to facilitate capacity trading and the auction.

  5. A standard market timetable that provides for a harmonised gas day start time, common nomination cut-off time and common auction service nomination cut-off time.

Application of Capacity Trading Reforms in the Northern Territory

At the request of the Northern Territory Government, Energy Council agreed that the capacity trading reforms will apply in the Northern Territory with the exception of the day-ahead auction for which application will be delayed.

The derogation will cease to apply to a transportation facility wholly or partly in the Territory at the discretion of the Northern Territory Minister by declaration in the Northern Territory Government Gazette, or on a date determined by the Energy Council after the fifth anniversary of the commencement of the capacity trading reform package amendments.

The Senior Committee of Officials intends to monitor the development of competition in the Territory gas market and appropriateness of the derogation on an ongoing basis. This may include through the review of the capacity trading reforms scheduled for two years following implementation.

Please refer to the Bulletin for more information.

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