MOOMBA TO ADELAIDE NATURAL GAS PIPELINE (Moomba to Adelaide Pipeline System) APPLICATION UNDER SECTIONS 1.24 AND 1.25 OF THE NATIONAL THIRD PARTY ACCESS CODE FOR NATURAL GAS PIPELINE SYSTEMS FOR REVOCATION OF COVERAGE March 2005 Epic Energy South Australia Pty Ltd ACN 068 599 815 Level 8, 60 Collins Street Melbourne Victoria 3000 CONTACT: Stephen Livens TELEPHONE: (03) 8626 8414 MAPS APPLICATION FOR REVOCATION OF COVERAGE FORMAL APPLICATION SUBMISSION Table of Contents 1. FORMAL APPLICATION DETAILS..................................................................................................... 2 2. BACKGROUND INFORMATION.......................................................................................................... 6 PIPELINE AND CONTRACTED CAPACITY – THE POSITION NOW AND IN THE FUTURE.......................................... 6 HISTORICAL DEVELOPMENT OF MAPS .............................................................................................................. 7 OWNERSHIP AND OPERATION OF MAPS........................................................................................................... 9 3. MAJOR COMMERCIAL ISSUES........................................................................................................ 10 GAS SUPPLY .............................................................................................................................................. 10 GAS DEMAND .............................................................................................................................................. 10 GAS TRANSMISSION INFRASTRUCTURE ........................................................................................................... 11 SUPPLY AND DEMAND BALANCE...................................................................................................................... 12 ELECTRICITY MARKET IMPACTS ON GAS DEMAND ........................................................................................... 12 4. DEVELOPMENT AND INTRODUCTION OF THIRD PARTY ACCESS RIGHTS ON THE MAPS...................................................................................................................................................... 14 OVERVIEW .............................................................................................................................................. 14 COMMITMENT TO INDUSTRY CODE OF CONDUCT............................................................................................ 15 5. GROUNDS FOR REVOCATION – CRITERION (B)........................................................................ 18 DEFINITION OF SERVICES ................................................................................................................................. 18 RECENT MOVES TO BROADEN THE DEFINITION OF SERVICES.......................................................................... 19 RECOMMENDED APPLICATION OF REVISED DEFINITION................................................................................... 22 MAPS LATERAL PIPELINES .............................................................................................................................. 24 CONCLUSIONS ON UNECONOMIC TO DUPLICATE.............................................................................................. 26 6. GROUNDS FOR REVOCATION - CRITERION (A)......................................................................... 28 APPROACH TO ASSESSING CRITERION (A) ....................................................................................................... 28 MARKET DEFINITION - UPSTREAM MARKET(S) ................................................................................................ 30 MARKET DEFINITION - DOWNSTREAM MARKET(S)........................................................................................... 31 MARKET DEFINITION CONCLUSIONS ................................................................................................................ 36 PROMOTION OF COMPETITION – APPROACH TO ASSESSING........................................................................... 37 PROMOTION OF COMPETITION - THE UPSTREAM MARKET............................................................................... 39 PROMOTION OF COMPETITION - THE DOWNSTREAM GAS SALES MARKET ALONG THE MAPS AND THE PORT PIRIE/WHYALLA LATERAL..................................................................................................... 40 PROMOTION OF COMPETITION - DOWNSTREAM GAS SALES MARKET IN SOUTH EAST AUSTRALIA ................. 42 PROMOTION OF COMPETITION - DOWNSTREAM ELECTRICITY SALES MARKET ............................................... 44 7. GROUNDS FOR REVOCATION - CRITERION (C)......................................................................... 46 8. GROUNDS FOR REVOCATION - CRITERION (D)......................................................................... 47 10. GLOSSARY............................................................................................................................................ 50 CONFIDENTIAL MAPS.................................................................................................................................... 53 ENERGY MARKET ANALYSIS...................................................................................................................... 55 APPLICATION OF THE HYPOTHETICAL NEW ENTRANT TEST.......................................................... 77 WORKABLE COMPETITION IN THE DUOPOLY AIRLINE MARKET .................................................... 84 MAPS Revocation Application Page 1 MAPS APPLICATION FOR REVOCATION OF COVERAGE FORMAL APPLICATION SUBMISSION 1. Formal Application Details 1.1 Applicant’s name and contact details Applicant’s name: Epic Energy South Australia Pty Ltd (“Epic Energy”) (ACN 068 599 815) Contact details for Epic Energy: Manager, Regulation Risk & Insurance Epic Energy Level 8, 60 Collins Street, Melbourne Victoria 3000 Phone: (03) 8626 8414 Fax: (03) 8626 8454 1.2 Applicant’s address for the delivery of documents Documents should be sent by mail and (where possible) e-mail to the following addresses: Mailing address: Epic Energy Level 8, 60 Collins Street, Melbourne Victoria 3000 Email: [email protected] MAPS Revocation Formal Application Final 150305 Page 2 MAPS APPLICATION FOR REVOCATION OF COVERAGE FORMAL APPLICATION SUBMISSION 1.3 Description of the Covered Pipeline The Covered Pipeline comprises the following parts of the Moomba to Adelaide Pipeline System (the “MAPS”): (a) the Covered Pipeline as described in Schedule A of the Code (reproduced below) as follows: Pipeline Location/Route Operator Length (km) Pipe Regulator Licence diameter (mm) SA:PL1 Moomba to Adelaide Epic ACCC Pipeline System Energy Pty Ltd * Moomba to Adelaide 781 559 Pipeline Angaston Lateral 38.7 219 Taperoo Lateral 1.2 323 Dry Creek Lateral 1.3 323 Peterborough Lateral 1.9 89 Nurioopta Lateral 1.6 114 Burra Lateral 15 89 Port Pirie Lateral 77.8 168 Mintaro Lateral 0.3 219 Wasleys to Torrens 42 508 Island Loop Whyalla Lateral 87.7 219 Port Bonython Lateral 5.5 114 Tarac 0.4 89 Port Douglas Lateral 11.5 114 Osborne Lateral 1.3 273 *Epic Energy Pty Ltd has never been the operator of the MAPS – the correct operator was, and remains, Epic Energy Corporate Shared Services Pty Ltd (“EECSS”). (b) the following enhancements to the pipeline system that have been carried out since 11 November 1997: − the upgrading of all of the Solar Centaur compressor units in 1998 to Solar Taurus units; and − the upgrading of the Alison compressor units in 1998 at CS2 (one unit) and CS4 (both units). MAPS Revocation Application Page 3 MAPS APPLICATION FOR REVOCATION OF COVERAGE FORMAL APPLICATION SUBMISSION For the avoidance of doubt, the Covered Pipeline does not include the following parts of the MAPS (“uncovered pipeline”) • the New Facilities or expansion in capacity of the pipeline effected pursuant to the Pelican Point Power Extension/Expansion which in 1999, 2000 and 2001 involved: − the upgrade of the remaining Allison compressor units (at CS1, CS3, CS5 and CS6); − 34 kilometres of looping of the MAPS mainline at various locations between CS1 and CS5; − the construction of a 1.7km lateral from the mainline to the location of the power station known as the Pelican Point Power Station together with a meter station at the downstream end of the lateral; and − the installation of an additional compressor unit at Wasleys to provide additional pressure service to the mainline loop of the MAPS; • the 10.2km x 4” Amcor lateral and meter station; • the 0.12km x 6” Quarantine Power Station lateral and meter station; and • the 0.72km x 8” Hallet Power Station lateral and meter station. A confidential map showing the physical location of the MAPS is contained in Attachment A. For security reasons, a copy of this map will only be made available to bona fide access seekers, the NCC, its staff and the Minister. 1.4 Name of the Covered Pipeline operator and owner The MAPS is owned by Epic Energy. The MAPS is operated by EECSS under a services agreement with Epic Energy. Epic Energy is the Service Provider under the Code. 1.5 Whether the applicant is seeking revocation of coverage of all or part of the covered pipeline Epic Energy is seeking revocation of coverage of the entire Covered Pipeline, and any further extensions or expansions as might be described under sections 1.40 and 1.41 of the Code. 1.6 Reason for seeking revocation of coverage of the pipeline MAPS Revocation Application