AEMCPresentation to GWCFPAGE 1 AEMC and Rule changes Presentation to AEMO Gas Wholesale Consultative Forum Kamlesh Khelawan Director This presentation does not represent legal advice or the views of the Commissioners AEMO offices, Melbourne 22 September 2009

AEMCPresentation to GWCFPAGE 2 Contents About AEMC Subject matter for National Gas Rules Rule making test Procedure for making Rules Contents of Rule change proposal Contacts at AEMC

AEMCPresentation to GWCFPAGE 3 AEMC’s functions and powers AEMC Establishment Act 2004 Rule making functions and powers under NEL/NGL and Regulations Market development functions under NEL/NGL and the Rules Provision of advice to the MCE as requested by the MCE Other functions conferred under National and Jurisdictional Energy Laws or any other Law AEMC’s decisions are subject to judicial review –must pertain to matters that AEMC may make Rule on, meet the Rule making test and comply with the Rule making procedures

AEMCPresentation to GWCFPAGE 4 Subject matter for National Gas Rules (s 74) AEMC may only make Rules regulating –access to pipeline services –the provision of pipeline services –the collection, use, disclosure, copying, recording, management and publication of information in relation to natural gas services –the operation of a regulated retail gas market –AEMO’s declared system functions and the operation of a declared wholesale gas market –the activities of Registered participants, users, end users and other persons in a regulated gas market –the safety, security and reliability of pipelines Any matter or thing contemplated by NGL, or necessary or expedient for the purposes of NGL. Further details in Schedule 1 of the National Gas Law

AEMCPresentation to GWCFPAGE 5 Rule making test under the Law Refer Chapter 9, Part 1, Division 2 of the NGL. AEMC: –may only make a Rule if it is satisfied that the Rule will or is likely to contribute to the achievement of the national gas objective (NGO) may give weight to any aspect of the NGO, as it considers appropriate –must have regard to the MCE statements of policy principles –take into account form of regulation factors –take into account revenue and pricing principles

AEMCPresentation to GWCFPAGE 6 Initiation of a Rule change for declared gas market Request for Rule regulating a declared wholesale gas market may only be made by: –AEMO or –Minister of adoptive jurisdiction Request for Rule regulating the declared system functions may only be made by: –AEMO, or –Service provider for a declared transmission system who is a party to a service envelope agreement with AEMO, or –Minister of adoptive jurisdiction AEMC may only make Rule that affects allocation of powers, functions and duties between AEMO and service providers for a declared transmission system if: –AEMO consents, or –Rule is requested by the Minister

AEMCPresentation to GWCFPAGE 7 Procedure for making a Rule by the AEMC Refer Chapter 9, Part 3 of NGL Generally four stages – standard procedure Initial assessment of a Rule change proposal First round public consultation on a proposed Rule change Draft Rule determination and second round public consultation on Rule or more preferable Rule Final rule determination – Rule or more preferable Rule

AEMCPresentation to GWCFPAGE 8 Rule change process - timeline Final determination Decision on initial review of proposal First round submissions Second round submissions Max. 6 weeks Draft determination Final Rule Min. 4 weeks Min. 6 weeks Max. 6 weeks As soon as practicable AEMC may extend time if request raises complex or difficult issues or in event of material change to circumstances

AEMCPresentation to GWCFPAGE 9 Expedited and fast track Rule change AEMC may expedite a Rule change proposal if it considers it is a: –non-controversial rule (unlikely to have a significant effect on market for gas or the regulation of pipeline services) –urgent rule (if not made with urgency would prejudice or threaten supply of gas) –2 weeks for objection, 6 weeks to make Rule from date of notice AEMC may fast track a Rule if: –prior public consultation has been undertaken by a gas market regulatory body (eg. AEMO, AER) –request is based on MCE directed or AEMC initiated review

AEMCPresentation to GWCFPAGE 10 Rule change process – fast track Final determination Decision on initial review of proposal AEMC decides to fast track Second round submissions Max. 5 weeks Draft determination Final Rule Min. 6 weeks Max. 6 weeks As soon as practicable AEMC may extend time if request raises complex or difficult issues or in event of material change to circumstances

AEMCPresentation to GWCFPAGE 11 Consultation by regulatory body for fast track The gas market regulatory body must have consulted with public on nature and content of request In AEMC’s view, consultation conducted by the gas market regulatory body was adequate having regard to: –nature and content of the Rule, and –the kind of consultation conducted Under the fast track Rule change, the AEMC would not undertake the first round public consultation and prepare a draft Rule determination Example: –Rules arising from Reviews that are subject to public consultation Proceeding with a Rule change request under the fast track process where appropriate consultation has not been undertaken: –AEMC will not have met its obligations under the Law; and –substantive issues may be raised as part of AEMC’s consultations, delaying the making of the Rule

AEMCPresentation to GWCFPAGE 12 Contents of a Rule change request to AEMC Clause 13 of National Gas Regulations –the name and address of the person making the request –description of the Rule that the person proposes be made –a statement of the nature and scope of the issue that is proposed to be addressed and an explanation of how the proposed Rule would address the issue –an explanation of how the proposed Rule will or is likely to contribute to the achievement of the national gas objective –an explanation of the expected benefits and costs of the proposed change and the potential impacts of the change on those likely to be affected –in the case of a request by a gas market regulatory body for a fast track Rule change - a summary of the consultation conducted by the gas market regulatory body, including information about the extent of the consultation and about the issues raised during the consultation and the gas market regulatory body's response to those issues

AEMCPresentation to GWCFPAGE 13 Contents of a Rule change request to AEMO Division 8, r 356, of the Declared Wholesale Market Rules –the name and address of the person making the request –must include statement of reasons: necessary and desirable consistent with the national gas objective compatible with proper performance of AEMO’s declared system functions technically, operationally and economically feasible AEMO would need to consult on matters that the AEMC would be required to take into account under the NGL

AEMCPresentation to GWCFPAGE 14 Contacts Kamlesh Khelawan Director Australian Energy Market Commission (02) Australian Energy Market Commission Office address: Postal address: Level 5 PO Box A Elizabeth Street Sydney South NSW 1235 Sydney NSW 2000 Telephone: Facsimile: (02) (02)

AEMCPresentation to GWCFPAGE 15