Submission to Essential Services Commission Re Gas ... Related party contracts.....9 4 SERVICES...

Submission to Essential Services Commission

Re Gas Access Arrangement Review 2008 – 2012 Consultation Paper No. 1

Suite 46, 1 Ricketts Road

Mount Waverley Vic 3149

Phone: 03 8544 9432

Fax: 03 8544 9927

Contact: Andrew Schille

1 August 2006

Response to 2008 GAAR Consultation Paper 1

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TABLE OF CONTENTS 1 INTRODUCTION......................................................................................................................... 5

2 REGULATORY FRAMEWORK FOR THIS REVIEW.................................................................. 7

3 INFORMATION DISCLOSURE................................................................................................... 8

3.1 Onus of proof and verification of information .................................................................... 8

3.2 Related party contracts ..................................................................................................... 9

4 SERVICES ................................................................................................................................ 10

4.1 Issues associated with Reference Services.................................................................... 10

4.1.1 Transparency of tariff V Reference Service..................................................... 10

4.1.2 Meter Reading Services .................................................................................. 11

4.1.3 Ancillary Reference Services........................................................................... 11

4.2 Terms and Conditions ..................................................................................................... 12

4.2.1 Credit support .................................................................................................. 12

4.2.2 Recent performance ........................................................................................ 13

4.2.3 GSL scheme outcomes to date ....................................................................... 14

4.2.4 Electricity industry GSL scheme...................................................................... 14

5 CAPITAL EXPENDITURE......................................................................................................... 15

5.1 Reviewing capital expenditure forecasts for the third regulatory period ......................... 15

6 NON CAPITAL (OPERATING) COSTS .................................................................................... 17

6.1 Operating expenditure forecasts for the third regulatory period ..................................... 17

7 ROLL FORWARD OF THE ASSET BASE................................................................................ 19

7.1 Establishing the opening regulatory asset base ............................................................. 19

7.1.1 Capital Expenditure ......................................................................................... 19

7.1.2 Regulatory depreciation................................................................................... 19

8 RATE OF RETURN................................................................................................................... 20

9 REFERENCE TARIFFS AND REFERENCE TARIFF POLICY ................................................ 21

9.1 Reference Tariff and Reference Tariff Policy Issues ...................................................... 21

9.1.1 Price control and rebalancing constraints........................................................ 21

9.1.2 Process for varying Tariffs in the third regulatory period................................. 21


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9.1.3 Annual Tariff Reports....................................................................................... 22

9.1.4 Change in tax pass-through provision ............................................................. 23

9.1.5 Pass-through of licence fees ........................................................................... 23

9.1.6 New Fixed Principles ....................................................................................... 23

10 DEMAND................................................................................................................................... 25

10.1 Approach to assessing demand forecasts ...................................................................... 25

10.2 Key issues in preparing demand forecasts ..................................................................... 26

10.2.1 Tariff V forecasts.............................................................................................. 26

10.2.2 Tariff D forecast ............................................................................................... 30

10.3 Tariff banding .................................................................................................................. 30

11 INCENTIVE MECHANISMS...................................................................................................... 32

11.1 ECM for the third regulatory period................................................................................. 32

11.1.1 Implications for Access Arrangements in the third regulatory period .............. 32

12 CAPACITY MANAGEMENT, TRADING AND QUEUING......................................................... 33

12.1 Queuing policy ................................................................................................................ 33

12.1.1 Queuing policy for the third regulatory period ................................................. 33

13 EXTENSIONS / EXPANSION POLICY..................................................................................... 34

13.1 Existing provisions .......................................................................................................... 34

13.2 Unreticulated townships .................................................................................................. 34

13.2.1 New town extension and tariffs........................................................................ 34

14 ISSUES ASSOCIATED WITH FULL RETAIL CONTESTABILITY ........................................... 35

14.1 The FRC Fixed Principle ................................................................................................. 35

14.1.1 Remaining unrecovered capital expenditure form the second regulatory period............................................................................................................... 35

14.1.2 Application of adjustment factor to determine any under-recovered / over-recovered amounts.................................................................................. 35

15 OTHER ISSUES........................................................................................................................ 36

15.1 Albury Access Arrangement ........................................................................................... 36

15.2 Length of the regulatory period ....................................................................................... 36


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1 Introduction

The Essential Services Commission (the Commission) has issued its first consultation paper1 in relation to the Gas Access Arrangement Review 2008-2012 (2008 GAAR). The consultation paper provides important information regarding the Commission’s intended approach to the 2008 GAAR.

Multinet Gas (Mutlinet) welcomes this opportunity to respond to the consultation paper and supports the Commission’s efforts in commencing a process of preliminary consultation to facilitate informed and focused discussion. However, Multinet notes the scope of section 2.1 of the National Third Party Access Code for Natural Gas Pipeline Systems (the Code) is relatively narrow and would not seem, on its face, to “allow for resolution of significant issues early in the review process”.

Multinet also appreciates the Commission’s intention, through this process, to assist the company in developing its proposed Access Arrangement (AA) revisions and to give guidance on certain matters. The company intends to follow that guidance where appropriate. Multinet also notes, as the Commission has done, that ultimately the development of proposed revisions, and the information provided to support these provisions, is governed by the Code and the Law.

Multinet considers that many of the issues raised by the Commission are somewhat premature, and at best hypothetical. Discussion on the topics concerned need to be made against the proposed AA revisions that the Distribution Businesses (DBs) schedule to put forward at the end of March 2007. For example discussion on changes to the regulatory period are totally hypothetical until it is seen if any DBs seek a revised AA period, and what reasons they have for such a proposal. Multinet for one, has not considered such a change.

Further, Multinet points out that it intends to seek independent experts on many forecast issues. Responses to this paper have been submitted in the absence of such expert input, and as such are not as well informed as they could be, or should be for the decision making process. An example of such a question posed by the Commission is:

What are the drivers that will impact on new dwelling completions over the third regulatory period? What impact will these drivers have? What is the best way to estimate new connections for the period?

Multinet has not sought advice on this issue, and confused as to what use the Commission can make of the answers prior to receiving formal submissions in 2007.

In addition, it is noted that the Commission says it has not formed any final positions at this time. Similarly, this submission is made in the context of section 2.1 of the Code and does not represent any final positions of Multinet.

1 Essential Services Commission, Gas Access Arrangement Review 2008-2012 Consultation

Paper No. 1, May 2006.


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This submission follows the structure of the Commission’s consultation paper, and addresses the specific questions raised by the Commission. Each section of this submission commences with a summary of the Commissions’ questions, and Multinet’s response is provided immediately below.


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2 Regulatory Framework for this Review

Multinet notes that the Commission is proceeding on the basis of the continued operation and application of the Gas Pipeline Access Law to the 2008 review. However, the Commission has also noted that the existing legal framework is being revised at the moment by the Ministerial Council on Energy (MCE). The Commission has foreshadowed its intention to apply its discretion to adopt, for the purpose of the 2008 review, any elements of the new national framework that have been settled, subject to there being broad consensus to do so amongst the distributors and stakeholders.

Multinet’s view is that it is the role of Government, not the Commission, to set the regulatory framework. The Commission’s concept of developing its own rules, based on a combination of the existing and proposed regulatory instruments, falls substantially short of good regulatory practice. The Commission’s suggestion could potentially create confusion and uncertainty, especially in relation to the implementation mechanisms, tests for the adoption of the ‘new’ rules and the application of the Commission’s discretion which is to be governed, as the Commission puts it, by the existing legal and regulatory framework but where that framework does not deal with such matters.

Multinet also notes that it is unsatisfactory to perpetuate the existing regulatory framework unnecessarily. However, this difficulty is best overcome by the Australian Energy Regulator (AER) conducting the review under the new framework, once it is settled. The Commission should seriously consider whether stakeholders’ interests are best served by the AER conducting the 2008 GAAR.


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3 Information Disclosure

The consultation paper does not raise specific questions for respondents in relation to information disclosure. However, Multinet would like to respond to the following issues raised by the Commission:

• Onus of proof and verification of information; and

• Related party contracts.

3.1 Onus of proof and verification of information

The Commission comments (on page 17) that:

“While the Commission intends to utilise relevant publicly available information and/or specifically commissioned reports, the onus is on distributors to provide sufficient information to satisfy the Commission of the requisite matters.”

Multinet’s view is that the Commission must act in accordance with the requirements of the Gas Code, and cannot establish its own ‘burden of proof’ in conducting its review of Multinet’s proposed revised access arrangement and accompanying access arrangement information.

Multinet is particularly concerned at the Commission’s suggestion that the company has an onus to “satisfy the Commission of the requisite matters.” There is no such “onus” established by the regulatory framework. In Multinet’s view, regulatory certainty and predictability depends on the application of objective, rather than subjective, criteria. Multinet is not in a position to accurately anticipate how the Commission be minded when it comes to assessing information provided by DBs. Multinet has observed that in the past the level of verification necessary to satisfy the Commission has varied widely. In some cases, simple assertions have been sufficient, in other cases the Commission has not been satisfied by information that has been provided by independent experts, or information that has been verified by auditors acting under Australian Accounting Standards and Australian Auditing Standards.

Multinet points out the need for the Commission to provide clear requirements and reasonable timelines for the information it requires. Multinet notes that during the recent Electricity Distribution Price Review the Commission was found to have made unreasonable requests for information. In particular, the Appeal Panel concluded that2:

“On the evidence the Appeal Panel concludes that ESC has not discharged its onus of establishing that the production of the documents and the furnishing of information within a period of 14 days is reasonable in all the circumstances.”

2 Essential Services Commission Appeal Panel, reference e2/2005, Statement of Reasons for

Decision, page 5.


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Multinet is also mindful that energy regulation is moving to a national framework under the auspices of the Australian Energy Regulator (AER). The Commission will create an unnecessary regulatory burden if it develops new approaches or information requirements for the 2008 GAAR that will not be applied by the AER.

In this regard, Multinet is concerned by the Commission’s comments in relation to verification of forecast information. The Commission comments (on page 19) that:

“Failure to properly substantiate and verify information provided may result in it being given less weight or even being disregarded as of no probative value.”

Multinet’s view is that the Commission must be guided by the Gas Code, and cannot apply its own rules regarding the probative value of information. Multinet would be extremely concerned if the Commission disregarded company information in favour of the Commission’s own data, which has been subject to a lower standard of substantiation and verification.

Multinet intends to provide a high standard of information to the Commission to assist the Commission in carrying out its statutory functions. Therefore, Multinet will voluntarily provide expert reports that comply with the accepted principles and practices developed by the courts and tribunals.

Multinet expects the Commission to apply these same high standards to any expert reports that it relies upon in its deliberations. Multinet seeks a commitment from the Commission that it will publish, in a timely manner prior to making any related decision, any report upon which it intends to rely, which report will comply with the accepted principles and practices developed by the courts and tribunals in relation to reliance on expert reports.

3.2 Related party contracts

The Commission makes a number of comments in regard to related party contracts. Multlinet notes the Commission’s concerns. The fees paid under Multinet’s Operating Services Agreement (OSA), meet the tests required by the Code. The OSA was market tested and there were no incentives for the parties to contract other than at arms length. The OSA has produced efficient pricing outcomes, which will, in turn, lead to a passing back of efficiency gains to end consumers. The fees charged under the OSA compare favourably to market benchmarks.

It is important for the Commission to note that:

• Multinet and Alinta Asset Management (AAM) were not related parties in 2003 when the OSA was agreed; and

• The OSA was negotiated in good faith and at arms length, prior to any regulatory issues being raised by the Commission.

The Commission is mistaken if it has already formed the view that the costs incurred by Multinet under the OSA are not fair and reasonable.


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4 Services

4.1 Issues associated with Reference Services

4.1.1 Transparency of tariff V Reference Service

What is the preferred way of ensuring that the revenues and costs associated with gas haulage, connection to the gas system and provision of a gas meter are transparent? Options include:

• treating each individual component of the existing tariff V Reference Service as a separate Reference Service

• including separate charging components for haulage, connection and meter provision in the Reference tariff for the tariff V Reference Service, and

• requiring the distributors to separately identify the costs associated with haulage, connection and meter provision

What other approaches could be adopted?

Multinet does not believe that a case for introducing contestability in gas metering has been made. In fact, the Commission’s final decision of September 2005 in the review of gas meter service responsibilities concluded that metering functions should not be contestable at this time. In its consultation paper, however, the Commission suggests that contestability in the future will be facilitated if costs and revenues are separately identified and reflected in distribution tariff structures in the 2008 GAAR. Multinet does not accept the Commission’s views on this issue.

The building block approach to revenue-setting, should allow the Commission to identify the costs of gas haulage, connection to the gas system and provision of a gas meter. However, recovering the cost of these services as separate tariffs will increase regulatory compliance costs for distributors which will flow onto retailers. The retailer, in turn, will incur increased costs as they will need to deal with separate tariffs and pass these on to customers. Multinet doubts that the benefits delivered by providing separate tariffs for each of these distribution activities would exceed the costs.

Moreover, Multinet questions the extent to which separate tariffs would impact on the decisions of end consumers. For instance, customers’ retail tariffs presently reflect the bundled costs of transmission, distribution and gas fuel. It therefore seems unlikely that retailers would be inclined to include in customers’ bills much more complex pricing information regarding the components of distribution tariffs. Even if such information were included in customers’ bills, the extent to which customers would change their behaviour in response to that information is likely to be very limited.


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The Gas Code (Section 3, Services Policy) suggests that separate charges may be required where this is reasonable and practical. The above comments suggest that separate tariffs for components of the Tariff V Reference Service are neither reasonable nor practical at this stage. Multinet also doubts whether the separate identification of charges would be consistent with national arrangements under the AER.

4.1.2 Meter Reading Services

How should meter reading services be treated in the third regulatory period?

The consultation paper comments that the provision of scheduled meter readings should be treated as a separate Reference Service – rather than bundled into the existing Reference Service for tariff V customers. Multinet does not accept the Commission’s reasoning on this issue.

Multinet’s view is that scheduled meter reading should remain a bundled service because the vast majority of customers will derive no benefit from separately identifying the schedule meter charge. Essentially, a scheduled meter read is an intrinsic component of the reference service for tariff V customers. In contrast, Special Meter Reading is separable (by request, frequency, and timing) from gas haulage, connection to the gas system, provision of a gas meter, and meter data services, and should therefore be a separate Ancillary Reference Service.

Multinet urges the Commission to consider carefully the costs and benefits of unbundling meter reading services.

4.1.3 Ancillary Reference Services

Is it desirable to develop consistent definitions for Ancillary Reference Services across distributors?

Ancillary Reference Services are currently defined in a form that is consistent with business treatment and practices. Consistency across all distributors may be of interest, but is unlikely to deliver any significant benefit to customers, and may result in detriment. It should also be noted that uniformity across distributors provides little opportunity for innovation or differentiation. Rather than deterring innovation and differentiation the regulator should be fostering it, those being key characteristics of an efficient commercial market. Whilst there may not be the opportunity for direct price competition in gas distribution, some of the other efficiency oriented characteristics of competition are available. Multinet therefore questions whether the Commission’s preference for uniformity is consistent with the objectives of the regulatory framework. Multinet’s view is that the Commission should carefully consider the costs and benefits of moving to a consistent set of definitions across distributors.


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The Commission comments that there may be merit in establishing a working group to examine opportunities for the development of consistent definitions for Ancillary Reference Services. Multinet would be pleased to participate in such a working group.

4.2 Terms and Conditions

4.2.1 Credit support

What amendments, if any, should be made to the terms and conditions in the existing Access Arrangements?

The terms and conditions under which Multinet makes available each Reference Service are set out in Part C of the Access Arrangement. Multinet believes that the existing terms and conditions are reasonable and satisfy the requirements of the Code. Apart from a simplification to clause 9.9 of Part C (regarding Ombudsman complaints) and minor editorial changes to align references to the latest regulatory instruments, at this stage Multinet sees no need for further amendment. Multinet notes that the consultation paper appears to support this position with the exception of credit support arrangements.

In relation to credit support, the Commission suggests that existing credit support triggers should align with the quarterly cycle of electricity billing rather than the bi-monthly gas billing cycle. Multinet queries the Commission’s comment given that the trigger arrangements for requesting a User to procure an undertaking as set out in clause 7.8(a)(2) of Part C of Multinet’s Access Arrangement provide for:

“(A) 5 invoices [3 in electricity] within the required time limit for payment; or

(B) 3 consecutive invoices [2 in electricity] within the required time limit for payment”

Multinet also notes the Commission comments that it:

“considers that existing credit support arrangements between gas distributors and retailers should be reviewed in light of the outcomes of the consultation process in the electricity industry.”

In January 2006, the Commission commenced consultation on a review of the credit support arrangements set out in the Electricity Distributors’ Default Use of System Agreement. The Commission’s reasons for the review as stated in the Credit Support Issues Paper as follows:

“It has been claimed that providing the required credit support represents the largest financial barrier to entry for a new retailer. Hence, the review will consider whether these arrangements are efficient given the development of the market.

New retailer models and corporate structures have emerged and it is necessary to ensure that the arrangements continue to be efficient in the light of market developments.


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Additionally, there have been some disputes associated with the current arrangements for credit support. Counterparties have had difficulty coming to agreement on credit support, claiming that the current arrangements are unclear, too onerous and anticompetitive.” 3

A further driver for the electricity review was the Commission’s decision as part of the 2006 – 2010 Electricity Distribution Price Review to provide for “pass through events” relating to failed retailers’ debts. At the time of preparing this submission, the electricity credit support review has yet to progress, at least publicly, past the submission of initial responses.

Multinet is yet to see any clear evidence of the need for a review of credit support arrangements in the gas sector. As far as Multinet is aware there have been no instances where credit support has proven a barrier to entry, nor have there been issues in reaching agreement on either demonstrated or ‘acceptable credit ratings’ between distributors and retailers.

As the Commission notes on page 1 of the electricity credit support issues paper:

“The purpose of credit support is to financially protect the distributor from non payment of its distribution charges by the retailer.”

Multinet will not support any change to credit support arrangements that increases the level of risk to its revenue streams. Multinet’s provisional view is that it may be appropriate to align the credit support arrangements for gas more closely with those in electricity.

4.2.2 Recent performance

Is it necessary to introduce additional mechanisms to encourage distributors to maintain or improve their level of overall supply reliability?

As the Commission knows, the gas distribution sector is subject to stringent safety standards, and these standards result in the delivery of a highly reliable distribution network. For these reasons, Multinet’s view is that reliability is not a material issue in gas distribution, and therefore it is not necessary to introduce mechanisms to improve overall supply reliability. Multinet is expecting to replace 540 km of low pressure mains (primarily for safety reasons) during this access arrangement period, and this investment has a flow-on effect of improving reliability. Multinet is currently updating its Asset Management Plan, which will likely provide for a continuation of this low pressure mains replacement program. This is expected to ensure the on-going maintenance of the present high levels of network reliability.

3 ‘Retailer DUoS Credit Support Review Issues Paper’, Essential Services Commission, January

2006, page 2.


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4.2.3 GSL scheme outcomes to date

Why have the GSL events and payments to date been substantially lower than originally anticipated?

Multinet notes that GSL payments have been lower than forecast at the time of the previous Gas Access Arrangement Review in 2002. At the time of the 2003 GAAR, estimates were made on forecast payments based on engineering data available at that time. That data was based on interruptions that incurred prior to 2002, which indicated a high number of single customer interruptions. The most significant driver of those interruptions is rainfall. During the 2003 – 2005 period low rainfall has meant that the interruptions that drive GSL payments have been abnormally low. Whilst this is not the only factor, it is the most significant and it has been supplemented by good overall reliability performance – which indicates the incentive scheme has been working. This has been a good outcome for customers because it demonstrates that service levels have been better than expected.

4.2.4 Electricity industry GSL scheme

What amendments, if any, should be made to the current gas GSL scheme? Are the service areas covered, thresholds and payment amounts appropriate? Should non residential customers be included in the GSL arrangements in the third regulatory period?

Multinet does not have strong views on whether the GSL scheme should change. Providing the Commission can demonstrate that there is a genuine need to amend the GSL scheme it should remain as it is. There may be system and process cost impacts that outweigh any benefits a change to the scheme may produce. Notwithstanding this observation, however, Multinet would be pleased to participate in a workshop if the Commission would like to explore the future design of the GSL scheme in more detail.


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5 Capital Expenditure

5.1 Reviewing capital expenditure forecasts for the third regulatory period

Is the Commission’s proposed approach to assessing the distributors’ forecast capital expenditure appropriate?

In reviewing the distributors’ forecast capital expenditure for the third regulatory period the Commission explains that it proposes to:

• review capital expenditure on a category-by-category basis;

• analyse the nature, justification and scope of works proposed;

• establish a direct unit cost for each category of capital expenditure, having regard to efficient benchmarks (including historic unit costs);

• approve a base level work program for each category; and

• determine a reasonable level of capital overheads.

Multinet is concerned that the Commission’s proposed approach does not constitute a genuine “review”. In particular, the Commission’s approach does not include any steps that describe how a review of the reasonableness of the forecasts would be carried out, rather it proposes to “establish”, “approve”, and “determine” aspects of the capital expenditure projections without any linkage to the review step. In effect, the Commission is already anticipating that it will replace the company’s expenditure forecasts with its own view, independent of the outcome of any reasonableness review, many months prior to receiving the company’s access arrangement information.

Multinet is particularly concerned that the Commission is suggesting that it should “approve” a base level of work program for each category. Multinet does not accept that it is the Commission’s role to approve the company’s work program. In Multinet’s view, it is essential that the Commission’s approach to capital expenditure does not lead the Commission towards the micro management of Multinet’s business. In particular, the Commission should take care in assuming responsibility for “approving” business inputs. Not only would such an approach potentially undermine the incentive properties of the regulatory regime; it also potentially exposes the Commission to accountability for business outcomes.

Multinet’s view is that the Commission’s suggested approach of using a unit cost for broad categories of work is flawed because it does not take account of the mix of work in each category. Unit costs can double or treble depending on the site factors that specifically apply to a particular job. If Multinet’s mix of work changes from one access arrangement period to the next, the company is exposed to the use of inappropriate benchmarks. In particular, for the forthcoming access arrangement period, Multinet is planning pipe replacement work in inner suburban areas, where unit costs are, unavoidably, relatively high.


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In summary the Commission should only be stepping into replace the businesses forecasts with its own if a genuine review demonstrates that the business’s forecasts are not reasonable. Such a review needs to be carried out based on the merits and circumstances of the particular work program forecasts.


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6 Non Capital (Operating) Costs

6.1 Operating expenditure forecasts for the third regulatory period

Is the Commission’s proposed approach to assessing operating expenditure forecasts appropriate?

During the 2003 GAAR, the Commission adopted an approach to establishing operating cost benchmarks that was intended to minimise the level of regulatory intrusion and effort, whilst meeting the requirements of the Code, within a cost of service framework.

Multinet also favours approaches to establishing expenditure benchmarks that involve minimal intrusion by the regulator, and which do not rely on highly forensic regulatory examinations. The Commission will be aware that Multinet has consistently expressed a preference for regulatory approaches that set expenditure allowances and prices with reference to exogenous benchmarks, rather than firm-specific costs. The Commission has, however, adopted a cost of service approach in the regulation of gas distribution utilities.

Given the constraints imposed by the cost of service framework, Multinet considers that the approach - including the efficiency carry over mechanism - adopted by the Commission at the last review provides a reasonable basis for the establishment of expenditure benchmarks in this review. This approach is founded on the reasonable proposition that that the incentives provided by the regulatory framework would lead to efficient expenditure levels.

As noted in section 2.2 of this submission, the consultation paper comments on related party contracts. Multinet procures services under its OSA, which was market tested and there were no incentives for the parties to contract other than at arms length. The OSA has produced efficient pricing outcomes, which will be reflected in the prices paid by end consumers. The fees charged under the OSA compare favourably to market benchmarks. Therefore, the fees paid under Multinet’s OSA meet the tests required by the Code.

The consultation paper notes (page 41) that at the time of the last review, the Commission found it necessary to verify reported expenditure because of, among other things, “the lack of regulatory accounting guidelines at the time”. Multinet notes that the Commission established regulatory accounting guidelines during the course of the 2003-2008 regulatory period. In Multinet’s view, the only reasonable course of action for the Commission is to accept information that accords with the Commission’s guidelines.

The consultation paper refers to the “backward looking” approach applied by the Commission in the 2006 EDPR to identify the trend in operating and maintenance expenditure (change in partial factor productivity) and a forward looking approach to include expected increases in labour costs. Multinet does not accept the proposition that historical trends in partial factor productivity necessarily provide a good guide to


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the future. This is particularly so when the population of companies used in the partial factor productivity study is so small. The Commission’s regulatory decisions should not anticipate or second-guess prospective efficiency improvements. Under the incentive framework put in place at the last review, actual efficiency gains will be revealed through reported costs, and these will form the basis of expenditure benchmarks at the next review. In this way, consumers benefit from the gains achieved by the business in response to the incentives to reduce costs.


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7 Roll Forward of the Asset Base

7.1 Establishing the opening regulatory asset base

7.1.1 Capital Expenditure

What is the most appropriate method of ensuring that capital expenditure in the second regulatory period has met the requirements of the Code?

In the 2003 GAAR, the Commission considered it reasonable to infer that capital expenditure incurred in the first regulatory period would pass the requirements of the Code. The Consultation Paper suggests that the Commission may adopt a similar approach when reviewing capital expenditure in the second regulatory period. However, the consultation paper also states (page 48) that:

• “Regardless of the approach adopted, the Commission anticipates that it will need to review the actual capital expenditure incurred in the second regulatory period prior to inclusion into the RAB.

• The Commission may also seek independent verification in relation to the level of customer contributions received and disposals made.”

In Multinet’s view, the Consultation Paper fails to explain why the approach adopted in relation to rolling forward capital expenditure in the 2003 GAAR may not be appropriate in the forthcoming review. In addition, Multinet believes that the Commission should seek to minimise regulatory costs by focusing on material issues, rather than second-guessing Multinet’s investment decisions.

7.1.2 Regulatory depreciation

What is the most appropriate method of ensuring that forecast regulatory depreciation meets the requirements of the Code?

The consultation paper comments that the Commission has previously adopted the view that distributors should have a degree of flexibility over the rate at which capital is returned, and in particular to take account of technological change, projected future demand and any other factors that may affect the market value of their assets.

However, the consultation paper expresses the Commission’s concern that its approach to depreciation may limit the scope to consult on proposed changes to depreciation, particularly where changes to depreciation are proposed late in the Access Arrangement review process and where the impact on Reference Tariffs is material.

Multinet accepts the Commission’s concerns regarding effective consultation. From Multinet’s perspective, it is important to minimise revenue and price shocks for both Multinet and Users. In this regard, it is important that discretion and flexibility in determining regulatory depreciation should continue. Multinet will make every effort to ensure that users are properly consulted in relation to depreciation issues.


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8 Rate of Return

Multinet supports the Commission’s following observations (page 51) regarding the cost of capital:

“The Commission is also mindful that the distributors will not recover the costs associated with the investments being made now for up to 40 or more years. This makes it important that the Commission seeks to create, to the extent possible, a stable and predictable regime with decisions that can be replicated.

However, having regard to the latest market evidence in isolation is unlikely to create a sufficiently stable and predictable regime. The imprecision associated with the cost of capital estimation could result in the ‘best’ estimate varying substantially from one review to the next.

Given the difficulties in estimating the cost of capital it is important to adopt a cautious approach when interpreting new but uncertain evidence relevant to the cost of capital, and to adopt a cautious approach when considering changes to key inputs or assumptions relative to those adopted in previous reviews.”

Multinet believes that the parameter values for the capital asset pricing model are now converging across a number of regulatory bodies. Multinet will submit a cost of capital estimate that meets the requirements of the Gas Code.


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9 Reference Tariffs and Reference Tariff Policy

9.1 Reference Tariff and Reference Tariff Policy Issues

9.1.1 Price control and rebalancing constraints

Is it appropriate to continue using the tariff basket price control approach?

Has the existing CPI+2 per cent rebalancing constraint provided sufficient flexibility for the distributors to adjust their tariff structures, while also protecting consumers from undue tariff increases?

Multinet supports a continuation of the tariff basket price control approach. However, Multinet’s view is that a continuation of the 2% rebalancing constraint would be unduly restrictive.

Multinet is currently in the process of reviewing its cost of supply modelling and is also examining the case for introducing a new Large Business Tariff. As a part of this further work, Multinet intends to review its tariffs to ensure that they are cost reflective across customer segments.

Multinet’s review of its cost of supply models and the introduction of a new Large Business Tariff may support a conclusion that the rebalancing constraint should be relaxed for these purposes. In considering this issue, Multinet would like to draw the Commission’s attention to the fact that Multinet has used the inter-tariff rebalancing latitude responsibly during the current regulatory period.

9.1.2 Process for varying Tariffs in the third regulatory period

Is the current process by which tariffs are varied, introduced or withdrawn sufficient for the Commission to be satisfied that the new tariff structures are consistent with the Code? Should the distributor’s ability to change tariff structures be limited or subject to public consultation and Commission approval?

There are presently three forms of control on the introduction and withdrawal of tariffs intra-period:

• the pricing level of new and existing tariffs to ensure that Multinet complies with the price controls;

• cost-reflective charging, which means that tariffs must fall within upper and lower price bounds as per the cost of supply model; and

• transparency in the setting of tariff and future tariff policy direction, which is provided by the publication of Annual Tariff Reports.


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Multinet believes the present scope of controls is sufficient to ensure that tariffs meet customers’ requirements. To impose further restrictions on distributors’ ability to change tariffs would unduly restrict tariff innovation, which would ultimately be to the detriment of customers.

It is also worth noting that the limited time available during price reviews is not conducive to tariff development or the analysis and resolution of tariff issues. In general, price review periods are very busy for all parties and we have seen instances where very basic tariff issues (especially in the 2006 Electricity Distribution Price Review) have been seen as too difficult and thus dismissed out-of-hand in the rush to meet deadlines in the price review. It is therefore important that distributors are able to introduce tariffs between price reviews, subject to meeting the existing regulatory constraints.

It is further noted that Multinet’s ability to modify tariffs within an access arrangement period is critical to the ability of the business to manage risk effectively and manage appropriate price signals to customers in an evolving world. It is important that the business has an ability to respond, in the future, to new technology and developments which are unforeseeable at the time of each review. Constraining the ability of the business to introduce new tariffs, as proposed in the consultation paper, could have a significant impact on a business when the effect is left to compound for up to 5 years.

Finally, it is noted that the National Gas Code has been revised (in section 8.3) to incorporate sections 8.3A to 8.3H – which specifically allow for intra-period modifications of reference tariffs. Given these provisions, the Commission may be limited in its power to restrict intra-period tariff modifications.

9.1.3 Annual Tariff Reports

Do stakeholders find the annual tariff reports to be useful? Is there any additional information that they should contain?

Multinet notes that this question is directed principally at stakeholders other than Multinet. Multinet has consulted with stakeholders on the annual tariff reports, with no significant issues being identified. The company would be pleased to participate in a workshop on the content of the annual tariff reports, if the Commission believes that such a workshop is appropriate.


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9.1.4 Change in tax pass-through provision

In relation to the tax pass-through clause:

• are the pass-through events appropriate?

• is there merit in better defining a minimum materiality threshold for events that can be passed through?

• if so, what is an appropriate level of that threshold?

Multinet is concerned that the Commission is considering a materiality threshold in relation to tax pass-through provisions. Multinet will consider carefully whether the existing provisions in its access arrangement continue to meet the requirements of the Gas Code.

9.1.5 Pass-through of licence fees

Is there merit in changing the licence fee factor to align with the approach adopted in the electricity industry?

The consultation paper explains that the calculation of the licence fee factor for each year of the regulatory period is based on notional distribution revenues for the calendar year under consideration. These notional revenues were determined during the 2003 GAAR. In the Electricity Distribution Price Review (EDPR), the Commission adopted a different licence fee factor, which uses an estimate of the distribution revenue from the previous year rather than notional revenues, and wash-ups to account for differences between estimates and actuals. The purpose of this revised licence fee is to reduce the risk of over or under recovery of the licence fee.

Multinet agrees with the Commission on the issue of the licence fee factor. Multinet would like to ensure that the regulator’s costs can be recovered with minimum risk and administrative cost to Multinet. At present, the L factor exposes distributors to risk because there is the possibility of five years of compounding error in the forecasting of revenue, remaining uncorrected each year. As the distributors have no ability to influence the size and recovery of the L factor, there is little point in having a mechanism that introduces risk to the distributor. In Multinet’s view, the EDPR mechanism for recovering the regulator’s costs is more complex, but preferable as it exposes Multinet to less risk.

9.1.6 New Fixed Principles

The Commission’s comments raise the prospect of unnecessary regulatory risk. In Multinet’s view, the transition to the national distribution regulatory arrangements should provide for continuity and appropriate recognition by one Relevant Regulator of commitments made by a previous Relevant Regulator. Indeed, it is particularly noteworthy that the rationale for provisions of the Code that allow fixed principles to


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be put in place is to avoid the difficulties foreshadowed by the Commission in its consultation paper.

The consultation paper notes that the gas regulatory regime is currently under review by the MCE, and states:

“Further, the Commission may not be the Relevant Regulator for the purposes of considering proposed revisions to the distributors’ Access Arrangements at the end of the third regulatory period. To the extent that the distributors propose any new Fixed Principles as part of their Access Arrangement revisions, the Commission will need to have regard to these factors when considering whether the Fixed Principles are in the interests of the distributors, Users and Prospective Users.”

The difficulties perceived by the Commission regarding the consideration and approval of fixed principles that meet the Code requirements seem to suggest that it would be inappropriate for the Commission to be the Relevant Regulator for this review. Given the difficulties perceived by the Commission it would seem more appropriate for the AER - the Relevant Regulator at the time of next access arrangement review - to conduct the forthcoming 2008 review. Multinet notes that this would be consistent with the Australian Energy Market Agreement (AEMA), which requires all reviews that commence after 1 January 2007 to be conducted by the AER, with the GAAR commencing on 31 March 2007.


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10 Demand

10.1 Approach to assessing demand forecasts

How can the Commission best ensure that the distributors’ demand forecasts meet the requirements of the Code? What information should the distributors be required to provide to the Commission?

The Commission raises two options that could be employed by distributors to satisfy the Commission that the demand forecasts used in the calculation of Reference Tariffs are ‘best estimates arrived at on a reasonable basis’:

(a) the distributors developing forecasts on the basis of any methodology they consider appropriate. The distributors could then have these independently verified to ensure that they represent ‘best estimates arrived at on a reasonable basis’; or

(b) the Commission specifies a methodological approach that it considers is consistent with the Code requirements. Distributors could then be required to adopt this methodology in deriving their forecasts. Independent verification could also be required.

The Commission comments that its preliminary preference is for Option (a) – so that distributors can prepare and submit demand forecasts based on their own preferred methodology and the requirements of the Code. The Commission also states that distributors must provide, at a minimum:

• a summary of the inputs, assumptions and sources of data used in the demand forecast methodology, and

• historic and forecast information on demand.

The Commission has noted that its forthcoming information templates will set out its information requirements.

Multinet supports the Commission’s preference for option (a). In fact, Multinet notes that option (b) is probably inconsistent with the Gas Code’s propose-respond model. Multinet would be concerned if the Commission’s information templates constrained the company’s choice of forecasting methodology, and had the potential to force the company into submitting a set of figures which were not the company’s forecast..

In general, a clear distinction needs to be drawn between demand and volume forecasting. There are also quite disparate forecast/assumption requirements for transmission system design and distribution revenue recovery.


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Victorian Energy Networks Corporation (VENCorp) forecasts are created for the purpose of evaluating transmission requirements for the state of Victoria, with respect to peak demand. The forecasting assumptions are therefore focused on peak hour demand, peak day demand, and extreme weather events. Such assumptions are appropriate for design of distribution and transmission networks.

Distribution forecasts for the purpose of revenue evaluation is 1.1% related to demand, and 98.9% related to volume, due to this being the ratio of revenue calculated on a demand and volume basis. For this reason, the total consumption (volume) by pricing season is of more importance than extreme weather events for revenue recovery.

Accordingly we would expect the general methodology for evaluating the impact of various factors on demand and volume to be similar to VENCorp. To this end, Multinet has commissioned National Institute of Economics and Industry Research (NIEIR) to provide volume forecasts. However for the above reasons, the assumptions used for peak demand and average volume may differ. Accordingly, we would expect there to be some assumptions used in the forecasting that are materially different from those used in VENCorp’s forecasts.

10.2 Key issues in preparing demand forecasts

10.2.1 Tariff V forecasts

Tariff V connection numbers

What are the drivers that will impact on new dwelling completions over the third regulatory period? What impact will these drivers have? What is the best way to estimate new connections for the period?

The following factors affect new dwelling completions and the associated consumption profile:

• economic growth, new housing activity, household discretionary spending on energy and energy consuming appliances, business production levels, business longevity;

• temporal changes in consumption due to: higher density infill houses and new residences built in the last 5 years; associated growth reduction due to changes in housing stock and new appliance efficiency, and gas connection rates, and appliance penetration trends;

• reduction in demand and gas infiltration due to reduced gas retailer advertising;

• effects of policy initiatives such as 5 star housing (for new and retrofit), commercial building standards, solar hot water incentives, Minimum Energy Performance Standards (MEPS), water initiatives (shower heads and mixing valves), Sustainable Energy Authority Victoria (SEAV) demonstration programmes, Greenhouse Challenge participation, etc;


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• price related effects that may drive fuel substitution and appliance lifetime economics.

A particular factor of note is that Melbourne’s main new housing growth corridors are largely outside Multinet’s geographical area. This is reflected in the Melbourne 2030 urban development plan, and the Government’s urban development policy more broadly.

Multinet is seeking independent expert advice on this and other demand forecasting issues. More detailed information on these issues will be provided in Multinet’s 31 March 2007 submission.

Tariff V usage – domestic customers

Should VENCorp’s forecast annual standard EDD measure be used to determine the impact of weather on tariff V usage over the third regulatory period?

Multinet notes that in the 2003 GAAR the distributors proposed that the baseline Effective Degree Day (EDD) value was trending downwards in line with rising average temperatures. The Commission did not accept this proposal in its Final Decision, consistent with VENCorp’s position at the time. However, since 2002 VENCorp has accepted that the baseline EDD measure is falling each year. It appears from the consultation paper that the Commission now accepts that it made an error in the 2003 GAAR. In the 2008 GAAR, the Commission should carefully consider Multinet’s approach to forecasting on its merits, rather than simply relying on VENCorp’s approach.

Multinet notes that VENCorp is currently developing a new EDD measure, but this may not be available in time to be used in the preparation of the 2008 GAAR submissions. VENCorp’s work in this area indicates that there are issues with the current EDD66 standard, and also with the previous EDD99 standard. VENCorp is also changing the measurement/definition of the gas day.

Given this level uncertainty in the underlying fundamental measures, the variants of the EDD index will need to be further investigated, to identify any biasing effect on weather normalisation of actual data.

Multinet has substantial historic information and experience associated with the VENCorp EDD99 standard, and will most likely use the old standard for historic information, and either the EDD66 or latest VENCorp standard going forward.

The Commission’s position on EDD, irrespective of the basis on which it is measured, appears to be moving towards recognition of a warming trend in the EDD baseline - consistent with the position advocated by Multinet in the 2003 GAAR. Multinet will want to carefully examine VENCorp’s method for factoring the warming trend into the new EDD indexes, and Multinet may need to make appropriate adjustments to VENCorp’s methodology.


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Tariff V usage – existing and new domestic connections

What will be the drivers of average existing domestic usage during the third regulatory period? What impact will these drivers have? What evidence supports the case that average domestic usage is changing?

What will be the drivers of average new domestic usage during the third regulatory period? What impact will these drivers have?

The key drivers of existing average usage will include a mixture of socio-demographic factors, energy efficiency improvements, weather patterns, and appliance choice trends, including:

• socio demographic trends such as the aging population, and a continuing reduction in the average household size, which will tend to dominate overall trends;

• replacement of the appliance stock with more efficient appliances. For instance, storage water heaters will continue to be replaced with instantaneous heaters;

• changes in the appliance stock being due to fuel substitution. For instance, reverse-cycle air conditioning will continue to replace gas-fired space heating;

• Federal and State policy initiatives in the energy efficiency and housing sectors;

• public awareness and sentiment as influenced by SEAV “You have the Power” advertising campaigns.

It is also noted that consumption levels for new housing stock will be influenced by:

• the increase in apartments and smaller houses in Multinet’s area, which will lead to significant reductions in average new customer usage;

• policy initiatives such as 5 star housing (for new and retrofit), solar hot water incentives, MEPS, water conservation initiatives (shower heads and mixing valves), and SEAV demonstration programmes; and

• price related effects that may drive fuel substitution and appliance lifetime economics.

Multinet also notes that the Government may introduce new initiatives in the future that may affect both existing and new customers. In general, these initiatives will be aimed at CO2 emission reduction, and therefore reduced consumption. In terms of forecasting, there is an asymmetric risk that actual consumption will be lower than a central forecast. This risk needs to be carefully considered by the Commission. The above factors are matters that have been recognised by regulators in this and other jurisdictions in the past as having a material impact on consumption.


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It is also noted that cogeneration has the potential to increase gas consumption; however, recent studies have shown that cogeneration for individual small consumers is not yet economically feasible. New total energy/service providers with models such as GridX may have found an economic niche. Such models, if successfully implemented, will have the effect of reducing the potential number of new V customers and converting them into a single D customer. The Commission’s review of streamlining applications for the exemption of small embedded distributors may play a part in hastening the reduction in what would otherwise have been new V customers for distributors.

Non domestic average usage – existing and new customers

What are the key drivers of commercial usage? Is there a significant relationship between commercial usage and weather and/or output? If so, what is the relationship?

Is average commercial usage changing over time? If so, how is it changing and what data supports the case for a change?

Is average usage from new commercial customers likely to be materially different from the average usage of existing commercial customers? If so, what is the difference and what data supports such a conclusion?

Small business usage is driven by economic activity levels and weather patterns however overall usage is often difficult to predict as there have been shifts between tariff D and V. There are numerous issues that have an impact on consumption. While many of these issues are interrelated, a number of studies have attempted to identify the impact of individual factors.

The following factors will have an impact on forecasts of customer numbers, volume and demand, and should be included where appropriate:

• economic growth: household discretionary spending on products, business production levels, business longevity;

• weather normalisation: recognition of decreasing EDDs;

• day of the week impact on monthly figures;

• temporal changes in consumption due to economic activity;

• reduction in demand due to reduced Australian Gas Association (AGA) and dedicated gas retailer advertising;

• replacement of the appliance stock with more efficient appliances; and

• policy initiatives such building standards that promote greater energy efficiency, solar hot water incentives, MEPS, water conservation initiatives, SEAV demonstration programmes, Greenhouse Challenge participation.


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It is important that the above factors are recognised in Multinet’s demand forecasts, and taken into consideration by the Commission.

10.2.2 Tariff D forecast

What are the key drivers of tariff D demand? What macroeconomic variables are important when forecasting tariff D demand?

Tariff D gas usage is driven by a large number of factors. These include, for example: construction cycles, economic factors such as exchange rates, and farm production trends. As many tariff D customers are trade-exposed industries, they face competition from Asian imports, and the increasing concentration of manufacturing production in China. Some tariff D customers have closed entirely or moved some production offshore.

In Multinet’s view, the impetus for cogeneration opportunities has lost momentum in Victoria. Greenhouse Gas Abatement Programme (GGAP) subsidies and grants for new cogeneration projects have concluded. Moreover, existing cogeneration plants are reaching the ends of their inaugural contracts. Such contracts - which were set prior to contestability - had very favourable rates. Following renegotiation of these contracts - in the context of the present outlook for wholesale electricity prices - cogeneration plant is likely to be operated at a lower average load duty. All else held constant, this would lead to a reduction in Tariff D gas usage.

10.3 Tariff banding

Do the 2004 usage banding figures provide a sound basis for forecasting future tariff V usage bands? If not, what approach should be adopted to determining usage within each band?

Multinet has 4 pricing seasons – namely Peak, Spring Shoulder, Off-peak, and Autumn Shoulder. While the 2004 calendar year total EDD is similar to the VENCorp standard for that year, there are significant variances in the seasonal EDDs.

Analysis of seasonal data (on a reducing EDD basis on a line of best fit from 1976 to 2006 on an annual basis) suggests that total EDDs are 0.2 Standard Deviations away from the mean, however, the individual seasons vary significantly; as follows:

2004 Season Peak Spring Shoulder Off-peak Autumn

Number of Standard Deviations from mean

-0.4 0.58 0.06 -0.71


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Given these observations, 2004 is not a good representation of the underlying normalised weather conditions and thus the bands from 2004 are not appropriate to be used as a basis for forecasting. (Use of the 2004 bands would put too much emphasis on lower and higher tariff bands in various seasons.)

Accordingly, Multinet will be using a normalised set of banding figures for each season for forecasting purposes.


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11 Incentive Mechanisms

11.1 ECM for the third regulatory period

11.1.1 Implications for Access Arrangements in the third regulatory period

Is it appropriate to continue to apply an ECM in its current form? Is it desirable to retain an ECM in respect of capital expenditure? If so, what provisions can be included to ensure that incentives to inefficiently defer capital expenditure are minimised?

Multinet supports the continuation of the ECM in its current form. Multinet notes that the ECM is currently part of an approved access arrangement. In formulating its revised proposed access arrangements to apply from 2008, the company will consider whether the current scheme continues to be consistent with the requirements of the Code.


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12 Capacity Management, Trading and Queuing

12.1 Queuing policy

12.1.1 Queuing policy for the third regulatory period

Is it necessary for the Access Arrangements to include a Queuing Policy, and if so, what amendments should be made to the Queuing Policy in the existing Access Arrangements?

Multinet notes that it is a Code requirement to include a queuing policy in the access arrangement. There have been no operational issues with the current queuing policy and therefore, at this stage, Multinet sees no reason to amend it.


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13 Extensions / Expansion Policy

13.1 Existing provisions

The Commission seeks comment on the coverage and tariff provisions of the Extensions/Expansions Policy.

Multinet’s principal concerns relate to the Commission’s approach to unreticulated townships, which is considered below.

13.2 Unreticulated townships

13.2.1 New town extension and tariffs

The Commission seeks comment on the unreticulated townships clause of the Extensions/Expansions Policy and the manner in which it has been applied by the Commission? Does it provide sufficient flexibility for distributors to extend the network to unreticulated townships?

What are the advantages and disadvantages of creating new and separate tariff zones rather than applying a Surcharge when establishing Reference Tariffs for supply to unreticulated townships?

Multinet is disappointed with the approach the Commission has taken regarding the approval of the Yarra Ranges New towns project. In accordance with the requirements of the Gas Code, Multinet sought approval for a surcharge to apply for twenty years in order to recover that portion of the cost of the investment that would not be recovered through tariffs. The Commission has chosen not to approve the surcharge for the full twenty years and Multinet is required to seek re-approval of the surcharge in the forthcoming Access Arrangement review.

The Commission’s approach does not provide Multinet with the certainty required to facilitate further investment in similar schemes. This in turn may potentially deprive future new towns of the ability to connect to the gas network.


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14 Issues Associated with Full Retail Contestability

14.1 The FRC Fixed Principle

14.1.1 Remaining unrecovered capital expenditure form the second regulatory period

The Commission seeks comment on its proposed treatment of gas FRC capital expenditure incurred in 2006 and 2007 and which remains unrecovered at the end of the second regulatory period.

There are fixed principles in place to ensure that the businesses are able to fully recover those FRC capital costs that have not been recovered through the Order in Council process. These costs should be rolled into the Regulated Asset Base (RAB) as an opening adjustment and any discrepancy in 2007 can be corrected for in 2013 in a similar fashion to that applied to any capital expenditure forecast error in the last year of an Access Arrangement.

14.1.2 Application of adjustment factor to determine any under-recovered / over-recovered amounts

What is the best approach for dealing with the under and over recovery amounts that exist at the end of 2007? Should the timing of the 2007 submission be changed to be more consistent with the Commission’s timetable for the Access Arrangement revisions?

The current reporting process imposes a substantial regulatory burden on Multinet. Multinet is required to provide audited information in September of each year in order to enable the Commission to approve any tariff variations. Multinet is also required to provide audited information again in April of each year as part of the Regulatory Accounts process.

The most efficient approach (for both Multinet and the Commission) would be for Multinet to not lodge a submission in the 2007 calendar year for a change in 2008 tariffs. Any variations at the end of 2007 can be recovered in 2009. The process for identifying these variations would be the 2007 Regulatory Accounts which are prepared in April of 2008.

This process would eliminate the need to have two separate audit processes at the conclusion of the Order in Council. It would also enable the Commission and the businesses to concentrate resources on the Access Arrangement revision rather than committing resources to variations of Order in Council expenditure and revenue that are very small in comparison to the Access Arrangement.


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15 Other Issues

15.1 Albury Access Arrangement

What are the advantages and disadvantages to Envestra, retailers and customers from merging the Albury and Victorian Access Arrangements?

Multinet has no comment on this issue.

15.2 Length of the regulatory period

What is the most appropriate length of the third regulatory period?

Multinet has not assessed this issue at this time. The issue only needs to be addressed if a DB proposes a different Access Arrangement review time. As such there is no need to debate this as a hypothetical issue at this time.

Multinet comments that there may be merit in adopting longer rather than shorter regulatory periods, particularly in circumstances where the regulator and the company both have substantial experience in the operation of an established regulatory regime. Multinet will give further consideration to this issue in preparing its access arrangement information. Multinet notes, however, that the Commission’s information templates only cover 5 years, and the company presumes that this does not indicate that the Commission has in fact reached a decision on the duration of the regulatory period.

Submission to Essential Services Commission Re Gas ... Related party contracts.....9 4 SERVICES...

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