DISPOSICIONES SOBRE REEMBOLSO

functions and responsibilities; Chair; funding; number of members, their tenure, appointment process and required expertise; and project management office/staffing arrangements.

The COAG Energy Council should appoint senior (executive or Board level) representatives that meet the established skills requirements.

Additionally, the Chair of the COAG Energy Council’s Senior Committee of Officials (SCO) and one or two other SCO officials should be members of the GRG, as

determined by the COAG Energy Council. The total number of members of the GRG should be limited to provide a balance between a small enough group to be

manageable while still having sufficient coverage of the required skills and experience. It would be important that the members of the GRG were committed to participate in a relatively long reform process, in order that the GRG maintains its institutional

knowledge and the seniority of its membership.

Given the requirements for extensive, senior level industry engagement, the

complexity and scope of the issues to address, the relatively long-lived nature of the reform process and the need for a broad east coast focus, the Commission does not recommend that SCO officials be required to progress the package of reforms. SCO officials are already tasked with championing both national and state-level reform processes and in most cases are supported by relatively small teams. Such an additional burden would create significant risks to the delivery and timing of the reform program.

SCO representatives will still be able to provide a central role in the GRG and provide a clear policy direction to the GRG, taking into account the views of all participating jurisdictions. This should mean that the package of changes to the NGL and NGR developed by the GRG is consistent with the policy intent. Although the

recommendations of the GRG would not be binding on the COAG Energy Council or AEMC to implement through NGL and NGR changes, the Commission envisages that through the SCO representatives, the GRG's recommendations would likely be

appropriate and consistent with the NGO. The GRG should also be required to report regularly to the COAG Energy Council (for example, prior to each COAG Energy Council meeting, which are typically biannual).

The GRG, including the Chairperson, would be an independent group funded by the COAG Energy Council and supported by a dedicated and full time project

management office. The project manager would report to and be appointed by the Chairperson of the GRG, coordinate the design work overseen by the GRG and provide legal, economic and technical advice, both through the staff and through external consultancies or law firms. It may be appropriate for the project manager to be appointed early in the implementation of the GRG, as one of the first tasks of the newly appointed Chairperson. The project manager would work closely with the GRG and the Chairperson in particular.

The project manager would coordinate work undertaken by various Working Groups to develop the reform package. Working Groups would be comprised of members of industry, including from organisations not represented directly on the GRG, market institutions such as the AEMC, AEMO and the AER where relevant, and government officials. These groups, the GRG's staff, and external consultancies would be expected

to undertake the majority of the work to develop the reforms, under the direction of the GRG and under the management of the project manager.

The number, membership and remit of Working Groups would be determined by the GRG in collaboration with the project manager. We expect that Working Groups might be formed in the following areas:

1. Day ahead auction design for contracted but un-nominated capacity; 2. Capacity standardisation, capacity trading platform and capacity trading

information provision; 3. Southern Hub access;

4. Southern Hub trading and balancing; and

5. STTM transition models and other wholesale market design changes.

The COAG Energy Council should fund the GRG to cover salaries and other on-costs for the Chairperson and staff including the project manager; office space and related outgoings; IT costs; consultancy costs; and travel and other out-of-pocket costs for members of the GRG and Working Groups. Members of the GRG (other than the Chairperson) and Working Group members would be expected to provide their time on a voluntary basis. This cost is appropriately borne by industry given the likely importance to industry of progressing appropriate reforms.

A summary of the proposed GRG model is provided in Figure 3.1.

3.1.2 NGL and NGR changes required to give effect to the package of reforms The task of the GRG would be to propose the details of recommended NGL changes to the COAG Energy Council and details of recommended NGR changes to the AEMC to effect the detailed design of the recommended reform package. It would also develop a draft of any subordinate documents, such as AEMO procedures, that it recommends be created under the NGR.

The Commission has considered the changes to the NGL, NGR and subordinate instruments that may be required to implement each of the packages of the secondary capacity trading reforms. These are detailed in chapter 5. The Commission expects to take a similar approach to its recommended changes for wholesale markets in the Draft Final Report to the Review of the Victorian DWGM.

In many cases, the NGL and NGR changes and subordinate instruments required will depend on the detailed design of the reforms, which will only be known once the GRG's analysis has progressed. However, regardless of the detailed design, the Commission will require NGR making powers in regard to the regulation of pipeline capacity trading arrangements. Such powers are not currently conferred by the NGL (unlike for example the power to make rules with regard to the regulation of the operation of the DWGM).75 _{The Commission therefore recommends that the COAG} Energy Council progress an amendment to s74(1)(a) of the NGL to give the AEMC a rule making power with regard to the regulation of pipeline capacity trading

arrangements.

Recommendation 11: COAG Energy Council to progress an amendment to s74(1)(a) of the

NGL to give the AEMC a rule making power with regard to the regulation of pipeline capacity trading arrangements.

Further issues to be resolved by the GRG in the implementation of the package of reforms include whether:

• Schedule 1 to the NGL needs to be amended to include additional matters or things (to be specified in that Schedule 1) for which the AEMC may make Rules; and

• the AER’s statutory functions and powers as set out in the NGL are sufficient for it to monitor and enforce the reforms, in particular the capacity market

arrangements including the operation of the auction platform and trading platform.

In many cases, the GRG may recommend that highly detailed design is not contained in the NGR, but instead in subordinate instruments. This is a common approach taken in both the NGR and National Electricity Rules (NER). In these cases the NGR might contain overarching design features and principles, and instruct another body to be responsible for the detail through the subordinate instrument.

Options for subordinate instruments include, but are not limited to: • AEMC Standards;

• AEMO Procedures; • AER Guidelines;

• extensions of the access arrangement regime for pipeline regulation (ie, an AER approved instrument); and

• documents overseen by Committees created under the NGR. Examples in the electricity sector include the Reliability Panel76_{, the Information Exchange} Committee77 _{and the Settlement Residue Committee}78_.

3.2

Assessing the development of the reforms

An important element in determining whether the Energy Council's Vision is being achieved will be monitoring the development of liquidity in the wholesale gas and pipeline capacity trading markets. Monitoring liquidity on an ongoing basis will allow industry participants and policy makers to understand how the trading markets are performing, the value they are providing to gas market participants, and how they could be improved to better meet market participants' needs.

Accordingly, the Commission recommends that the Energy Council tasks the

Commission with reporting to Energy Ministers on a biennial basis on the growth in trading liquidity in the wholesale gas and pipeline capacity trading markets.

Recommendation 12: COAG Energy Council to task the Commission with providing a

biennial report on growth in liquidity in wholesale gas and pipeline capacity trading markets, with the first report due by July 2018.

The Commission recommends the first report be provided to the Energy Council by July 2018, and expects that report to primarily cover how trading is developing at the Wallumbilla and Moomba GSHs, as well as updating Energy Ministers on how the market is adjusting to the structural changes underway. Subsequent reports will measure the development in gas trading at the Southern hub and capacity trading, once reforms to these markets have been implemented.

Through the biennial report, the Commission will consider whether to recommend to the Energy Council that additional work to expand the geographic scope of the Wallumbilla GSH be undertaken and progressed through the GRG.