Epic and OffGAR trade broadsides

The war of words between Epic Energy and the WA Office of Gas Access Regulation (OffGAR) has reached new levels after the regulator released an independent report supporting its position on pipeline tariffs.
Epic and OffGAR trade broadsides Epic and OffGAR trade broadsides Epic and OffGAR trade broadsides Epic and OffGAR trade broadsides Epic and OffGAR trade broadsides

Epic's suggested amendments to the May final determination were rejected by regulator Dr Ken Michael, and he has also ignored two recent judgments from the Australian Competition Tribunal that raise questions concerning the model on which his assessments have been based.

However, the report by Lakshman Alles, of Curtin University's Institute for Research into International Competitiveness, found that the regulator's methodology used to set tariffs was "the most appropriate framework" and that there was no industry indication that pushing for bigger returns on pipeline assets was justified or should result in policy change.

Epic Energy has constantly argued that the revised tariffs are too high and that they have forced the embattled company into selling its Australian assets, including the ageing Dampier to Bunbury Natural Gas Pipeline (DBNGP), which is at the centre of the debate.

Epic Energy's CEO, David Williams, responded to the report by saying that the decision of the gas regulator not to raise access tariffs on the Dampier-to-Bunbury gas pipeline means that it is not a viable business.

In setting his tariffs the regulator has worked on a capital base of $1.55 billion for the pipeline, a return on equity of 12.5% per cent and a weighted cost of capital of 7.4% real before tax.

That has led him to publish tariffs from Dampier to Perth (backdated to January 2000) at $1 a gigajoule to Kwinana, $1.06 a GJ to Rockingham and $1.08 a GJ to Bunbury.

In 1998 Epic paid the WA Government $2.4 billion for the pipeline, a price industry analysts believe was around $700 million too much, and almost immediately sought an increase in tariffs to justify a $300 million expansion of the pipeline.