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Editorial comment

Sing while you’re winning

Australia was a first time competitor in last month’s 61st Eurovision Song Contest. They were a somewhat unexpected addition to the group of (mainly) European nations, but they held their own as newcomers, winning a solid second place position behind Ukraine.

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This year the organisers used a new voting system, in which two sets of result rankings were combined to make one final score for each nation. Here’s how it worked: a panel of judges from each country voted on all 26 songs and then allocated rankings to their top 10 songs. A league table was established. These results were combined with some data from telephone votes from all of the nations involved (which were also translated into top 10 rankings). Drama ensued: the panels voted markedly differently to the public and the new tally of two sets of rankings (as opposed to one combined set of rankings in the old system) meant that the initial league table underwent quite a transformation. Poland moved from bottom of the table to eighth after televotes were counted. Russia lost some vital ground. Ukraine was victorious. It’s worth noting that, under the old voting system, Australia would have won.

The issue of competition is a sore point for Australia at the moment: the nation’s gas industry has been under fire for allowing gas suppliers to take advantage of market uncertainty to raise prices and manipulate contract terms. A year long enquiry into the competitiveness of wholesale gas prices on the east coast, conducted by the Australian Competition and Consumer Commission (ACCC), has concluded that regulations covering the region are ineffective. The ACCC claims that pipeline operators are indulging in monopoly pricing, resulting in higher gas prices. “The regime regulating gas pipelines is not fit for purpose and pipeline pricing is largely unconstrained by either the threat of regulation or effective competition,” said ACCC Chairman Rod Sims as he presented the results to the government.

The enquiry was prompted by complaints from industrial gas users, who balked at surging wholesale gas prices amidst the emergence of Queensland’s LNG export sector. Gas supply should be able to cover both domestic demand and existing LNG export contracts for the next 10 years, but the fall in global oil process has stalled some development projects and it is in this gap that gas suppliers are allegedly finding themselves able to push up their margins. “While the pipeline sector is responding to changing market dynamics and offering new services, pricing based on significant pipeline market power is prevalent,” says Sims.

The ACCC is advising government ministers to change the current test on whether a pipeline should be covered by regulation, replacing it with a new test that focuses on whether a pipeline has substantial market power, and whether this power is likely to continue in the future.

Of course, pipelines are built to supply both a current need and a future demand; so putting increased regulatory scrutiny on projects that could play a major part in the near to mid term may stymie these important projects.

Operators are opposed to any significant rehaul and re-regulation of existing gas pipelines, which where liberalised in the 1990s. Of the 27 major gas transmission pipelines operational in the east coast, only five are subject to any direct regulation: a change in this policy would mean operators are less able to inject investment into new capacity and are less able to respond flexibly to changing market needs (pretty key in a market where LNG’s contribution to the energy mix is not guaranteed, and new suppliers are few). As Mick McCormack, Managing Director of the APA Group (Australia’s largest gas pipeline operator) has said in the wake of the ACCC report: “The challenges of developing new gas supplies have been obvious for a number of years. It is a perverse approach for the ACCC to consider that more regulation … will contribute to solving this issue.” There is a thin line between promoting healthy competition, and changing the rules entirely.

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