Draft Regulatory Decision for the Dampier to Bunbury Natural Gas Pipeline

March 15, 2011

The Economic Regulation Authority (ERA) of Western Australia yesterday released
its Draft Decision on DBP’s Proposed Revisions to the 2011-2015 Access
Arrangement for the Dampier to Bunbury Natural Gas Pipeline (DBNGP) lodged on 1
April 2010.

This Draft Decision will be the subject of further review and consultation with
interested parties including DBP. The ERA has indicated that it expects to issue its
Final Decision before the end of this financial year.

DBP notes that capacity on the DBNGP is fully contracted and on that basis the
ERA’s proposed access arrangement will not have an impact on revenues it will earn
prior to 2016 as DBP will continue to operate under existing negotiated tariffs.

Ultimately the parameters of the final access arrangement will affect the starting point
for the 2016-2020 regulatory period.

The Draft Decision proposes a 7.6% increase in the reference tariff, which is a
smaller increase than that requested by DBP in its filing.”

The key reasons for the differences are:

Rate of Return: The ERA proposes a Real pre tax Weighted Average Cost of
Capital of 7.16%

CPI assumption: Using 100% of CPI (all capital cities), rather than CPI (Perth)
that DBP considers more relevant to its business

Operating costs: some costs are proposed to be excluded

Capex: The ERA has allowed all but $50 million of the $1.85 billion in capital
expenditure incurred by DBP since 2005

DBP’s CEO, Mr Stuart Johnston said: “While it is important that the ERA has agreed
to roll in almost all of the capital expenditure that we have invested in the last 5 years
expanding pipeline capacity, it is just as important the business be allowed to earn an
appropriate return on that investment.”

“That return must be commensurate with the prevailing conditions in the market for
funds, as well as the risks in operating an essential high pressure gas transmission
pipeline and providing services to customers. As a result, we will closely review this
aspect of the draft decision.”

Mr Johnston went on to say “DBP is proud of its track record over the past 25 years
of safely and reliably operating the DBNGP.”

“DBP’s submission to the ERA on operating expenditure was based on continuing to
be a prudent and efficient operator, whilst meeting our service delivery obligations to
customers. DBP will review the reasons why the ERA proposes not to accept all of
DBP’s submitted operating expenditure.”

A copy of the ERA’s draft decision, together with a copy of DBP’s initial submission
and supporting submissions are available on the ERA’s website.

STAFF LOGIN

Recover Password
login