Summary

  • The AER’s 16 October draft would exempt two Australian Gas Networks hydrogen trials from specified gas ring-fencing rules until 30 November 2031, subject to conditions.
  • A formal request by a third party to connect or gain access for a renewable-gas facility would have to be reported within 15 business days. It would open a review path, not cancel an exemption automatically.
  • The proposal rests on the AER’s current finding that the trials are small and no direct local competition or relevant access request has been identified. The decision remains open to submissions through 6 November.

The Australian Energy Regulator has proposed a five-year exception to structural separation for Hydrogen Park Gladstone and Hydrogen Park South Australia. The draft, published on 16 October, would let Australian Gas Networks Limited (AGN) continue producing and blending hydrogen within the same corporate group that owns and operates the relevant distribution networks. It would also remove the requirement to keep separate marketing staff for those two related activities. The proposal is limited to sections 139 and 140 of the National Gas Law; it does not repeal gas ring-fencing rules for other businesses.

Ring-fencing is designed to stop a network operator from using control of a pipeline to give an affiliated business better access, pricing or information than rivals. The National Gas Rules allow an exemption when their specified tests are met. For the section 139 exception, the AER must be satisfied that the relevant pipeline is not significant, compliance costs exceed the public benefit, and the business has internal controls that substantially replicate safeguards for a related-party contract. The section 140 test also weighs compliance costs against public benefit.

The AER says both trial networks are small relative to AGN’s wider systems. HyP Gladstone supplies about 700 customers and has blended up to 10% hydrogen by volume since November 2024. HyP South Australia supplies fewer than 4,000 customers with a blend containing up to 15% hydrogen. Those operating figures and network comparisons are drawn from the regulator’s assessment of AGN submissions. AGN estimated one-off compliance costs of A$500,000–A$1 million for Gladstone and A$750,000–A$2 million for South Australia.

The AER accepts that separation would bring material costs and operational inefficiency; the estimates remain AGN’s, not audited cost findings.

Competition is the condition the draft would keep watching. The AER says it found no competing hydrogen-blending facilities or third-party access requests on the Gladstone or Tonsley networks. It also assessed two South Australian renewable-gas projects. It says the Wasleys biomethane facility is on a physically separate sub-network and the SA1 Salisbury plant is not currently a competitor given its stage and location. That is a local, present-tense assessment, not a claim that renewable-gas markets will remain empty.

The proposed safeguards make future change legible to the regulator. AGN would have to notify the AER as soon as practicable, and within 15 business days at the latest, if a project materially changes in size or scope, if a third party formally requests connection or access for a hydrogen, biomethane or other renewable-gas facility, or if the internal controls change materially. The notice must include relevant documentation and explain any increased risk of public detriment. The AER says it would then assess whether the change affects the exemption basis and whether further action, including variation or revocation, is needed.

A request alone would not decide the outcome.

The proposed exemptions would begin when existing deemed exemptions expire on 30 November 2026 and end on 30 November 2031. A defined expiry would require a fresh assessment if AGN seeks another exemption. Stakeholders can submit views by 6 November; the AER expects a final decision by 30 November. The central question is whether monitored internal controls can remain a credible substitute for structural separation as hydrogen activity and potential access demand develop.

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