The potential risk to public safety posed by the economic regulation of gas infrastructure

Studies into the causes of major disasters have emphasized the extent to which cost cutting by senior management has contributed to the potential for accidents in the medium to long-term. Setting budgets for safety expenditure is considered an internal company matter with the required spending level meeting, at a minimum, regulatory requirements for safety. For companies also subject to pricing regulation (such as monopoly natural gas suppliers), economic regulation—seeking to emulate the price pressures of competition— requires that all expenditure, even that related to safety, must be deemed as ‘efficient’. Drawing on 49 stakeholder interviews, document review and case studies, this research—focusing on the Australian gas transmission pipeline and distribution network (infrastructure) sector—considers the extent to which economic regulation influences safety expenditure and thus potential long-term public safety outcomes. The economic regulatory submission, prepared by regulated gas companies, can be conceived as a boundary object that mediates the social worlds of the economic regulator and the regulated company. Such a conceptualization reveals differing orientations towards safety expenditure and what this means for the public good. We argue the Australian economic regulatory framework, as currently enacted for the natural gas sector, is significant for the management of public safety risk. We conclude that minimizing risk to the public from a major gas transmission pipeline or distribution network failure would be better served by the economic regulatory regime considering safety-related expenditure separately from all other expenditure categories, and that consideration should be informed by the technical safety regulator's view. The findings of this research will be of interest to jurisdictions around the world where economic and safety regulatory regimes intersect.