The Federal Government plans to extend the current cap on gas prices through to mid-2025 amongst other measures to minimise the risk of supply shortfalls, deliver Australian gas at reasonable prices, and provide certainty for trading partners.
In December last year, the government introduced a price cap of $12 a gigajoule (GJ) to apply to new domestic wholesale gas contracts by east coast producers for gas to be supplied over 12 months from developed fields.
Coupled with action to cap coal costs for power generators, gas price caps under the Government’s Energy Price Relief Plan nearly halved wholesale energy prices.
In its final consultation of the mandatory code of conduct (Gas Code). the Federal Government proposes measures to ensure domestic prices are reasonable, through the combination of:
- A price cap, which is to be set at $12/GJ and subject to a review commencing by 1 July 2025;
- A process for qualifying for exemptions from the price cap on the basis of making satisfactory ACCC and court enforceable supply commitments; and
- Allowing small producers of gas to be exempt from the price cap if they supply only the domestic market.
The government states the Gas Code will ensure sufficient supply of Australian gas for Australian users at reasonable prices, give producers the certainty they need to invest in supply, and ensure Australia remains a reliable trading partner by allowing LNG producers to meet their export commitments.
“The release of the Gas Code consultation today gives stakeholders an opportunity to provide technical feedback on the draft regulations before the Code is finalised ahead of the new financial year.
“In addition, it will require all participants to abide by conduct provisions that will level the negotiating playing field between users and producers to deliver a better functioning gas market.”
The Government is seeking views from gas market participants on the Gas Code, including the merits of the approach to reasonable pricing relative to the original framework proposed in December 2022, as well as submissions from large gas providers on the supply and price commitments they would be prepared to make in the context of the proposed exemption framework.
The Gas Code will be supported by a strong enforcement regime delivered by the ACCC, with a review to be undertaken no later than two years after coming into effect, to ensure the Gas Code remains effective and fit for purpose.
The consultation on the draft Gas Code opens today and will close for submissions on May 12.
