Strains in the gas market have not been eased by the Albanese government’s price caps imposed late last year, with an industry group claiming supply shortages remain while the peak gas lobby is warning the sector has become “virtually paralysed”.
One month on from the government’s rare intervention to limit domestic gas prices to $12 a gigajoule and black coal to $125 a tonne, big commercial gas users are hoping new compliance guidelines to be released soon by the Australian Competition and Consumer Commission will force suppliers to provide an adequate supply.
“The gas industry is still behaving like a bunch of bullies and effectively looking like they’re withholding supply,” said Andrew Richards, CEO of the Energy Users Association of Australia (EUAA). “You would only withhold supply if you had market power.”
One large gas customer had gone to the market five times recently and failed to receive an offer, Richards said. At $12 a gigajoule, suppliers would still enjoy a markup of 100%, but not the five times windfall if they charged the price they could get on export spot markets after Russia’s invasion of Ukraine, he said.
The federal treasurer, Jim Chalmers, said the government expected gas producers “to act promptly to implement the temporary price cap”.
“[T]he ACCC is closely monitoring the behaviour of the gas producers to make sure that they are consistent with their obligations under that temporary price cap and under the [gas trigger ] ADGSM [Australian Domestic Gas Security Mechanism] as well,” he said.
Energy supply and prices loom as a danger for a government that came to office last May promising electricity prices would be $275 a year lower for households by 2025. Households can expect power prices – which are influenced by the cost of gas – to rise another 23% this coming year, on top of 20% in 2022, even with the price caps, according to treasury modelling.
Samantha McCulloch, the chief executive of the Australian Petroleum Production & Exploration Association (Appea), said the government’s intervention had resulted in “a chilling of the market” at a time when the sector needed more investment to boost supply.
“The gas industry has sought clarification of a number of practical questions and issues regarding the implementation of the price cap and we are still waiting for guidance from the regulator,” McCulloch said. “The lack of clarity on how the price cap order is to be applied alongside the threat of permanent gas price regulation has virtually paralysed the market.”
Companies could face a $50m penalty for breaching rules that are still being defined, she said, adding the “complex and far-reaching reforms” had been rushed through without adequate consultation.
AGL Energy, the country’s second-largest gas retailer, confirmed on Monday it was unable to sign up new industrial and commercial customers because it had no access to “incremental” gas supplies. Efforts to woo new household clients continued.
Existing large customers whose contracts run out will be forced on default tariffs based on current spot-market prices, a spokesperson said.
Both gas retailers and customers faced a “challenging” market because of tight supplies, Sarah McNamara, the chief executive of the Australian Energy Council, said.
“It will take time for the new price caps to feed through to retail prices and the timing will also depend on a retailer’s supply arrangements,” McNamara said.
One complication was that producers “appear to be trying to understand the full implications of the new federal laws, so they don’t inadvertently breach them and end up potentially facing severe penalties”, she said.
The ACCC said it was aware that some gas producers had paused entering into new contracts while they sought to understand the government’s gas market emergency price order. It would, however, be on the lookout for “avoidance” behaviour.
“The ACCC is responsible for enforcing the price order and will soon publish interim compliance and enforcement guidelines to support the gas industry with their obligations to comply,” a spokesperson said.
“If we become aware that gas is not being made available and there is evidence that it was planned, or likely to be available, or is being offered on terms which effectively equate to a refusal to supply, we will investigate whether that conduct may amount to an avoidance scheme,” he said.
