Energy user groups have condemned the Albanese government’s agreement with gas exporters saying it will lock in high prices that will force businesses to close, hurt households and hobble the transition of the electricity sector off fossil fuels.
The resource minister, Madeleine King, on Thursday said the government had signed a new agreement with the big gas exporters from eastern Australia that would ensure there was sufficient supplies to meet local demand.
But industry and consumer groups said prices being offered were as high as $70/GJ. At that price, everything from groceries to electricity bills will continue to climb, they said.
“Getting sufficient volumes of Australian sourced gas to supply the Australian market should never be a question we need to answer,” the chief executive of the Energy Users’ Association of Australia (EUAA), Andrew Richards, said. “[It] seems we will have plenty of gas, it’s just a pity that nobody will be able to afford it.”
The EUAA was so incensed by Thursday’s announcement it took down a media release from Wednesday in which Richards had thanked the government “for going into bat for domestic gas consumers”.
The executive director of Manufacturing Australia, Ben Eade, said the agreement “smashes investment confidence for gas customers while entrenching super profits”.
“It condemns more Australians to paying global spot gas prices that are already at unsustainable highs,” he said. “At the same time, it makes the job of transitioning to a lower emissions energy sector much harder because it will make it much more expensive.”
As gas often sets the price for electricity in the national electricity market, its higher cost will also push up power bills.
“Gas producers have got to recognise that they have a role to play in meeting the national interest and not working against it,” the industry minister, Ed Husic, told ABC’s RN Breakfast on Friday.
“There is definitely room there to supply at prices for an Australian resource that meets the needs of Australian manufacturers and households,” he said.
At the Thursday announcement, King said the agreement was “a significant improvement on the deal done by the previous government”, ensuring there was an additional 157PJ of gas in east coast gas markets in 2023. That will be almost three times the shortfall forecast by the ACCC in July.
“Additional supply will put downward pressure on prices,” King said.
The gas industry that represents the big three east coast gas exporters – Santos, the ConocoPhillips-led APLNG group and Shell’s QGC – said the agreement ensured domestic supplies while fulfilling obligations to trading partners and investors.
The manager of policy and research at St Vincent de Paul Society, Gavin Dufty, said the gas pact gave some certainty to the market but potentially locked in high gas and electricity prices for a long time.
But the pain would not be evenly distributed, as households with solar panels, for instance, would be shielded from some of the cost increases.
Victorian households may also avoid some of the impacts due to the state’s gas suppliers being on long-term contracts.
The principal national adviser for the AiGroup, Tennant Reed, said support for the most vulnerable 10% of households and businesses to nullify the impact of higher energy costs could reach $6bn to $7bn over three years.
“On the one hand, it’s a lot of money,” Reed said. “On the other hand, it’s not compared to what we have spent in this country to get through Covid quite recently.”
Governments could support “a lot of sensible things on energy management, energy efficiency, switching from away from gas [but] they’re probably not going to help a lot of people in the next couple of years”, he said.
Future wholesale power prices were higher across the National Electricity Market, Reed said. New South Wales’s 2023 power price had risen to $235/MWh as of Thursday, up from $216/MWh last Friday. While those in Queensland were at almost $227/MWh up from $209/MWh.
Reed said the higher gas prices fed directly into power prices. An open cycle gas generator paying $8/GJ for gas could generate electricity at about $100/MWh, but at $50/GJ the cost was up $600/MWh.
