Gas reset ‘could cut bills by $270’
Government intervention in the east coast’s gas sector through a reservation policy could slash $270 from annual household power bills, under modelling sent to the Coalition by the Centre Alliance as part of a major energy reform package.
The controversial reset of the industry negotiated by Centre Alliance senator Rex Patrick in exchange for supporting the government’s tax cuts includes a proposal to replicate Western Australia’s gas reservation in the eastern states, along with a review of the export trigger and pipeline reforms.
Mr Patrick consulted with the Institute for Energy Economics and Financial Analysis — a US-based non-profit group that backs climate-friendly investment — as part of negotiations with the government to boost supplies and lower gas and power prices on the eastern seaboard. Each Australian household would save $270 per electricity bill if the government intervened in the market and set a gas reserve price, the IEEFA study found.
It proposes the solution to “excessively high” gas prices is a full domestic gas reservation policy fixing prices at $5 a gigajoule on existing and future gas production.
“Every major gas producing nation in the world has some form of gas reservation policy, except eastern Australia,” IEEFA investment analyst Bruce Robertson said. “Even Western Australia has successfully implemented one. The government has set a very public intention to bring energy prices down. A gas reservation policy is really the only solution.”
Gas prices have jumped to $12 a gigajoule, up to three times historical levels, while long-term contracts are also proving difficult to negotiate for some manufacturers. Gas shortages on the east coast are also set to emerge within three years and prices will remain high for the next decade, ratcheting up pressure on large industrial users struggling with soaring tariffs, experts have warned.
Mr Patrick said he spoke at length with Mr Robertson as part of his research into the east coast gas industry and said the IEEFA’s cost savings from gas reservation roughly tallied with other estimates made by economists he had spoken to.
“I provided a draft copy of the IEEFA report to the government during my discussions,” Mr Patrick told The Australian. “I sought independent guidance as to the accuracy of the numbers and they were within acceptable tolerances.”
While the government has indicated it will gradually release details of any new proposals with the industry over the next few months, it’s expected to raise the prospect of a domestic gas reservation policy through the formal Coalition of Australian Governments process.
In addition to tweaks to ensure more domestic supplies are made available through the export trigger, the minor party has raised the issue of potential pipeline “gouging” with the Coalition.
Australia’s petroleum and gas lobby has slammed the proposed changes and called for more details to be released by the government.
However, Mr Patrick said full consultation on any regulatory reforms will be done in conjunction with industry.
Pipeline giant APA Group rejected a push by the Centre Alliance for a regulatory crackdown on east coast pipelines last week and is expected to fight any reform plans.
APA has long been a target for both politicians and regulators amid a blame game over high prices and a supply shortfall on the east coast, given it owns pipelines that transport more than half of Australia’s gas supplies.
The competition regulator found in 2016 that more regulation of gas transmission pipelines would help resolve gas supply shortages.
APA rejected that claim three years ago and yesterday said there was also no basis to the Centre Alliance’s accusation of gouging in the sector.
Instead, it called for more supply into the market as the quickest way to ease shortages.