ACCC Launches Investigation into Lack of Transparency in Australia’s Gas Markets

Friday 21 April 2017 @ 8.38 a.m. | Legal Research | Trade & Commerce

The Australian Competition and Consumer Commission (ACCC) will use its inquiry powers, including its ability to compulsorily acquire information, to increase transparency and address opaqueness in the gas market.

The ACCC will provide regular information to the market over the next three years on the supply and pricing of gas under a broad reference from the Federal Government.

Background to the Investigation

It was recently announced that the Federal Government has given the ACCC a broad remit to investigate the gas market after industrial users complained that contract prices have soared around 500 per cent in recent years.

In 2015, the ACCC undertook an Inquiry into the east coast gas market. The Inquiry found that unprecedented changes in the east coast gas market since 2012 can be attributed to three key factors:

  • the magnitude of gas flows to the liquefied natural gas (LNG) projects in Queensland, which are removing gas from the domestic market;
  • lower oil prices, which are resulting in declining investment in gas exploration and lower production forecasts for both domestic and LNG projects; and
  • moratoria and regulatory restrictions, which are affecting onshore gas exploration and development.

The ACCC cautioned that the east coast gas supply outlook in the medium term was uncertain and emphasised that there was an urgent need for new gas supply from diverse sources to support the domestic market. The ACCC also made a number of recommendations around improving arrangements for gas transportation and gas market operations and transparency.

The Australian Energy Market Operator’s [AEMO] 2017 Gas Statement of Opportunities projected that declines in gas production will lead to insufficient gas between 2019 and 2024 to meet both domestic gas and electricity forecast demand. AEMO and industry have developed a framework to make sure gas is delivered at times of peak electricity demand to prevent blackouts, to be in place by 1 October 2017. The gas industry has also revised supply and production figures which, subject to further study by AEMO, should help address projected shortfalls.

Scope of the Inquiry

Matters to be monitored and considered by the inquiry will include:

  • the pricing and availability of offers to supply gas;
  • the volumes of gas supplied or available for current or future supply, including natural gas extracted or produced in Australia, or imported into Australia;
  • the pricing, volume and availability of gas for domestic supply compared to the pricing, volume and availability of gas for export; and
  • the pricing, volume and availability of other goods or services, such as goods or services for drilling, storing or processing gas, that enable, assist or facilitate the supply of gas or gas transportation services in Australia.

The ACCC will also work with Dr Michael Vertigan to recommend longer term transparency measures. The scope of this work will cover the full supply chain, including producers, transporters and retailers.

Reaction from the ACCC

Commenting on the investigation in a recent ACCC Media Release, the ACCC Chairman Rod Sims said:

“This new measure is an important element of the Government’s plan to make sure more affordable gas is available to industry and consumers. The inquiry will examine how gas suppliers will make more gas available to Australian industry and other domestic gas users, and the effect this has on overall market dynamics. Improved transparency will provide a clear overview of the entire market and help ensure it is operating efficiently and that competition is benefiting all gas users. We will be seeking to identify the use of market power and other obstructions to the efficient supply of gas, as well as publicly reporting on market information when it is needed. Equally as important, we will identify longer term measures that can address these issues. Importantly, the inquiry will help verify progress in changes in domestic gas supply and monitor commitments made by gas suppliers to the Government to make more gas available and also ensure gas is delivered at times of peak electricity demand.”

In undertaking this work, the ACCC will liaise with energy agencies such as the Australian Energy Regulator, the Australian Energy Market Commission and the Australian Energy Market Operator.

ACCC to ensure Supplier Commitments Delivered

Mr Sims said an import role of the inquiry will be to monitor commitments made by gas suppliers to the Government to make gas more available and ensure gas is delivered at times of peak electricity demand.

Until now, much of the information received by existing market regulators, such as the Australian Energy Regulator and the Australian Energy Market Commission, is only handed over on a voluntary basis.  The ACCC chairman said, while he had yet to speak individually to the major gas players, the Government had informed them of the plan and what was expected of them.

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Gas market transparency measures – Project Overview - ACCC article

ACCC to investigate gas market's lack of transparency on prices and supply –

ACCC to investigate and report on Australian gas markets and market transparency – ACCC Release MR 51/17

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