Stronger measures need to be taken so businesses and households are not paying more for gas than would be expected in a well-functioning market, ACCC Chair Rod Sims said today.

Mr Sims was speaking at the Australian Domestic Gas Outlook conference on the importance of ‘Overcoming gas affordability issues’.

“Our gas inquiry continues to find the gas market is not a functional, competitive market,” Mr Sims said.

“WLPG Storage Tanks (Stock)e can see no end to the increasingly complex and difficult environment we are in, unless LNG producers and other gas suppliers, pipeline operators and governments all work together.”

Mr Sims spoke about the lack of progress on the voluntary Gas Code of Conduct, which is intended to even the playing field between gas suppliers and buyers.

“The Code provides an opportunity for industry to collectively develop a new set of rules that addresses poor selling practices and facilitates competitive outcomes,” Mr Sims said.

“The failure by industry to present a substantially progressed voluntary Gas Code by the government’s deadline of February this year is unacceptable; stunningly gas users have yet to even see a copy of the Code.”

“It is fundamental that the Code provides clear and meaningful obligations on gas suppliers, and offers clarity and certainty to users. Independent and detailed governance and dispute resolution arrangements are also key for it to be effective,” Mr Sims said.

Export parity prices are also an important factor influencing domestic gas prices and affordability in the east coast gas market.

“In October 2018, at the request of gas users, we started publishing our Liquefied Natural Gas (LNG) netback price series. Gas suppliers had this information but many buyers did not, so it provided much needed transparency to the market,” Mr Sims said.

“Global LNG markets have changed since the ACCC developed the current approach, and the factors that could influence pricing strategies and varying industry views about the most appropriate international price marker have also changed.”

“It is important we get this right and that we debate the issues publically, transparently and thoroughly,” Mr Sims said

The ACCC published an issues paper on the LNG netback price series last week and invites interested parties to provide a submission.

Mr Sims said that despite gas prices falling significantly over the past year, the ACCC’s January 2021 report found that prices were still higher than export parity and the risk of a supply shortfall remains.

“The long term supply outlook shows us that there is a risk of a shortfall for southern states as early as 2024, and the east coast market as a whole in 2026 and beyond. New sources of supply and related infrastructure will be required to avoid a potential shortfall,” Mr Sims said.

“Adding to this problem is the limited degree of competition at the producer and retailer level, which results in higher prices and a reduction in competitive outcomes for commercial and industrial users.”

The ACCC welcomes the steps taken by various governments over the last year to facilitate the development of new sources of supply.

“We will, of course, continue to also play a part by monitoring and reporting on the behaviour of all gas suppliers and pipeline operators over the remainder of our inquiry,” Mr Sims said.
Release number:
30/21
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