Securing Australia’s domestic gas supply: issues paper

Securing Australia’s domestic gas supply
Submission to the Department of Industry,

Science and Resources

Date: 22 August 2022
On behalf of: Daniel Walton, AWU National Secretary
Submission - Securing Australia’s domestic gas supply
22 August 2022

Findings and recommendations

Finding 1: The Australian energy market is in crisis. While external factors have precipitated the current
crisis, the ultimate origin of the crisis can be found in the failure to reserve Australian gas for domestic
users as the export industry grew scale. Prices in the domestic gas market have regularly exceeded the
price paid by Australia’s export customers.
Finding 2: Despite several Commonwealth reviews and inquiries since 2017, no meaningful policy
action has been taken to reduce prices for domestic gas consumers.
Recommendation 1: The Australian Government should reform the Australian Domestic Gas Security
Mechanism (ADGSM) to:
a) Allow it to be activated with immediate effect after a 30-day consultation period
b) Allow it to be activated upon the occurrence of any of the following triggers:
i. If the ACCC expects a shortfall in the next calendar year
ii. If spot gas prices from the Gas Supply Hub – the benchmark for Australia’s east coast gas
market – exceed a level of 100% above the average price from the last five years –
approximately $18/GJ
iii. If spot gas prices from the Gas Supply Hub are more than 20% above the ACCC’s
estimate of the netback price of export gas.
c) Relocate the decision to activate the trigger to a committee comprising the Industry, Resources
and Energy Ministers.
If the proposed price formula is not accepted, then the Ministers for Industry, Resources and Energy
should determine the reference price, based on the advice of the Energy Security Board (AEMO, AEMC
and AER/ACCC). The Ministers should also be required to consult with State and Territory Energy
Ministers.
The ADGSM should apply to contracted gas.
Recommendation 2: The Australian Government should establish a national gas reservation policy,
requiring producers to make gas equivalent to 15% of exports available to domestic consumers. If this is
impractical, the Australian Government should establish a windfall profits tax that redirects earnings
during periods of high gas prices to gas users (including industry and consumers).
Recommendation 3: The Australian Government should work with state and territory governments to
develop a national gas supply policy, encouraging onshore gas developments that meet industry-
standard safety and environmental criteria.
Submission - Securing Australia’s domestic gas supply
22 August 2022

Table of Contents
Findings and recommendations ................................................................................................ 2
1 Australia’s gas market is in crisis ...................................................................................... 4
1.1 Gas market analysis ................................................................................................................... 4
1.2 Failed gas policy ......................................................................................................................... 6
2 Now is the time for genuine reform .................................................................................... 7
2.1 Reform and trigger the ADGSM ................................................................................................. 8
2.2 Actions to avoid the next gas crisis ....................................................................................... 12
Submission - Securing Australia’s domestic gas supply
22 August 2022

The Australian Workers’ Union welcomes the opportunity to make a submission in response to the
Department of Industry, Science and Resources’ issues paper on securing Australia’s domestic gas
supply. The AWU represents around 70,000 members nationally in a diverse range of industries,
including large parts of the gas supply chain – from extraction, through to transmission and storage,
through to ultimate use in manufacturing. For AWU members in manufacturing – be it steel, aluminium,
plastics, concrete, fertiliser, or many others – gas is an essential input to their work, either as an energy
source to generate heat, part of their electricity generation, or as a feedstock into the final product.

This submission will detail the current crisis and the underlying policy failures that have allowed it to take
place, before detailing reforms to secure Australia’s domestic gas supply.

1 Australia’s gas market is in crisis
1.1 Gas market analysis
Fears of an energy market crisis off the back of the Russia-Ukraine conflict were crystallised in May as a
series of unfortunate events catapulted energy prices to levels unimaginable in recent memory. The first
domino to fall was the Eraring coal-fired power station in Victoria, which produced less power than
expected due to difficulties accessing coal. As power and gas demand surged with the east coast cold
snap, gas-fired power generation ramped up to fill the gap. But this has forced households, industry and
electricity generators to fight for scraps in a ‘Hunger Games’-style contest over the arbitrarily-limited
domestic supply of gas, while multinational gas companies export most of their product at sky-high world
prices.

Despite Australia being the world’s biggest gas exporter, Australian businesses and households are now
paying sky-high prices for their own resource. Before the government intervened with price caps at the
end of May, the spot price for gas reached an eye-watering $800/GJ in Victoria. The institution of price
caps saw price fall to $40/GJ on the east coast – still more than four times higher than the average spot
price over the last 5 years.

Meanwhile, major gas suppliers have been forced to stop trading as they faced difficulty securing
affordable gas in the wholesale market. Their customers (including both industry and government
agencies) were forced onto steep default plans with retailers of last resorts. The scale of the crisis was
clear when electricity provider ReAmped made the extraordinary decision to tell its 70,000 customers to
go elsewhere or face a doubling of their prices in the new financial year.

Some AWU worksites are on fixed-price contracts for all or part of their gas supply, meaning that they
are not exposed to the current spike – for now. But others are already paying as much as $100,000 a
day more for their operations – and warning that if high prices continue, they will be required to close,
Submission - Securing Australia’s domestic gas supply
22 August 2022

temporarily or permanently.

However, this crisis did not begin in 2022. Its origins begin when Australian governments failed to take
the reins on the massive growth of the Australian export gas industry over the last two decades. While
our LNG export capacity began to rise in the mid-2000s, the scale of the industry truly exploded with the
expansion of Queensland onshore gas in the middle of the 2010s (see below chart).1

When Western Australia’s export gas industry built scale off the back of gas projects on the North West
Shelf in 2006, the WA Government insisted on a gas reservation policy. Exxon Mobil and other investors
said that this would kill their projects; the WA Government called their bluff. Today, the state benefits
from a world-leading gas export industry and cheap local gas – while customers the eastern states were
paying $40 per gigajoule or more at the height of the energy crisis, their Western Australian counterparts
were paying less than $6.2

As a result, Australia is now in the absurd position of facing a domestic gas shortage while being the
world’s largest gas exporter. In early August, the ACCC released its alarming assessment of the
domestic gas market. It predicts a 10% shortfall of over 50,000 terajoules3 – while, at the same time, we
export three-quarters of our gas production overseas. In fact, China gets more Australian gas each year
than Australia does.4

1
https://www.rba.gov.au/publications/bulletin/2015/mar/pdf/bu-0315-4.pdf
2
https://www.gastrading.com.au/spot-market/historical-prices-and-volume/daily-price-history
3
https://www.accc.gov.au/media-release/lng-exporters-must-divert-gas-to-the-domestic-market-to-avoid-shortfalls
4
In 2021, Australia produced around 5800 PJ of gas, exported approximately 4500 PJ, and imported around 200
PJ for the Darwin LNG facility. 40% of exports, or 1770 PJ, were delivered to China, compared to 1525 PJ for
Submission - Securing Australia’s domestic gas supply
22 August 2022

This means that Australian companies are forced to buy gas for the same price, or even more, than
manufacturers in Beijing, Seoul or Tokyo. The chart below illustrates that for extended periods over the
last 5 years (including during the current energy crisis), prices in the domestic gas market (from the
Wallumbilla Gas Supply Hub) exceeded the price paid by Australia’s export customers (as estimated by
the ACCC’s netback price series).5

50

45

40
Gas price per petajoule ($)

35

30

25

20

15

10

5

0
Jul-17

Oct-17

Jan-18

Apr-18

Jul-18

Oct-18

Jan-19

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Oct-20

Jan-21

Apr-21

Jul-21

Oct-21

Jan-22

Apr-22

Jul-22
Domestic benchmark price Export netback price

Finding 1: The Australian energy market is in crisis. While external factors have precipitated the
current crisis, the ultimate origin of the crisis can be found in the failure to reserve Australian gas for
domestic users as the export industry grew scale. Prices in the domestic gas market have regularly
exceeded the price paid by Australia’s export customers.

1.2 Failed gas policy
Through multiple leaders over many years, the previous Liberal Government failed to heed the warnings
and take any meaningful action on gas supply for manufacturers. Despite many attempts, Australia
missed its opportunity to avoid the current crisis.

In July 2017 the Turnbull Government announced the Australian Domestic Gas Security Mechanism. At
the time, Resources Minister Matt Canavan said: ‘securing our domestic gas supply should also put

domestic consumption. Data sourced from the Department of Industry’s Resources and Energy Quarterly:
https://publications.industry.gov.au/publications/resourcesandenergyquarterlymarch2022/index.html
5
AWU calculations from Gas Supply Hub historical data published by AEMO and ACCC netback price series.
Submission - Securing Australia’s domestic gas supply
22 August 2022

downward pressure on the price paid by Australians’.6 Gas companies claimed the measure would
adversely affect confidence in the oil and gas sector and discourage new market entrants and supply
diversity, harming investment. But the Government’s own review in January 2020 conceded it was
impossible to attribute any moderation in gas prices to the measure.7

By September 2018, the Turnbull Government announced the Australian East Coast Domestic Gas
Supply Commitment, an agreement with the big east coast gas suppliers. The Government said it
wanted a gas market that benefits all Australians, strengthens our economy through LNG exports, and
delivers competitive domestic gas prices. Yet domestic gas spot prices still regularly exceeded export
prices, according to the ACCC’s netback price series.8 The ‘Gas Supply Commitment’ was ultimately
hollow, as it only relied on the word of gas exporters rather than regulation.

In September 2020, the Morrison Government announced a new suite of measures, including
new gas supply targets, enforcing ‘use it or lose it’ provisions, and an industry-led code of conduct. No
action was ultimately taken on supply targets and enforcing use-it-or-lose-it provisions. The ‘industry led’
code of conduct was not finalised until December 2021, immediately prior to the current energy crisis,
and like the Gas Supply Commitment before it, relied on the voluntary action of gas exporters. Other
proposed measures, like the national gas infrastructure plan and pipeline reform, were also not
completed until the dying days of the Morrison Government – and ultimately only toyed at the edges with
regulatory change, with no ultimate impact on market outcomes.

The only option with a meaningful chance to affect gas market outcomes and prices – a national power
to reserve gas for domestic use – died with an issues paper by the end of 2020, with no government
response or action.9

Finding 2: Despite several Commonwealth reviews and inquiries since 2017, no meaningful policy
action has been taken to reduce prices for domestic gas consumers.

2 Now is the time for genuine reform
At the outset of the current energy crisis, the new Government has proposed even more reviews of
energy market regulations, including the current review. While the appetite for genuine reform is
appreciated, Australia’s manufacturers cannot afford to wait.

The AWU proposes the following reforms, both within the scope of the Australian Domestic Gas Security

6
https://www.energymagazine.com.au/gas-security-mechanism-to-keep-gas-in-australia/
7
https://www.industry.gov.au/sites/default/files/2020-01/review-of-the-australian-domestic-gas-security-
mechanism-2019.pdf
8
https://www.accc.gov.au/regulated-infrastructure/energy/gas-inquiry-2017-2025/lng-netback-price-series
9
https://consult.industry.gov.au/options-for-a-prospective-national-gas-reservation-scheme-issues-paper
Submission - Securing Australia’s domestic gas supply
22 August 2022

Mechanism (ADGSM) and beyond.

2.1 Reform and trigger the ADGSM
The AWU supports reforming the ADGSM to include a price trigger and then activating it with immediate
effect. In particular, the AWU proposes the following reforms:

a) The ADGSM should be amended to allow activation with immediate effect (not the following
calendar year) after a 30-day consultation period

b) The ADGSM should be amended to permit activation upon the occurrence of any of the following
triggers:

i. If the ACCC expects a shortfall in the next calendar year

ii. If spot gas prices from the Gas Supply Hub – the benchmark for Australia’s east coast gas
market – exceed a level of 100% above the average spot price from the last five years –
approximately $18/GJ

iii. If spot gas prices from the Gas Supply Hub are more than 20% above the ACCC’s
estimate of the netback price of export gas.

c) The decision to activate ADGSM should be relocated from the Resources Minister to a committee
comprising the Industry, Resources and Energy Ministers.

d) If the proposed price formula is not accepted, then the Ministers for Industry, Resources and
Energy should determine the reference price, based on the advice of the Energy Security Board
(AEMO, AEMC and AER/ACCC). The Ministers should also be required to consult with State and
Territory Energy Ministers.

e) The ADGSM should apply to contracted gas.

The AWU notes that this is in line with the new Government’s platform, which committed to ‘a price
related export control trigger, and domestic reservation policies’.10

The evidence underlying these proposed reforms is indicated in response to the questions posed in the
issues paper below.

Issues Paper Question 1. Would a short term activation power effectively address sudden shocks
or shortfall risks?

The AWU understands the need to consult on triggering the ADGSM to manage the significant range of
stakeholders in the energy sector.

10
https://alp.org.au/media/2594/2021-alp-national-platform-final-endorsed-platform.pdf
Submission - Securing Australia’s domestic gas supply
22 August 2022

However, the current framework is so inflexible as to not be useful. In particular, the Resources Minister
must forecast a gas shortfall in the following calendar year. After a months-long consultation process,
gas cannot be diverted until the beginning of the following calendar year.

The current crisis was not foreseen until February this year as Russia invaded Ukraine. And even then,
with months to respond to the potential crisis, the Government could not activate the ADGSM without
immediate price or supply concerns. Even if it were activated, it could not have an effect until January
next year. By this time, many employers of AWU members could have closed or significantly reduced
their operations, with significant job losses among our membership as a result.

As a result, the AWU supports a short-term activation power for the ADGSM to allow it to more
effectively address sudden shocks or shortfall risks.

Issues Paper Question 2. What timeframes and limitations should apply to shorter-term activation
powers?

The chronology of the current crisis should give some indication of a timeframe for short-term activation
that would ensure the ADGSM can serve as a more useful tool. After weeks of tension at its border,
Ukraine was invaded by Russia on 24 February of this year. The current energy crisis became obvious
by the end of May, as Weston Energy ceased trading and its customers were transferred to retailers of
last resort.11 Over this period of 3 months, the risks to Australian gas customers were clear – yet the
Government was unable, or unwilling, to take action.

In the view of the AWU, 30 calendar days is a realistic timeframe to consult with energy market
regulators, workers’ representatives, industry and other stakeholders about the activation of the ADGSM.
This timeframe should include negotiation with gas companies about the required quantity of gas to be
diverted to the domestic market. Indeed, the current ADGSM legislation indicates that the Minister must
notify the market of their intent to determine a shortfall year 30 days prior to doing so. However, the
proposed Committee should then have the power to active the ADGSM with immediate effect once
satisfied that a gas shortfall or price spike is imminent.

Issues Paper Question 3. How would short-term activation interact with other energy security
measures, like the Gas Supply Guarantee?

As it currently stands, the Gas Supply Guarantee only benefits electricity generators and users. Industrial
users for heat or feedstock have no relief, but stand to lose just as much if the market collapses. Unlike
electricity users, they have no reasonable alternative to gas use. Indeed, the review of the Gas Supply

11
https://www.aer.gov.au/communication/aer-ensures-continued-supply-for-former-pooled-energy-and-weston-
energy-customers
Submission - Securing Australia’s domestic gas supply
22 August 2022

Guarantee completed by AEMO in November 2021 recognised that the role of gas-powered electricity
generation in the long-term is highly uncertain.12 Therefore, there will likely remain a significant risk of
gas users and electricity generators being forced to compete for limited Australian gas during a crisis like
the current one. A short-term activation mechanism would aid, not hurt, electricity generators.

Issues Paper Question 4. What should be the threshold for a short-term activation mechanism?

Issues Paper Question 5. What factors should a reference price take into account? How should
each factor be measured or monitored?

The AWU submits that there should be multiple triggers for a short-term activation mechanism:

• If the ACCC expects a shortfall in the next calendar year

• If spot gas prices from the Gas Supply Hub – the benchmark for Australia’s east coast gas
market – exceed a level of 100% above the average spot price from the last five years - –
approximately $18/GJ

• If spot gas prices from the Gas Supply Hub are more than 20% above the ACCC’s estimate of
the netback price of export gas.

While the current ADGSM framework leaves the Resources Minister as the ultimate decision-maker, this
fails to reflect the range of Australian sectors affected by high gas prices. Should any one of these
threshold triggers take place, a committee of the Ministers for Industry, Resources and Energy should
undertake the 30-day consultation process. Following this consultation process, the committee should
face a yes or no decision to activate the ADGSM – the activation of the ADGSM consultation process
should not be reliant on the Resources Minister’s initiative.

Issues Paper Question 6. Which entity is best placed to determine the price, and what should that
process include?

If the formula proposed in the response to Issues Paper Question 5 is not chosen, then a range of
stakeholders should be involved in setting the reference price.

The AWU proposes that the Ministers for Industry, Resources and Energy determine the reference price,
based on the advice of the Energy Security Board (AEMO, AEMC and AER/ACCC). The Ministers
should also be required to consult with the new State and Territory Energy Ministers roundtable.

Issues Paper Question 7. What implications or unintended consequences could price-based
activation have, including on new supply and the competitive functioning of the market?

12
https://www.aemc.gov.au/sites/default/files/2021-11/EMO0041%20-%20final%20-%20final%20report.pdf
Submission - Securing Australia’s domestic gas supply
22 August 2022

The AWU rejects the claim that price-based activation would meaningfully limit new supply. As noted
above, the Western Australian gas market has much lower prices than the east coast, despite a firm 15
per cent reservation, alongside a world-leading gas export industry.

Australia’s multinational gas exporters are currently experiencing record-high profits – indicating that
they are not facing significant risks from their investments.13 The quantity of gas required to have a
meaningful impact on domestic prices would still be low by comparison to exports and overall production.
In the AWU’s view, this would be unlikely to affect the fundamental economics of new projects.

Issues Paper Question 8. How could the ADGSM be amended so that during a shortfall year,
stronger incentives exist for LNG exporters to increase domestic supply?

The ADGSM has not been activated in its five years of operation. Given their record profits and the
highly lucrative option of export, it is unlikely that LNG exporters will volunteer to increase domestic
supply without its activation. The AWU submits that, if the ADGSM were activated, the Government
would be well placed to negotiate with gas producers about appropriate volumes for domestic supply.

Issues Paper Question 11. Should contracted gas be exempt from the ADGSM? If so, how could
this exemption be designed to ensure the objectives of the mechanism are met?

The AWU submits that contracted gas should not be exempt from the ADGSM. Under the current market
design, producers are incentivised to export as much gas as possible, and several export-oriented
producers are not supplying domestically at all. This would be an excessive limitation that would
undermine the goal of the ADGSM and limit its effectiveness – if producers suspected that the ADGSM
would be triggered, they would simply contract more gas to export customers.

Recommendation 1: The Australian Government should reform the Australian Domestic Gas Security
Mechanism (ADGSM) to:

a) Allow it to be activated with immediate effect after a 30-day consultation period

b) Allow it to be activated upon the occurrence of any of the following triggers:

i. If the ACCC expects a shortfall in the next calendar year

ii. If spot gas prices from the Gas Supply Hub – the benchmark for Australia’s east coast
gas market – exceed a level of 100% above the average price from the last five years –
approximately $18/GJ.

13
https://www.santos.com/news/2022-half-year-results-2/; https://thewest.com.au/business/energy/oil-and-gas-
majors-rolling-in-7-billion-of-profits-as-shell-joins-rebound-c-6755155
Submission - Securing Australia’s domestic gas supply
22 August 2022

iii. If spot gas prices from the Gas Supply Hub are more than 20% above the ACCC’s
estimate of the netback price of export gas.

c) Relocate the decision to activate the trigger to a committee comprising the Industry, Resources
and Energy Ministers.

If the proposed price formula is not accepted, then the Ministers for Industry, Resources and Energy
should determine the reference price, based on the advice of the Energy Security Board (AEMO,
AEMC and AER/ACCC). The Ministers should also be required to consult with State and Territory
Energy Ministers.

The ADGSM should apply to contracted gas.

2.2 Actions to avoid the next gas crisis
The actions set out above would set up a mechanism that would allow immediate action to reduce gas
prices. But the Australian Government must undertake a broader set of reforms to avoid the next crisis.

In the short term (over the next 2 years), the Australian Government should establish a national gas
reservation policy. The AWU began our ‘Reserve Our Gas’ campaign in 2014, calling for the Australian
Government to adopt the WA reservation policy. Queensland has since taken action to require some gas
tenements to provide only domestic gas – but this is not enough.14 The AWU believes that only a
national gas reservation policy in line with Western Australia’s, requiring producers to make gas
equivalent to 15% of exports available to domestic consumers, will provide long-term relief for gas users
such as the industries employing AWU members.

Noting that competition between electricity generators and other gas users has amplified the current
crisis, the AWU also observes that gas peaking plants could serve as a contracted customer under a gas
reservation scheme – allowing them to obtain gas below their usual spot price exposure while providing
a longer-term revenue source for gas producers. The Federal Government, as the owner of the Snowy
Hydro Corporation and its 3 gas peaking plants, has the power to integrate their role into the broader gas
network while maintaining an affordable domestic supply of gas for other uses.

As an alternative, a windfall profits tax could reallocate the benefits from surplus profits to affected gas
consumers (including industry). In economic terms, a tax on gas producers and subsidy to gas users is
equivalent to a gas reservation – and does not require the specific reservation of gas as a product.15 In
July this year, the UK’s Conservative Government brought in a windfall profits tax. This policy explicitly

14
https://statements.qld.gov.au/statements/92958
15
https://theconversation.com/a-gas-reservation-scheme-is-protectionism-in-disguise-11810
Submission - Securing Australia’s domestic gas supply
22 August 2022

recognised that oil and gas companies are profiteering from the Russian invasion of Ukraine, not from
any great achievement of their own.16 Windfall taxes are generally recognised to be efficient taxation
measures by economists, as they are hard to avoid and do not lead to changes in behaviour by
producers.17

Recommendation 2: The Australian Government should establish a national gas reservation policy,
requiring producers to make gas equivalent to 15% of exports available to domestic consumers. If this
is impractical, the Australian Government should establish a windfall profits tax that redirects earnings
during periods of high gas prices to gas users (including industry and consumers).

Issues Paper Question 12. What can the states and territories do to ensure their gas needs are
met during the energy transition?

In the medium-term (over the next 3 to 5 years), Australia will also need a sensible national gas supply
policy, making genuine efforts to bring more gas online in consultation with state and territory
governments (who undertake the primary approvals for gas projects). There is wide variation in the
amount of available gas between states, and in the regulations applying to new gas projects, particularly
onshore gas. In 2020, as illustrated in the below table,18 WA was the largest gas producer in absolute
terms – noting that it is not connected to the east coast domestic gas market. Queensland was by far the
biggest producer of gas in the east coast domestic gas market, owing to its significant extraction of coal
seam gas. It is followed by the Northern Territory (the home of the INPEX offshore gas project), Victoria
(which has some remaining offshore gas), and South Australia (where onshore gas development takes
place in the north-west of the state in the Cooper Basin).

16
https://www.washingtonpost.com/world/2022/05/27/britain-windfall-tax-oil-gas-inflation/
17
https://www.niesr.ac.uk/blog/windfall-tax-good-idea
18
https://www.appea.com.au/wp-content/uploads/2021/06/2021-APPEA_Key-Statistics-1.pdf
Submission - Securing Australia’s domestic gas supply
22 August 2022

Victoria, regrettably, has imposed a complete ban on onshore gas development in the state and has
placed a moratorium on fracking in its state constitution. New South Wales, meanwhile, has limited the
area available for gas exploration to only Santos’s Narrabri Gas Project (which is nearly ready to begin
extraction).

The Productivity Commission has previously identified that moratoriums fail to apply a risk-based
approach to resources development, noting that ‘the weight of evidence available, and the experience of
jurisdictions where unconventional gas development takes place, suggests that risks can be managed
effectively.’19 This finding was also made in every state and territory that has conducted a public scientific
inquiry into the safety of fracking.

The AWU recommends that the Australian Government work with state and territory governments to
develop a national gas supply policy, encouraging onshore gas developments that meet industry-
standard safety and environmental criteria.

Recommendation 3: The Australian Government should work with state and territory governments to
develop a national gas supply policy, encouraging onshore gas developments that meet industry-
standard safety and environmental criteria.

2.3 Storage and transport of gas
Storage and transport of gas have been identified by the ACCC as contributing to high costs, noting that
they are ‘natural monopoly’ infrastructure. 20 In Victoria, the Iona storage facility reached record low

19
https://www.pc.gov.au/inquiries/completed/resources/report/resources.pdf
20
https://www.accc.gov.au/system/files/ACCC%20Gas%20Inquiry%20-
%20July%202022%20interim%20report%20-%20FINAL.pdf
Submission - Securing Australia’s domestic gas supply
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levels, prompting calls for minimum storage levels.21 Maintaining ample stockpiles can prevent the need
for knee-jerk emergency reactions during periods of high demand – noting that with shifts in the
electricity mix, gas peaking is likely to play a significant and complementary role to renewable power
generation. The ACCC has also identified pipeline transportation costs as a particular cause of high gas
prices. According to the ACCC, ‘the standing price for transporting gas from Wallumbilla to southern
demand centres can range from $2.24 to $2.58/GJ which is a significant proportion of commodity gas
prices.’22 Pipeline regulation reforms commenced in April this year, but the impacts of these reforms
should be reviewed within the next 6 to 12 months.

21
https://www.theguardian.com/australia-news/2022/jul/21/victoria-demands-aemo-maintain-minimum-gas-storage-
levels-as-supplies-dwindle
22
https://www.accc.gov.au/system/files/ACCC%20Gas%20Inquiry%20-
%20July%202022%20interim%20report%20-%20FINAL.pdf