The Australian Energy Market Commission (AEMC) has released its recommendations for a balanced reform program to promote the COAG Energy Council’s Vision for gas market development on the East Coast of Australia.
The reform package is outlined in the Stage 2 Draft Report for the East Coast Wholesale Gas Market and Pipeline Frameworks Review published today.
“The COAG Energy Council Vision is to establish a liquid wholesale gas market that provides efficient signals for the production and use of gas, and for investment over the longer-term,” said AEMC Chairman John Pierce.
“Our recommendations are focused on addressing the challenges of an increasingly dynamic market where market participants need greater flexibility in how gas is bought and sold; and consumers in particular need greater transparency on what’s happening with demand and supply.”
The report sets out a roadmap for the future development of the market, based around a new approach to trading gas, supported by improved access to pipeline capacity and additional information provision.
Wholesale market redesign
To establish a liquid wholesale market, the AEMC recommends concentrating gas trading at two primary pricing points, one each in Queensland and Victoria, with improved trading arrangements at these hubs. This would support the development of gas trading as an alternative to bilateral contracts and provide transparent reference prices for gas, reflecting underlying demand and supply conditions in these two main areas of gas trading on the East Coast.
Improved pipeline capacity usage
To support these new market arrangements there must also be improved access to short-term pipeline capacity to allow gas to be transported to, from and between markets. The AEMC is recommending a new market-based mechanism to allocate day-ahead capacity to those that value it most and platforms to trade standardised capacity products with published prices.
Improved price transparency on the gas market’s information website (Bulletin Board)
Establishing a one-stop shop for gas market data is essential so sellers and buyers can make more informed decisions to produce, consume, transport and trade gas. The AEMC has developed detailed recommendations to improve information transparency, including expanding the coverage of the Bulletin Board, enhancing the reporting and compliance framework for it, and introducing a regular review process to maintain its relevance.
Mr Pierce said, “These recommendations together form an integrated package, proportionate to the issues identified by the Energy Council when developing its Vision, and by the AEMC in Stage 1 of the review.
“Improved gas trading and transportation arrangements will lower barriers to entry, helping smaller players transact – improving competition so consumers can benefit from prices that better reflect the costs of gas supply.”
Review of the Victorian Declared Wholesale Gas Market
The AEMC has today also released the Draft Report for the Review of the Victorian Declared Wholesale Gas Market. This review was requested by the Victorian Government, with the agreement of the COAG Energy Council.
The Draft Report provides further detail on the changes to the gas trading and pipeline capacity arrangements that te AEMC is recommending in Victoria. More information can be found here.
For information contact: Media: Communication Manager, Prudence Anderson 0404 821 935 or (02) 8296 7817