The Australian Energy Market Commission (AEMC) has proposed extending emergency arrangements for one of Victoria's critical gas storage facilities by four years to help manage supply risks, while implementing strong consumer protections against inappropriate cost-shifting.
The draft rule would extend the Australian Energy Market Operator's (AEMO) interim buyer and supplier of last resort powers for the Dandenong LNG storage facility through to 2029, one year longer than the Victorian government requested to ensure adequate time for permanent reforms.
AEMO and the ACCC have projected gas supply risks from 2026 as production from the state's Bass Strait fields decline, and contracting for the Dandenong facility is projected to drop significantly without any AEMO intervention.
The facility, located on Melbourne's outskirts, provides critical backup capacity that can rapidly inject gas during peak demand periods and supply emergencies.
The interim arrangements require AEMO to purchase all uncontracted storage capacity each March, regardless of actual system needs, functioning as an insurance product for the Victorian gas market.
While this ensures maximum availability during potential crises, these arrangements are unsuitable as a long-term solution.
Industry operators APA Group and BOC, had sought a 10-year extension to provide investment certainty for significant capital expenditure on the facility's aging liquefaction equipment.
The AEMC’s draft rule rejects this approach, removing provisions that potentially could have been used to justify passing capital investment costs to Victorian gas users.
The draft rule clarifies that interim arrangements are designed as a stopgap measure, not an investment mechanism for unregulated assets.
The four-year extension aligns with the implementation timing for the Commonwealth government's east coast gas market reliability and supply adequacy reforms, including the supplier of last resort mechanism, expected to be operational by 2027. This could provide a long-term solution for the Dandenong LNG storage facility.
AEMC Chair Anna Collyer said the approach balances immediate reliability and system security needs with appropriate regulatory boundaries.
"The Commission is proposing that interim arrangements remain a targeted response to projected supply risks, not a long-term investment underwriting mechanism," Ms Collyer said.
"While facility operators sought a decade-long extension to justify significant capital investment, our draft rule maintains gas system security without exposing Victorian consumers to costs that should be recovered through commercial arrangements."
The proposed rule responds to a rule change request submitted by Victorian Energy Minister Lily D'Ambrosio in April 2025.
Submissions on the draft determination close 18 September 2025, with the final determination to be published by 30 October 2025. Public hearing requests must be submitted by 14 August 2025.
For more information, visit the project page.
Media: Jessica Rich | 0459 918 964 or media@aemc.gov.au