Energy ministers have asked the Australian Energy Market Commission (AEMC) to review the nation’s gas supply guarantee arrangements.
Terms of Reference for the review released today describe the gas supply guarantee as “an important mechanism (to) ensure availability of gas to meet the demands of gas generators during peak demand periods across national electricity market jurisdictions.”
Under this review the AEMC will consider whether the guarantee should continue either in its current or in another form.
We will carry out this work during 2021 and report back to the energy ministers in the first quarter of 2022.
The purpose of this review is to advise energy ministers on:
- whether there continues to be value in retaining a mechanism of this or similar type;
- whether, and in what form, such a mechanism should be incorporated in the national energy framework.
What is the gas supply guarantee (GSG)?
The guarantee was initiated by the Australian Government in March 2017 in a package of gas market initiatives which included the national domestic gas reservation policy.
Under the GSG, gas producers and pipeline service providers made voluntary commitments to the Australian Government to supply gas-fired generators to regions under system stress, such as demand spikes during heat waves.
Specifically, under the guarantee gas producers are to make extra gas available to gas fired generators through the facilitated gas markets or using bilateral contracts. In addition, pipeline service providers are to provide interruptible transport agreements for extra supply, coordinate the transfer of gas between pipelines, and as transport additional gas as required.
To date, the gas supply guarantee has not been called upon.
What are the gas supply guarantee guidelines?
To support the gas producers and pipeline service providers delivering on these commitments, the gas supply guarantee guidelines were developed by the market operator, AEMO.
These guidelines are in operation until March 2023.
Under these guidelines, AEMO monitors gas and electricity market outlooks to help it form a view on the risk of supply shortfalls in gas available to meet the needs of gas fired generators operating at the capacity required during peak demand periods in the national electricity market.
If AEMO considers that there is, or may be, a shortfall, then a conference of industry participants is convened to resolve the supply inadequacy.
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