From the new Mandatory Gas Code of Conduct Fact Sheet:
The price cap, initially proposed to be set at $12/GJ, will be subject to review and may be updated by the ACCC every two years. This mechanism balances the need for the cap to be responsive to market conditions while providing the certainty required for continued investment in gas production.
The price cap review process is proposed to include a requirement for public consultation. The ACCC can review the price cap earlier if market conditions substantially change or if requested by the Minister for Climate Change and Energy and the Minister for Resources.
The price cap will apply to gas sold by producers without an exemption (see below). The price cap will not apply to transactions in the Declared Wholesale Gas Market (DWGM) in Victoria, the short-term trading markets (STTMs) in Brisbane, Sydney, and Adelaide, or to anonymous trades or pre-matched trades on gas exchanges of three days or less on the Gas Supply Hub (GSH). These markets exist to balance gas supply and demand requirements on a day-to-day basis and thus play a different role to the wholesale gas contract market (which accounts for around 90 per cent of all gas supplied in the east coast gas market).
It is proposed that volume neutral swap agreements will also be exempt, as these arrangements facilitate efficient market operation and play an important role in balancing and hedging gas supply and delivering additional gas at peak times. The price cap will not apply to imported LNG or transportation and storage charges.
Exemptions framework
The proposed design will include an exemptions framework from the pricing requirements of the Code. There will be two types of exemptions: ‘deemed exemptions’ and ‘conditional exemptions’.
Deemed exemptions will automatically apply to producers who produce less than 100 PJ of gas per year and who supply it exclusively to the domestic market. Eligibility for a deemed exemption will be determined on an annual basis based on production in the previous calendar year. This will ensure that producers who drop below the 100 PJ threshold over time can benefit from the coverage of the deemed exemption, and those that increase production come within the scope of the ‘conditional exemptions’ framework.
Small producers will not lose their exemption if, at the point of sale, buyers intend not to export that gas. Sales on spot markets and anonymous trades on the GSH will also not be considered – this is because the producer has no control over who the counterparty is or their intentions. Small producers will also not lose their exemption if they enter a volume neutral swap transaction with an LNG exporter. This will allow a small domestic producer to make a swap with an LNG exporter to source supply for a domestic user at a particular time or location to avoid transportation costs and constraints. It will also support supply during high demand periods.
Conditional exemptions can be sought by any producer who is ineligible for a deemed exemption. To obtain a conditional exemption, producers will apply to the Minister for Climate Change and Energy and the Minister for Resources who will have joint responsibility for making exemption decisions. An exemption could be granted on conditions relating to volume, price, new production, how gas is offered to the market and/or other similar matters – these will be negotiated with the producer seeking an exemption. Penalties will apply for non-compliance with the conditions of an exemption.
The circumstances in which Ministers may revoke or vary a conditional exemption will be limited to non-compliance or by mutual agreement.
This means the only folks that the price cap applies to are contracts offered by the big exporters. The Gippsland JV will be under 100Pj in a few years.
This does nothing to prevent another energy shock as spot gas prices are also exempt. They set the marginal cost of electricity in the National Electricity Market.
This guarantees that the Australian energy transition will be as expensive and disruptive as possible.
Four ministers, the PM and the nation have just been humiliated by a foreign-owned, war-profiteering, China-beholden gas cartel.
If you can’t summon the will to tackle an openly egregious public enemy of this scale in an area so critical, then you are a poltroon of the highest order.
Albo has no backbone for the job of PM and should resign immediately.
