Leading advocate for large commercial and industrial energy users, the Energy Users’ Association of Australia (EUAA), said it was disappointed with the ACCC’s decision not to amend the way it calculates its key LNG netback series.
“Given that domestic gas users do not use LNG, the EUAA and many others had been urging the ACCC to exclude all costs associated with LNG production,” EUAA CEO Andrew Richards said.
The association said the ACCC’s decision meant domestic gas users would continue to foot the bill for LNG projects they had never been involved in, never benefitted from and that were thousands of kilometres away from their operations.
“Domestic gas users are feeling let down by this decision as we feel the existing methodology continues to favour the seller in a market dominated by sellers,” Mr Richards said.
“Conditions are already tight for many domestic gas users who are still reeling from a three-fold increase in gas prices. They are looking for the ACCC to help level the playing field, but this decision seems to reinforce the status quo.”
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EUAA said many domestic gas users felt that by helping to pay for LNG infrastructure, it effectively locked them into cross subsidising international gas users, some of whom were their competitors.
“We urge the ACCC to re-consider this decision and we are open to working with them to find a solution that better reflects the reality of the domestic market and addresses the issues faced by domestic gas users,” Mr Richards said.
The ACCC is proposing to publish LNG netback prices for five years linked to forward oil prices, alongside its existing tracker.
“Publishing longer-term forward LNG netback prices will add transparency to the market and address an existing information asymmetry between C&I (commercial and industrial) users and those suppliers who already consider oil-linked LNG prices when forming views about longer-term domestic prices,” the ACCC said in a draft decision released today.
A key challenge would be to work out the appropriate percentage—or “slope”—of the oil price to determine the LNG price, the ACCC said. It plans to use an industry consultant to estimate an appropriate slope at least once a year.
The final decision on the matter is due in September.
