The Australian Government has implemented a mandatory Gas Code of Conduct, as part of the Energy Price Relief Plan announced in December 2022, to ensure that east coast gas users can contract for gas at reasonable prices and on reasonable terms.
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The Mandatory Gas Code of Conduct has been developed in consultation with producers, retailers and energy users and will be managed by the Australian Competition and Consumer Commission (ACCC). Key elements of the Code include:
- a price cap, initially set at $12/GJ, designed to anchor wholesale contract negotiations between gas producers and buyers
- an exemptions framework to incentivise producers to commit more gas to the east coast gas market in the short term and facilitate new investment to meet ongoing demand in the medium term which supports the ability for east coast gas users to access gas at reasonable prices and on reasonable terms
- transparency obligations to increase visibility of the amount of uncontracted gas to be produced, and when producers will bring that gas to the domestic market
- conduct provisions aimed at reducing bargaining power imbalances between producers and gas buyers and establishing minimum conduct and process standards for commercial negotiations.
The Code commenced on July 11, 2023, and there will be a two-month transitional period to allow companies to adapt to new conduct provisions, record keeping and reporting obligations.
The ACCC is providing further guidance material on how it will monitor and enforce the Code. This guidance will be published on the ACCC website in the weeks following the Code coming into effect.
Producers can apply for conditional exemptions from provisions in the Code which will be considered by the Energy Minister and the Resources Minister.
The Energy Users’ Association of Australia (EUAA) said the Code puts the onus firmly on the gas industry to supply Australian business and households with gas at a fair and reasonable price.
“We welcome the provisions in the Mandatory Gas Code which outlines guidelines that aim to create a fair and sustainable relationship between gas sellers and gas buyers,” EUAA CEO Andrew Richards said.
“Over the coming days we will consult with our members, as they are the ones who have to negotiate gas contracts to sustain the business, to ensure the code will work for them.”
The uncertainty surrounding the details of the Mandatory Gas Code of Conduct had been blamed for lower volumes of gas being offered to large C&I in recent months despite plenty of uncontracted gas being available. With the details of the gas code now released, the EUAA expect gas offers to resume at normal volumes.
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“With gas being a critical input into so many essential goods produced by large C&I in Australia such as bricks, steel, food, packaging and glass, we expect that now the code has been released that large C&I will have better outcomes in terms of price, supply and contract terms,” Richards said.
