New compliance guidelines for Gas Market Code

Gas burner alight with blue flames (supply)
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The ACCC has published compliance and enforcement guidelines on the new Gas Market Code.

The Code commenced on July 11 this year with a two-month transition period for the gas industry to prepare for some of the new obligations that the Code establishes. The ACCC will begin enforcing the Code from mid-September 2023.

The new Code includes a $12 per gigajoule price cap, and minimum conduct, process and transparency obligations that together support good faith negotiations to allow gas producers and users to enter supply agreements on reasonable terms.

Related article: Government implements mandatory Gas Code of Conduct

The Code also contains an exemptions framework that is designed to incentivise producers to commit more gas to the east coast market. The framework allows Government ministers to grant gas producers an exemption from the Code, including if the ministers are satisfied with producers’ voluntary but enforceable commitments to supply gas to domestic gas users.

“We have developed these guidelines to help the gas industry to understand their compliance obligations under these new laws, before the transition period ends,” ACCC Commissioner Anna Brakey said.

“There are serious penalties for non-compliance with the Code’s requirements, and we will use our full investigative and enforcement powers in response to alleged contraventions or attempts to circumvent them.”

There are three tiers of pecuniary penalties for companies that breach the Code. The maximum penalty is up to the greater of $50 million or three times the value of the benefit obtained, or, if that value cannot be determined, 30 per cent of the company’s turnover during the period it engaged in the conduct.

Requirements under the Code and the Competition and Consumer Act relating to compliance with the price cap, good faith negotiations and avoidance schemes, as well as the conditions attached to any exemptions, will attract the highest penalties as they are critical to its effective functioning.

Gas industry participants who suspect there may have been a breach of the Gas Market Code are strongly encouraged to report it to the ACCC.

Under the Code, gas producers are also required to report certain information to the ACCC, including their volumes of available gas, expressions of interest, offers to the market and supply agreements.

Related article: Ministers reject proposal to rename natural gas ‘fossil gas’

To assist producers with their obligations, the ACCC will soon release information for the gas industry on the record keeping and reporting requirements of the Code.

In December 2022, the Competition and Consumer Act was amended to introduce a new part that relates to the gas market. These amendments allowed the Australian Government to introduce a temporary price cap on the supply of regulated gas late last year, and a mandatory Code of Conduct this year.

The Code applies to east coast and Northern Territory gas producers and their affiliates that sell gas to wholesale customers.

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