The Victorian Government presented its proposed gas market reforms to the COAG Energy Council on Friday.
The government developed its own plan because the Australian Domestic Gas Security Mechanism, which was implemented by the Federal Government to tackle a domestic gas shortfall, doesn’t go “far enough, quick enough”.
“In fact, the Turnbull Government’s own analysis released to COAG has shown the mechanism cannot be expected to reduce domestic prices below export prices,” a government statement said.
The Victorian proposal includes a new gas export mechanism that would place a cap on the total allowable gas that major companies can export in order to protect domestic needs.
“Malcolm Turnbull’s own advice shows that his gas plan won’t have any impact on prices,” Victorian Minister for Energy, Environment and Climate Change Lily D’Ambrosio said.
“Our plan would have an immediate impact and should be implemented without further unnecessary delays.”
The state government is also exploring the development of a LNG import terminal in Victoria.
“Australia is now the world’s second largest LNG exporter, with around two thirds of gas produced for the east coast market exported to Asia,” the statement said.
“There is something seriously wrong when you can buy Australian gas in Japan for a cheaper price than what businesses in Victoria are being charged – and this needs to change.”
Coinciding with the COAG meeting on Friday, the AEMC handed down its review into the Victorian gas market.
At the request of the Victorian government the AEMC has made a number of recommendations that should lower barriers to entry, streamline trading practices and improve transparency to help support greater competition in the Victorian market.
The recommendations have been accepted by the state government and will be implemented “without delay”.
The reforms will help the reliability of electricity supply in both Victoria and other states, as gas fired generators would benefit from having better access to available supplies.
Victoria’s southern gas hub is one of the two pivotal wholesale gas-trading centres on the east coast.
Implemented in full, PricewaterhouseCoopers estimates these reforms to the Victorian gas market have the potential to increase Australia’s gross domestic product by up to $1.7 billion in net present value terms by 2040.
AEMC chairman John Pierce said improving access to gas across the eastern seaboard was one significant way to help keep prices as low as possible for consumers.
“The ability to move gas around is critical to our energy and economic future,” Mr Pierce said.
“The Commission is making both short and longer term recommendations to deliver benefits to Victorian consumers, increasing consistency with the wider east coast market while being relatively quick and low cost to implement.”
The recommendations declared wholesale gas market are to introduce a clean and simple wholesale price for the Victorian trading hub; establish a new forward trading exchange; and improve the allocation and trading of pipeline capacity rights.
Victoria has joined South Australia, Queensland and the ACT to independently request the AEMC investigate the implementation of a national clean energy target.
“If Malcolm Turnbull was genuinely concerned about rising power prices he would immediately endorse a clean energy target and cap the unsustainable level of gas exports that are driving up prices – this would give businesses, industry and consumers the certainty they need,” Minister Ambrosio said.
“Victoria and other states are willing to go it alone on a clean energy target.
“The paralysis in the Liberal party, fuelled by childish bickering between Malcolm Turnbull and Tony Abbott, is leading to higher energy prices for Victorians.”