The Review’s title is somewhat misleading; the Australian Energy Market Commission (AEMC) will be reviewing the facilitated markets on the East Coast; the Short Term Trading Markets (STTM) in Adelaide, Brisbane and Sydney; the Declared Wholesale Gas Market in Victoria and the Gas Supply Hub at Wallumbilla. As many market participants, including APGA, have pointed out none of these markets is actually a wholesale market!
The clear issues for gas users in Eastern Australia right now are gas availability and the gas price.
Neither of these issues will be addressed in this Review.
The clear issue for gas producers is the moratoriums on unconventional gas development in New South Wales and Victoria, which also will not be addressed by the Review.
APGA is concerned that the recommendations made by the AEMC to CoAG on improving facilitated markets and pipeline frameworks will be publicly sold as helping the gas supply tightness (crisis!) facing the East Coast.
So what will this Review do?
It will run over the course of the year, with a first report due in June and second report in December.
The first report will assess facilitated markets and pipeline frameworks and make recommendations on short-term improvement.
The second report is to set out a long-term road map for reform, considering questions such as the appropriate number of facilitated markets for the East Coast and the appropriate regulatory framework for pipelines.
There are many issues of consequence for the gas transmission industry in this Review.
While the Terms of Reference task the AEMC with examining pipeline capacity trading, we are still awaiting CoAG’s enhanced information proposal resulting from the last exhaustive process examining capacity trading.
APGA’s submission to the Review will set out that:
- Pipeline investment has supported and will continue to support the evolution of the Eastern Australian Gas Market;
- The pipeline sector is responding to changing conditions with new services, increased willingness to take on medium-term risk in investment decisions and initiatives to facilitate market development;
- The circumstances of Australia are unique. In particular, the number of participants in the Eastern Australian Gas Market and the relatively small gas demand are the major limiting factors to developing a deep and liquid gas market;
In the short-term, improvements that can be made to facilitated markets include:
- Aligning market parameters;
- Improving transparency of production and export capacity and activity; and,
- Implementing the information measures arising from the CoAG Energy Council process to enhance pipeline capacity trading.
Improvements to facilitated markets should not be confused with measures to address or accelerate gas supply.