Gas prices to increase on tariff review

As the gas crisis bites into the state's industries and households, the state government has confirmed that it will increase the cap on gas tariffs for residential and small business customers by around 10 per cent.

But, the WA government says, the price hike is not related to the state's current gas shortage.

Energy Minister Fran Logan announced the increase today amid uncertainty over WA gas supplies following the Varanus Island explosion.

The state lost 30 per cent of its gas supplies when the Apache Energy Varanus Island gas plant shut down following the June 3 explosion and fire.

Mr Logan said the proposed increased caps on tariffs, which come into force from July 1, were not related to the shortage.

He said they followed recommendations in an interim review of prices by the Office of Energy.

Residential customers in the state's south-west and mid-west using smaller amounts of gas would pay 5.4 per cent more, Mr Logan said.

This would increase to 16.5 per cent for bigger customers whose usage exceed one terrajoule of gas a year.

Users in Kalgoorlie and Albany will have an across-the-board 10 per cent increase.

"The larger tariff increases for higher consumption customers are intended to provide an incentive for energy efficiency and lower gas consumption, which should drive greenhouse gas emission reductions," Mr Logan said.

He said the price increase was needed to meet rising cost pressures from increased gas commodity prices, transmission pipeline costs and retail operating costs.

International natural gas prices had soared in recent years, he said.

Many gas consumers would be able to choose between two retailers, Alinta and Synergy, so they could be supplied on contract rather than tariff, Mr Logan said.

"Gas for at least half of small business consumption in the mid-west/south-west area is now sold under contract and will not be impacted by these tariff changes," he said.

"A more detailed review is also underway to consider the gas tariff arrangements for 2009-10 and onwards."

Below is a statement from energy minister Fran Logan:

The State Government has confirmed that it will increase the cap on gas tariffs for residential and small business customers.

The proposed increase is included in the interim recommendations of a review of gas tariffs, conducted by the Office of Energy.

Energy Minister Francis Logan said the tariff cap increase would apply to residential and small business customers who used less than one terajoule of gas each year.

But tariff caps for residential customers in the South-West and the Mid-West would be structured so that increases were smaller for lower use customers.

For residential customers in the South-West and Mid-West, the increase would range from 5.4 per cent for smaller gas users to 16.5 per cent for bigger users. The median increase would be about nine per cent.

"The larger tariff increases for higher consumption customers are intended to provide an incentive for energy efficiency and lower gas consumption, which should drive greenhouse gas emission reductions," Mr Logan said.

Customers in Kalgoorlie and Albany will have an across-the-board 10 per cent increase.

The Minister said the review indicated that the cap needed to rise to meet rising cost pressures from increased gas commodity prices, transmission pipeline costs and retail operating costs.

He said international natural gas prices had soared in recent years.

Previous annual cap increases had been kept in line with inflation, under the Gas Tariff Regulations.

Mr Logan said the proposed increased cap, which would apply from July 1, was not related to the current gas shortage.

Gas consumers who used more than 0.18 terajoules per annum, of which a significant proportion were business customers, could choose between two retailers - Alinta and Synergy, so they could be supplied on contract rather than tariff.

"Gas for at least half of small business consumption in the Mid-West/South-West area is now sold under contract and will not be impacted by these tariff changes," the Minister said.

"A more detailed review is also under way to consider the gas tariff arrangements for 2009-10 and onwards."