GAS reservation and government intervention are necessary short-term measures to ensure sufficient competitive gas supplies to local industry and electricity generators, according to the nation’s peak electricity body.
GAS reservation and government intervention are necessary short-term measures to ensure sufficient competitive gas supplies to local industry and electricity generators, according to the nation’s peak electricity body.
The Energy Supply Association of Australia this week handed down the findings of its first comprehensive study of the state’s energy market, aimed at identifying measures to improve Western Australia’s long-term energy supplies.
The report comes amid claims by major industrial customers of a looming domestic gas shortage due to gas producers’ increasing preference to supply the more lucrative global liquefied natural gas market.
However, producers say plenty of gas is available for customers prepared to pay realistic prices.
Launching the report in Perth, association chief executive Brad Page said there were clearly significant underlying structural problems in the WA market, which had led to the current conflict between gas exporters and domestic customers.
In particular, he said the local market was characterised by a lack of competition among suppliers, and demand being concentrated among a relatively small number of major industrial customers.
Furthermore, opaque contractual arrangements between suppliers made it difficult to keep track of market pricing and demand changes and had helped blanket the signals needed to spark investment in new domestic gas supplies.
That meant that direct government intervention, most notably in the form of gas reservation, was necessary until the market’s underlying structural problems could be resolved.
“Given Western Australia’s critical gas supply shortage issues, we have suggested that until underlying market failure issues as well as more competitive regulatory and taxation arrangements are put in place, a domestic gas reservation policy may be a necessary tool to secure domestic gas supply,” Mr Page said.
“However, in the longer term, a strategic, market-based approach to policy implementation specifically addressing the market failures that have arisen would better promote a secure, reliable and competitive supply of gas in Western Australia.”
Mr Page identified joint marketing of gas from multi-party gas developments such as the North West Shelf and Gorgon projects, the ease with which retention leases could be renewed, and limited new investment in gas transportation and storage as critical issues needing resolution.
He also said timely transition to fully cost reflective pricing was vital in both the gas and electricity sectors to ensure reliable and secure long-term energy supplies.
Therefore, an independent body, such as the Economic Regulation Authority, should be empowered to set electricity tariffs rather than government ministers.
Mr Page also advocated the establishment of a single system operator to oversee and co-ordinate the expansion and integration of the North West electricity network.
