IEEFA Australia: Energy Market Commission should amend national gas laws to curb massive price hikes

Nov. 7, 2018, SYDNEY (IEEFA): The Institute for Energy Economics and Financial Analysis (IEEFA) and Environmental Justice Australia (EJA) are seeking an amendment to Australia’s national gas rules to ensure energy prices become affordable and market competitive in Australia.

IEEFA and EJA lodged the amendment request with the Australian Energy Market Commission (AEMC) which makes and amends the rules governing Australia’s electricity and gas markets.

If applied, the amendment will constrain Jemena, an Australia gas pipeline operator ultimately owned by the Chinese (60%) and Singaporean (40%) governments, from the current practice of price gouging.

Bruce Robertson, an IEEFA financial analyst, said Jemena is charging twice what is reasonably acceptable, and then some.

“The Chinese and Singaporean governments are reaping huge monetary benefits due to an exemption under the law allowing Jemena to charge in excess of what is reasonable for up to 15 years,” said Robertson.

“They knowingly built an inefficient pipeline – the Northern Gas Pipeline connecting Queensland and the Northern Territory in Australia – and they are allowed to recover their costs. They can then duplicate the pipeline and again recover their costs. And under the exemption, they get 15 years grace where they can charge what they want, and nobody – not the government, the consumer, nor other pipeline operators – can appeal.

“We are asking for the amendment to be removed to better protect energy consumers bearing increasingly higher gas prices.”

Australia’s national gas rules operate to improve transparency in an opaque monopoly market-place, and to increase fairness for consumers.

Jemena received a special exemption from the National Gas Rules in 2017. The exemption applies to the current Northern Gas Pipeline and Jemena’s proposal to build another pipeline to transport gas from fracking operations in the Northern Territory.

David Barnden, principal lawyer with Environment Justice Australia, said Jemena’s pipeline enjoys an exemption built into the rules.

“The exemption allows Jemena to price gouge, potentially costing consumers over A$2 billion,” he said. “No other pipeline gets this special treatment. The exemption should be removed to improve the market.”

The AEMC will invite comments on the exemption after 15 November 2018. Following consultation, a decision from the AEMC should be provided in the new year.

Bruce Robertson said while consumers wait for the AEMC’s decision, Jemena must also wait.

“Their recent media describing a proposed expansion of their Northern Gas Pipeline must be read as a company feeling the heat,” he said.

“The National Gas Rules are designed to create transparency in gas market and pricing. We trust the AEMC will remove the exemption and bring professionalism, transparency and cheaper prices into Australia’s gas market, which in turn will reduce electricity prices.”

IEEFA and EJA’s request for an amendment to the National Gas Rules can be found here. The request is available on AEMC’s website.

Media Contact: Kate Finlayson +61 418 254 237

David Barnden is a Principal Lawyer at Environmental Justice Australia, a not-for-profit legal practice. He currently represents 23 year old Mark McVeigh in a Federal Court action against A$50 billion super fund REST concerning trustee duties on climate change in investment decisions. Before coming to EJA, he represented investors in a number of successful multi-million dollar securities class actions.

Bruce Robertson has been an investment analyst, fund manager and professional investor for over 32 years. He has worked for major domestic and international institutions including Perpetual Trustees, UBS, Nippon Life Insurance and BT. Robertson is an active participant in the national debate on energy issues in Australia and has been invited to present to a number of government enquiries into the electricity and gas industries.

About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy and to reduce dependence on coal and other non-renewable energy resources.