Submission: DCCEEW – Proposed Extension of AEMO’s East Coast Gas System Reliability and Supply Adequacy Functions

13 February 2026
 

To: Department of Climate Change, Energy, the Environment and Water
Re: Proposed Extension of AEMO’s East Coast Gas System Reliability and Supply Adequacy Functions
 

Thank you for the opportunity for the Institute for Energy Economics and Financial Analysis (IEEFA) to provide input to the Department of Climate Change, Energy, the Environment and Water (DCCEEW)’s consultation on the Proposed Extension of AEMO’s East Coast Gas System Reliability and Supply Adequacy Functions.

IEEFA is an independent energy finance think tank that examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

IEEFA is broadly supportive of the proposed extension to the Australian Energy Market Operator (AEMO)’s powers and provides the following high-level feedback. IEEFA notes that:

• The government’s design of the recently announced domestic reservation scheme could reduce uncertainty about future gas supply and therefore help to reduce barriers to investment, particularly in gas transmission and storage infrastructure
• An overemphasis on supply-side measures risks imposing higher costs on gas users, particularly if accessible, financially beneficial opportunities to reduce gas demand are not prioritised alongside supply measures. It is vital that governments also prioritise demand reduction measures, which in addition to reducing household and industrial energy bills will also improve the supply-demand balance and provide greater certainty to the gas industry on future demand (noting demand risk is a key uncertainty impacting on investment).
• The setting of a “reserve price” under the proposed “LT RSA [long term reliability and supply adequacy] tool” to support gas supply and/or infrastructure projects will ultimately determine the costs borne by end users. Where the tool is used to support infrastructure projects that exhibit natural monopoly characteristics, there is a risk that reserve prices will reflect monopoly prices to the detriment of the efficient operation of the market. 

IEEFA welcomes the opportunity to engage further on the matters raised in this submission.
 

Kind regards,

Josh Runciman 
Lead Analyst, Australian Gas