Former State Premier Urges Albanese Govt to do ‘Whatever Necessary’ to Cut Gas Prices

A kitchen gas stove burner at a residential property in Melbourne, Australia, on June 16, 2022. Joel Carrett/AAP Image

Former Victorian State premier Jeff Kennett has urged the Albanese government to do “whatever action is necessary” to force gas suppliers to enter into new contracts at or below the legislated price.

This comes as several Australian gas retailers report having supply issues since the Federal Labor government introduced its gas price cap on Dec. 23, 2022.

Kennett, who is the chairman of the Food Revolution Group, said hundreds of small manufacturers were being “threatened with closure” or operating at a loss due to the gas price hike.

“Every day the government and suppliers fail to address the failure of suppliers to write new contracts at the legislated price of $12 per gigajoule, is putting more small and medium sized businesses at risk,” Kennett said, reported The Australian.

Kennett said that there was little value in passing legislation that will put a cap on the price of gas, particularly if there are no means for gas suppliers to roll over existing contracts when they expire at the legislated price, reported The Daily Telegraph.

“Every day, as contracts expire, companies (particularly small companies) and businesses are having to accept a default rate that might be as much as four times their contracted rate.”

The former premier said some default prices were anywhere between $12 to $48 a gigajoule.

“So, a small business with a gas bill of $50,000 a year will go to $200,000 or more,” Kennett said.

Meanwhile, Treasurer Jim Chalmers told reporters on Jan. 19 that he expects the price cap to “take some of the edge off, some of the sting out of, these forecast price rises,” adding that the Coalition would prefer that the government did “absolutely nothing” thereby leaving small businesses and pensioners and families and whole industries “swinging in the breeze.”

Federal energy minister Chris Bowen told ABC on Jan. 19 that the federal government had been “upfront” that its intervention was not about bringing the prices down.

“It was about ensuring that the increases were more in line with Australians’ expectations.”

However, opposition leader Peter Dutton has previously criticised the move saying that the legislation would be “catastrophic for economy policy” because it will disrupt the energy market.

“There will be other companies in other sectors who are looking to invest here at the moment, who will be looking at the sovereign risk that’s created out of this and questioning whether they will invest in agriculture or whether they’ll invest in the manufacturing, advanced manufacturing, into the health care sector,” he said in December 2022.

Australia’s Biggest Gas Producers Hold Off on Offering New Gas Supplies

Gas giants, Woodside Energy and Shell, have continued their suspension on offering new supplies since the Albanese government introduced a gas price cap in December 2022.

The energy giants, two of the east coast’s biggest gas producers, have currently suspended the offer of new gas volumes to large companies for 2024 due to uncertainty over the legislation, reported The Daily Telegraph.

Woodside and Shell reportedly suspended talks with buyers to supply new gas into Australia’s east coast on Dec. 13.

Woodside had initially negotiated with commercial and industrial customers to buy 50 petajoules of gas over 2024 and 2025 but instead has paused the process.

Both Woodside and Shell are reportedly keeping the pause in place until further details on the Federal government’s code of conduct is released in February.

Australian Workers’ Union national secretary Daniel Walton said that without the government’s mandatory gas industry code of conduct, which consultation closes on Feb. 7, the ACCC does not have “enough teeth” to punish non-compliant producers, reported The Australian.

Guidelines for the Gas Industry

On Jan. 17, the Australian Competition and Consumer Commission (ACCC) published interim guidelines for the gas industry in relation to the temporary price cap.

The price cap of $12 a gigajoule will apply to new domestic wholesale gas contracts from East Coast and Northern Territory producers for gas to be supplied over the next 12 months from developed fields.

The price cap generally does not apply to supply contracts entered into before Dec. 23, 2022, but may apply if a price provision in an agreement for supply in 2023 is varied.

However, the price cap does not apply to sales of gas intended for international export.

“Our guidelines are intended to support the gas industry with their obligations to comply with the new laws, so the country experiences the intended benefits from these emergency measures,” ACCC Chair Gina Cass-Gottlieb said in a press release.

“While our primary objective is to achieve compliance with these laws, we are ready to exercise our enforcement powers in response to any alleged contraventions, particularly if we become aware of conduct that may be intended to circumvent the price cap.”

According to the ACCC, the maximum penalty for a company that breaches the emergency price order is the greater of $50 million or three times the value of the benefit obtained, or 30 percent of the company’s turnover during the period it engaged in the conduct.

Alfred Bui contributed to this report.