The Federal Government’s Mandatory Gas Code of Conduct (Gas Code) has now been enshrined in law.
The Code is designed to ensure Australian gas is available for Australian users at reasonable prices, give producers the certainty they need to invest in supply, and help to ensure Australia remains a reliable trading partner.
The Code has been registered and will come into effect from 11 July 2023.
Producers have already offered indicative domestic supply commitments of at least 260PJ to 2027. These indicative commitments reduce the risk of shortfalls as assessed by the Australian Competition and Consumer Commission (ACCC) and Australian Energy Market Operator (AEMO).
The final Gas Code follows extensive consultation with gas producers and users to ensure it is fit for purpose.
The final design was welcomed by industry, with the Energy Users’ Association of Australia noting that its “expectation is that the Code will make it easier to contract gas in Australia at reasonable prices and with reasonable contract terms.”
The Code will ensure domestic prices are reasonable by establishing a price anchor, or mechanism to drag prices down, through the combination of:
- A price cap, which is to be set at $12GJ and subject to a review commencing by 1 July 2025
- A process for qualifying for exemptions from the price cap on the basis of making satisfactory ACCC and court enforceable supply commitments
- Allowing small producers of gas to be exempt from the price cap if they supply only the domestic market
In addition, it requires all participants to abide by standards of conduct to level the playing field between users and producers to deliver a better functioning, more competitive gas market.
The Gas Code is supported by a strong enforcement regime through the ACCC, with a review to be undertaken no later than two years after coming into effect, to ensure the Gas Code remains effective and fit for purpose.
The Federal Government took immediate action to shield Australian gas users by temporarily capping the price of gas in December 2022, and the Gas Code will operate alongside this cap until it expires.
Coupled with action to cap coal costs for power generators, the government’s actions nearly halved wholesale energy prices.
This is in contrast to the former approach on gas and energy policy, which saw average gas prices increasing by 250 per cent between the 2019 and 2022 elections and persistent supply shortfalls forecast by the ACCC.
To access the final code, click here.
Factsheet and documentation, including exemption forms for producers after the Code commences will be available here.