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Gas prices on the rise – up to 20% from 1 July 2014?

14 March 2014

Businesses in NSW may be paying significantly more – up to 20% more - for natural gas from 1st July 2014.

Gas retailers, such as AGL, ActewAGL, and Origin, have applied to the pricing regulator, IPART, for increases of 18% to 20% for 2014/15, with further rises in 2015/16 in some cases.

The expansion of Australia’s LNG export gas market has been cited as one of the major reasons for the proposed increases. Rising international demand from countries like Japan – where customers pay twice as much for their gas than Australians – are putting pressure on domestic gas supplies, pushing the price towards export parity. Forecasts predict NSW retail gas prices of $16/GJ by 2017 for large gas users.

Increases in the Australian wholesale gas price has already led to recent domestic plant closures, write-downs, or mothballing of gas-fired generating plants1, and so the flow-on increases to the retail market are not unexpected.

It is predicted that NSW will be particularly affected, as the state only produces 5% of their current gas needs, with the balance being imported mainly from South Australia and Victoria. This exposes NSW to significant price increases.

These forces are expected to encourage a wave of energy efficiency in gas-consuming industries, similar to the uptake of electricity energy efficiency programs that occurred when electricity prices rose precipitously.

The proposed retail price rises in July 2014 will apply to those users who have not signed a market contract with their gas retailer.

IPART are conducting a review on the proposed pricing increases. Stakeholders can respond to IPART’s draft report, due on 29th April 2014.

For more details see IPART’s website:
http://www.ipart.nsw.gov.au/Home/Industries/Gas/Reviews/Retail_Pricing/Changes_in_regulated_gas_retail_prices_from_1_July_2014

1 Gas price surge sends wrecking ball though energy markets, REnewEconomy, 3rd March 2014.