Improving energy security, reliability and affordability

Joint media release with Minister for Climate Change and Energy Chris Bowen, and Minister for Resources and Northern Australia Madeleine King.

The Albanese Government’s first Budget includes measures to help address increasing energy cost pressures that have been exacerbated by the illegal Russian war on Ukraine.

The measures in this Budget include:

  • Delivering a $67 million package of reforms to modernise energy market regulation with the states and territories, increase the monitoring and oversight of gas markets and improve the functioning of the Australian Domestic Gas Security Mechanism (ADGSM), including moving to quarterly-based consideration.
  • The new National Energy Transformation Partnership, agreed in August by energy Ministers from each state and territory– creating policy certainty for the first time, to attract the necessary investment in transmission and renewable energy projects. This includes delivering critical market reforms, supporting investments in the grid such as large-scale storage and transmission, and helping to make homes and appliances more energy efficient.
  • A new Heads of Agreement signed in September with East Coast LNG Exporters to prevent a gas supply shortfall – delivering an additional 157 petajoules of gas – or nearly three times the projected shortfall – to the east coast market in 2023.
  • Last week’s announcements of over $6 billion of new investments in energy infrastructure on the east coast, as part of our $20 billion Rewiring the Nation fund.
  • The Powering Australia plan, focusing on bringing cheaper renewable energy to Australian homes and businesses.
    • $224.3 million for the Community Batteries for Household Solar grants program, to deploy 400 community-scale batteries for up to 100,000 Australian households.
    • $102.2 million for Community Solar Banks for 25,000 Australians living in apartments, rentals and low-income households across Australia.
    • $63.9 million to invest in dispatchable storage technologies, such as large-scale battery projects - redirected from the failed UNGI program which delivered 0MW of capacity.
    • $62.6 million for an energy efficiency grants program for small and medium-sized business to reduce energy use and lower energy bills.
    • $83.8 million to develop and deploy First Nations Community Microgrid projects. Remote communities will benefit from improved security and affordability of energy supply.

In addition, the Government has asked the Australian Competition and Consumer Commission (ACCC) to examine the voluntary Code of Conduct governing Gas Supply Agreements between Gas Suppliers and Gas Customers (the Code of Conduct) and inform options to improve its operation and effectiveness with the view of making it mandatory. The ACCC has also been asked to consider options that will improve price transparency and ensure reasonable pricing.

Russia’s willingness to weaponise energy has sent coal, oil and gas prices through the roof, causing the most significant shock to global energy markets since the 1970s.

In Australia, the energy market shock has been compounded by the Coalition’s lost decade of denial, delay and dysfunction on energy policy. This resulted in a 3GW decline in dispatchable power.

It’s a challenging time in energy markets but the Albanese Government is determined to provide a stable policy framework that incentivises investments in cheaper and more reliable energy to improve the situation over the short, medium and long term.

BACKGROUND

Measures to modernise gas and electricity market

  • Increased support for the ACCC Gas Inquiry – The ACCC will be allocated $10.4 million over the forward estimates, a 40 per cent increase in funding, dedicated to monitoring the gas market through the ACCC Gas Inquiry, increasing the frequency of domestic gas supply assessments.
  • Improving Gas Security and Reliability – The Australian Energy Market Operator (AEMO) will have extended powers to intervene and respond to gas system security concerns and manage volatility. Ahead of winter 2023, immediate legislative reform will see AEMO’s powers to ensure adequate gas reserves are available for power generation extended to include all east coast gas markets. In addition, the National Gas Rules will be strengthened so that AEMO and gas market participants will be able to identify and respond to emerging gas system security concerns and manage periods of volatility - such as what occurred in this year’s winter. The Budget will allocate $23 million over three years to deliver these reforms.
  • Protecting Consumer Interests – The Australian Energy Regulator (AER) will take on a new compliance and monitoring role to ensure gas companies are acting in the best interests of consumers and support reforms to encourage investment in firm capacity, with $22.8 million provided in the Budget over four years for this increased activity.

    The AER will actively monitor the behaviour of pipeline service providers (such as prices charged, contract terms and access negotiation outcomes) and their compliance with obligations. They will administer, monitor and enforce compliance with an expanded information disclosure framework to ensure users have access to gas on fair terms.

  • A Stronger ADGSM “Gas Trigger” to Protect Supply: The Australian Government will reform the Australian Domestic Gas Security Mechanism (ADGSM) to give the Minister for Resources greater flexibility to protect domestic gas supplies. Under the reforms, the Minister for Resources will receive expert advice each quarter and will be able to start the process to activate the ADGSM if there is a risk of domestic gas supply shortages.

    Changes to the mechanism will deliver much more flexibility and will mean decisions to activate the ADGSM can be made every quarter ahead of peak seasonal demand periods, rather than only once a year under the old regulations. The Government will consult with industry in the coming months on the detailed design, ahead of planned commencement in mid-2023. The Budget will invest $10.8 million over the forward estimates to implement reforms to the ADGSM, such as operating tradable export permits.

    More information is available on the Securing Australian domestic gas supply web page.

Reviewing and strengthening the voluntary Code of Conduct 

The Treasurer has requested the ACCC provide observations on the existing voluntary Code of Conduct for the negotiation and development of Gas Supply Agreements between Gas Suppliers and Gas Customers in Australia.

In providing this advice before the end of the year, the ACCC will consider options and recommendations to:

  • improve price transparency,
  • better define a reasonable offer, including consideration of reasonable prices,
  • improve the operation of the code, with the intention of it being made mandatory.