The Australian Energy Market Commission has released the Stage 1 report for its East Coast Wholesale Gas Market and Pipeline Frameworks review and outlined priorities and timelines for Stage 2.

Stage 1 recommends a package of immediate actions for consideration by the COAG Energy Council which would make it easier to buy and sell gas.

More recommendations for the efficient long-term development of gas markets will be developed throughout Stage 2, with draft recommendations due to be provided to the Energy Council by the end of 2015.

AEMC Chairman, John Pierce, said the AEMC east coast gas review was focused on how to get gas to consumers in the most efficient way once it leaves the ground.

“Getting gas to well-functioning markets is fundamental to consumers being able to know whether the gas price reflects underlying demand and supply conditions,” Mr Pierce said.

“Significant investment in pipelines over the past 15 years means the east coast market is now interconnected, but as export markets open up and unconventional gas resources come online, we need gas to flow easily to where it is most needed.

The Stage 1 Final Report, presented to COAG Energy Council Ministers today, includes recommendations to improve price transparency with a new gas price index to show price trends over time starting in 2016.

The report also includes recommendations to reduce market complexity by highlighting the need for the same start time for gas trading in all markets.

Other recommendations include the ability for rule change requests relating to the Victorian gas market to be submitted by any stakeholder, aligning Victorian requirements with the rest of the east coast markets; and the possible expansion of information required to be published on the Natural Gas Services Bulletin Board. This last recommendation is being implemented through the Enhanced Information for Gas Pipeline Capacity Trading rule change currently underway.

Mr Pierce said Stage 2 of the review will develop further options to promote long-term gas market development, including:

  • The design of wholesale markets with consideration of options for physical and virtual trading hubs and changes to the short-term trading market and gas supply hub models.
  • Measures to facilitate efficient investment in, and usage of, pipelines including measures to enable secondary trading of contracted but unutilised pipeline capacity.
  • Establishing a one-stop shop for gas market data to improve transparency, lower the costs associated with pipeline capacity trading and improve the operation and monitoring of the market.

Extensive consultation is planned to develop these options over the next six months.

The AEMC is also reviewing the Victorian Declared Wholesale Gas Market to identify whether reforms are required to enhance the liquidity, transparency and flexibility of the Victorian wholesale gas market in light of the structural changes across the entire east coast.

“As Australia’s first gas market, with relatively high levels of retail competition and a highly meshed transmission network, there are material differences between the Victorian system and other jurisdictions,” Mr Pierce said.

This review will continue throughout 2015 to consider whether objectives for the Victorian market should change in light of the broader east coast environment, including its potential role in providing an efficient reference price; and the capacity for inter-regional trade.

Consultation on Stage 2 and the review of the Victorian Declared Wholesale Gas Market will be held in the months ahead.

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