Amendments to the NSW Biofuels Act 2007 (Biofuels Act) came into effect in January 2017, moving the obligation for mandated biofuels sales from a small number of major fuel retailers and wholesalers to a greater number of large retailers. Under the revised Biofuels Act, volume fuel retailers must ensure that ethanol accounts for at least 6% of the total volume of petrol sold in any one quarter (ethanol mandate), unless they have been provided an exemption. The Independent Pricing and Regulatory Tribunal of NSW (IPART) has two ongoing roles under the amended Biofuels Act:
1. to determine, and periodically review, a ‘reasonable wholesale price’ (wholesale price) for ethanol for use in the production of petrol-ethanol blends such as E10, and
2. to monitor the retail market (including prices) for petrol-ethanol blend and make reports to the Minister for Innovation and Better Regulation (the Minister) on the effect of a determination of the reasonable price for wholesale ethanol.
Since January 2017, we have determined the wholesale price using an import parity price (IPP) methodology. We developed this methodology as part of our 2016 review where we found that a ‘less intrusive’ approach to price regulation of wholesale ethanol was appropriate. We found that as petrol prices were relatively low, and consumers had a high degree of choice for fuel in the retail market, the market imposed a sufficient constraint on wholesale ethanol prices. In addition, there was evidence of increasing competition between the three producers in the wholesale ethanol market in eastern Australia.
In our 2016 review, we also found that the retail market for petrol and the wholesale market for ethanol are not static, but are impacted by fluctuating supply and demand conditions, as well as regulatory changes. Therefore, we considered that we should monitor and report on these markets annually to reaffirm that a ‘less intrusive’ approach to regulation remains appropriate.
This report presents our draft findings on the retail market for E10, along with our draft findings on the wholesale ethanol market and the form of price regulation needed in that market.
IPART invites written comment on this document before 24 November 2017 and encourages all interested parties to provide submissions addressing the matters discussed.