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Discussion paper

Measures to improve transparency in the gas market: COAG Regulation Impact Statement for consultation

Natural gas Energy industries Energy resources Gas prices Sector regulation Australia

Recent reviews carried out by the Australian Competition and Consumer Commission (ACCC), Gas Market Reform Group (GMRG) and the Australian Energy Market Commission (AEMC) have identified a range of information gaps and asymmetries across the eastern and northern Australian gas markets that they consider are:

  • hindering the ability of the market to respond efficiently to changing market conditions;
  • impeding effective competition and the efficient trade of gas and infrastructure services; and
  • resulting in inefficient decisions about consumption, production and the use of infrastructure services and longer-term investment decisions.

Why is Energy Council action needed?

As the ACCC-GMRG have observed, it is not in the commercial interests of most market participants to address these information deficiencies on a voluntary basis, or to disclose information in a timely and accurate manner.1 Gas suppliers, retailers and infrastructure service providers who have benefitted from the opaqueness of the market over the years are likely to resist more timely and complete information disclosure.

Energy Council action may therefore be required to improve the transparency of the gas market. Improved market transparency is expected to deliver a number of benefits, including to:

enable more informed decisions to be made about gas consumption, gas production, exploration activities and infrastructure services, facilitating more efficient planning and investment across the market;

provide more timely and accurate signals about how well the market is functioning and whether there are any potential problems with the supply-demand balance, which will enable the market to respond more efficiently to changing market conditions; and

promote effective competition (where competition is possible) and the efficient trade of gas and infrastructure services by aiding the price discovery process, lowering search and transaction costs and reducing the information asymmetry and imbalance in bargaining power that users can face in each stage of the supply chain.

What are the policy options?

This Consultation RIS examines four options:

  1. Maintaining the status quo: This option assumes no additional action over and above what is currently in place. All existing temporary measures to increase transparency will discontinue once the measures cease.
  2. Implementing a sub-set of the measures recommended by the AEMC and jointly by the ACCC and GMRG: This option provides for the implementation of all the AEMC’s recommendations and the partial implementation of the ACCC-GMRG’s recommendations which cover gas and infrastructure prices, the supply and availability of gas and infrastructure services.
  3. Implementing all the AEMC and ACCC-GMRG’s recommendations: This option builds on Option 2 by providing for the implementation of all the ACCC-GMRG’s recommendations.
  4. Implementing a superset of the AEMC and ACCC-GMRG recommendations: This option includes all recommendations from Option 3 plus a number of other transparency measures identified while preparing this Consultation RIS.

This Consultation RIS seeks stakeholder comments on these options.

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