Despite vocal opposition from the gas industry, an Australian Senate committee has endorsed the Federal Labor government's controversial code of conduct aimed at capping gas prices.
The committee's support comes amid industry claims that the code could deter new investments and worsen the existing gas shortage on the eastern seaboard.
In late 2022, the government introduced a mandatory code featuring a price cap of $12 per gigajoule (GJ) on new supplies. This move followed concerns from the manufacturing sector that high gas prices were jeopardising their operations.
The Senate economics legislation committee concluded that the code would eventually lower gas prices, citing evidence from the ACCC. The price cap has been effective in reducing price pressures and is expected to improve retail gas prices as new contracts emerge.
Industry leaders expressed disappointment at the endorsement, advocating for a definitive end date for the legislation.
Australian Energy Producers chief executive Samantha McCulloch said, “With the code putting the government at the centre of east coast gas market operations, the government must urgently prioritise bringing on new gas supply.
“This includes through providing clear policy direction on the ongoing importance of gas, providing a long-term price signal to the market and removing regulatory barriers to new investment.”
The code is set to remain in place until 2025, coinciding with an anticipated east coast gas shortage.
This scenario raises concerns among energy executives who argue that insufficient gas supplies could hamper Australia's transition from coal to renewable energy sources.
The country has an ambitious target of sourcing over 80% of its electricity from renewables by 2030, a goal currently hindered by high battery costs and local opposition to pumped hydro projects.
With challenges ahead, the endorsed gas code remains a contentious issue dividing government and industry views on the most effective route to affordable and reliable energy.