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Labor’s gas price cap sails through Federal Parliament

December 15, 2022

The Albanese Government’s legislation to cap gas and coal prices sailed through Parliament this week despite predictable howls of protest from the Federal Opposition and industry lobby groups.

After earlier securing the support of the crossbench for the legislation, which caps gas prices at $12 a gigajoule and provides $1.5 billion in federal assistance for bill relief, the Greens backed the vital legislation in exchange for a package to help households transition from gas to electric appliances.

AWU National Secretary Dan Walton said the legislation was a hard-fought victory for Australian industry and domestic consumers.

“We’ve always supported the resources industry, and the quality jobs it creates. Attacks by environmental activists continue to threaten the affordable energy supply needed by Australian households and industry. This legislation is not about attacking gas – it’s about making sure their profits are not put ahead of the public interest,” Mr Walton said.

“The price spike in gas and coal produced mega-profits profits for gas exporters despite potentially forcing Australian factories, smelters and plants to the wall.”

“We knew these big multinationals would not give up their windfall gains without a lot of squealing.

“And we saw that when their lobbyists, backed by the Federal Opposition, mounted a histrionic attack on the Government for taking the side of Australia’s 800,000 manufacturing workers.”

Mr Walton said the attack was built on a grab bag of false arguments about the proposed legislative and regulatory measures. None stood up to close scrutiny.

 

Myth: The Government is imposing a permanent $12/GJ price cap

Fact: The Government is implementing an emergency, temporary cap on wholesale gas prices, and a mandatory code of conduct to regulate long-term market behaviour. This will ensure a stable longer-term market, and spot prices will not be affected.

 

Myth: Requiring supply at “reasonable pricing” is effectively nationalising the industry

Fact: The domestic price cap is a limited form of regulation for a limited part of the market. The Government already engages in price regulation across a range of sectors, including retail electricity, private health insurance and even milk. Contrary to claims of “nationalisation”, most Australian electricity infrastructure has been sold off in recent decades, and the vast majority of our gas will continue to be exported on market terms.

 

Myth: The plan will stop new investment, limit new supply and destroy the gas industry

Fact: New sources of supply are exempt from the cap, and Australia does not have a shortage of gas – we export three times our domestic needs. One major gas producer says its production cost is $3.50/GJ – a 240% rate of return after the cap is in place. Santos admits it expects even higher shareholder returns in future. And in Western Australia, which has had a gas reservation for 16 years, a world-class LNG export industry operates while domestic users pay just $5-$6/GJ.

 

Myth: This is an unjustified intervention on a competitive market

Fact: The gas market has long failed to operate competitively. The ACCC says 85% of gas is produced by just five firms that regularly operate in cahoots. And the Turnbull and Morrison governments’ missed their chance at earlier intervention, relying on their failed “gas trigger”, gas codes of conduct, heads of agreement and “gas-fired recovery” rhetoric.

 

Myth: There has been no consultation with the gas industry

Fact: In the Federal Budget, the Government tasked the ACCC with consulting with stakeholders to improve the gas code of conduct, with a view to making it mandatory. And despite a price cap being publicly floated by federal ministers for weeks, the gas companies failed to come up with any reasonable alternative policy that would have an immediate impact on domestic prices.

 

Myth: Prices could fall without regulatory intervention

Fact: Governments have tinkered at the edges of the market for more than five years with no impact on prices. Domestic prices are regularly above what Australia’s export customers pay. No currently legislated policy measures are directly affecting prices, and the gas industry has failed to propose lighter-touch options to achieve price relief.

 

Myth: This is an anti-gas policy

Fact: The AWU and the Government recognise that affordable and secure energy – including gas and thermal coal – is critical for Australian manufacturing. While anti-fossil-fuel activists push to destroy demand by making gas and coal unaffordable, the Government’s measures will ensure energy is available to those who need it. Australia cannot have a green manufacturing industry if it does not have a manufacturing industry at all.

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