EUAA Submission: Proposed ADGSM Guidelines
Emily Wood | February 23, 2023
‘…In summary we support the proposed ADGSM Guidelines as part of a broader suite of gas market reforms being pursued by government.
The revised ADGSM, the Heads of Agreement between the Commonwealth and LNG Shippers, the proposed Gas Industry Mandatory Code of Conduct with “fair and reasonable” pricing provisions and ongoing market monitoring and reporting by the ACCC and AEMO will go a long way to ensuring a fair and functioning domestic gas market for consumers measured by:
1. Achieving a long-term sustainable gas price that allows existing business to flourish and for new investments in manufacturing to occur.
2. Ensuring a competitive and highly liquid domestic gas market where market power is minimised or can’t be exercised.
3. Achieving fair and reasonable contractual terms and conditions.
4. Improving transparency and decreasing information asymmetry.
In the past we had pursued a price trigger as part of the ADGSM. However, given the temporary emergency price measures introduced recently by the commonwealth and with the establishment of a mandatory gas industry code of conduct, this is unlikely to be necessary. Therefore, the ADGSM can retain its focus on ensuring sufficient domestic supply while other elements of the government response can ensure fair and reasonable outcomes for domestic gas users.
One of our other concerns with the ADGSM was the time lag between identification of a potential shortfall and triggering of the ADGSM. This time lag meant that significant damage can occur (i.e. consumers being forced to contract on unfavourable terms) while we wait for the mechanism to take effect. We argued that short term activation power (linked to greater AEMO & AER oversight and reporting) would create a significant incentive for supply side participants to ensure they avoided the ADGSM from being triggered in the first instance and reduce the exposure of gas users to long periods of uncertainty. We are pleased that a near term ADGSM trigger is being proposed….’
Please download attachment to read full submission.
