Gas prices set to to rise again in NSW

NEW South Wales' Independent Pricing and Regulatory Tribunal has ruled in its draft decisions on average regulated retail gas prices for 2016-17 that gas prices in the state are set to rise by just 0.9%.

Haydn Black

This is less than the rate of inflation and well below the almost 4% price rise seen in 2015-15.

The rise comes as the Gladstone LNG projects move towards full production. However, the impact of east coast gas prices has been relatively milder than expected.

The state, which meets just 5% of its gas needs domestically, although will lose that production early next decade, relies on gas from South Australia, Queensland and Victoria.

In all, the IPRT expects the average household bill will increase by just $6 to $14 per annum from July 1, while ActewAGL’s customers in the Queanbeyan region would see a slight reduction of $2 per annum in their annual bills.

IPART chairman Dr Peter Boxall said IPART’s draft decisions are based on its assessment of pricing proposals submitted by AGL Energy and Origin Energy in January, and a revised pricing proposal submitted by ActewAGL in April.

“We consider that the average changes in the retail component of prices - including wholesale gas costs, retail operating costs and margin - plus the pass through of network prices from 1 July 2016 as proposed by the standard retailers are reasonable,” he said.

Dr Boxall said the upward pressure on retail prices from rising wholesale gas costs has eased for the time being.

“Our draft decisions are based on forecasts of inflation and gas distribution network prices,” Dr Boxall said.

“There is considerable uncertainty around gas network price changes from 1 July 2016. This has a substantial impact on the changes in regulated retail prices, as network prices typically account for half the retail bill.

“Recently the Australian Competition Tribunal made a decision to set aside the Australian Energy Regulator's revenue determination for the Jemena Gas Network and the AER subsequently appealed some aspects of this decision to the Federal Court.

“As a result the overall draft price changes from 1 July are uncertain. Once network prices have been determined, we will ensure that final network prices are passed through into regulated retail gas prices when we make our final decisions in June,” Dr Boxall said.

IPART found that competition in the retail gas market is working effectively for around 95% of small gas customers in NSW, and that there is an improved outlook for competition for the remaining 5% of customers in regional areas where there are only one or two active retailers.

He said that if the NSW government remove retail price regulation from July 2017 that would promote further competition across NSW.

Only around 20% of small gas customers in NSW remain on a standard contract with prices regulated by IPART.

The remainder has signed a contract in the competitive market, usually receiving a discount to the regulated price.

IPART’s proposal is now out for public comment.