Tuesday, 29 April 2014

NSW Premier Mike Baird telling fairytales regarding reasons for foreshadowed increases in gas prices

On ABC News online on 23 April 2014:

NSW Premier Mike Baird says around half of the proposed increase is due to the carbon tax.

The Independent Pricing and Regulatory Tribunal (IPART) shows Premier Baird up as a political fairytale purveyor in its April 2014  draft report, where is clearly states that increases in network distribution charges to gas retailers and industry structural changes are the main drivers of cost to consumers increasing. With future gas exports from Australia’s east coast expected to increase costs even more.

The Carbon Pollution Reduction Scheme is only a small component of these charges as is made clear in the Jemena Access Arrangement.

1.2 Reasons for these price increases

The allowed increases in regulated retail gas prices follow increases in prices in
2012/13 and 2013/14.8 The main reason for these past increases were sustained
rises in network costs.9

In the coming 2 years, the reasons for the increase are different. The main reason
relates to structural changes that are emerging in the wholesale gas market.
These changes are driving increases in wholesale gas prices, and so all 3 Standard
Retailers have wholesale gas costs that are significantly higher than in 2013/14.
However, we note there is still considerable uncertainty around how fast
wholesale gas prices will rise and what level they will peak at.10 This uncertainty
means there remains a wide range (and a high level of risk) in forecast efficient
wholesale gas costs, which we considered as part of our assessment of the
Standard Retailers’ proposed price changes.….

8 Average retail gas prices increased by 8.5% across NSW on 1 July 2013, or by between 5.2% and 9.2% in the Standard Retailers’ individual supply areas. Average retail gas prices increased by 14.2% across NSW on 1 July 2012, or by between 9.3% and 14.9% in the Standard Retailers’ individual supply areas.
9 Recent network cost increases have primarily been the result of Jemena’s successful appeal to the Australian Competition Tribunal (ACT) of the AER’s final decision on the maximum prices and charges they can levy on retailers for use of the distribution network. Information on the Jemena Access Arrangement can be found here.
10 Wholesale gas prices are likely to be influenced by the development of liquefied natural gas (LNG) facilities on the eastern coast of Australia and the subsequent export of LNG. This means that Australia’s domestic gas market will increasingly be influenced by the international market. However, there is still significant uncertainty around the impact this will have on gas prices in the domestic market.

Tables from IPART media release, 23 April 2014

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