Household gas cost set to explode - UOW expert reveals why

A University of Wollongong academic has blamed new access to global gas markets for an impending jump in gas prices across the Illawarra.

On Wednesday, state pricing regulator IPART recommended a gas price increase of 17.6 per cent or up to $225 a year for NSW households.

IPART chairman Peter Boxall blamed the increases on rising wholesale prices because the east coast market was now effectively connected to Asia through Queensland liquefied natural gas exports.

Dr Geoff Kelly from UOW’s Sydney Business School said before the east coast was connected to Asia, price increases had been due mostly to distribution costs.

‘‘The currently contemplated increases are in large part due to increased wholesale market costs,’’ Dr Kelly said.

‘‘These latter costs are the ones which are affected by the new ability to sell domestic gas into overseas markets with higher ruling prices.  

‘‘In that situation it would be expected that as more local supply is directed to overseas demand the local price will move towards the [higher] overseas price.’’

Dr Kelly said while reserving gas for domestic use could lead to lower prices, it would depend on just how much gas was reserved.

Stop CSG Illawarra spokeswoman Jess Moore said this meant Illawarra residents could expect their gas bills to jump from $3 or $4 per gigajoule to the global average of $9 per gigajoule.

‘‘Gas prices in eastern Australia are low by world standards because we’re not yet linked to international prices but this is about to change with the completion of the first of three LNG plants [in Queensland],’’ she said.

‘‘So for the first time in eastern Australia gas producers can choose to sell it overseas. 

‘‘Any growth in gas production will see more export and higher prices, not cheaper gas.’’

Increases by suppliers

• AGL customers on regulated tariffs face a 17.6 per cent rise in gas prices between 2014 and 2016, adding $152 to an average annual household bill.

• ActewAGL customers face a 17.5 per cent rise, adding $219 to an average annual household bill.

• Origin Energy customers living around the NSW-Victoria border face a 14.4 per cent rise, adding $173 to an average annual household bill.

• Origin Energy customers living in southwest and western NSW face a 19.4 per cent rise, adding $224 to an average annual household bill.

 Source: IPART

Jobs at risk

Gas prices are rising even faster for manufacturers on the east coast, who are sounding the alarm on the risk to jobs.

Australian Industry Group NSW director Mark Goodsell said on Wednesday that industrial gas users in the eastern states face “a doubling or tripling” of wholesale prices, with the impacts to be felt throughout the chemicals, fertilisers, food processing and other sectors.

“Some businesses will be able to pass on their costs to households and other customers, but trade-exposed businesses won’t,” Mr Goodsell said.

“That means a hit to profits, reinvestment, and ultimately jobs.”

AIG used the opportunity to reiterate its call for all future LNG export projects to be subjected to a national interest test to avoid further damage to local energy users.

That call was echoed by the Greens NSW mining spokesman Jeremy Buckingham, who wants government intervention to quarantine some gas for local use.

“No other country in the world would allow its households and manufacturing to be crippled by unrestricted gas exports,” Mr Buckingham said. “Australian governments can no longer just leave it to the market, because the market is failing the national interest.”

Coal seam gas impact

The regulator’s draft ruling on NSW gas prices has been seized upon by the anti-coal seam gas lobby as further evidence of the harm it says CSG is doing to consumers.

Phil Laird, national co-ordinator for the Lock the Gate Alliance, one of the fiercest opponents to CSG development in the eastern states, said: “It is a terrible outcome for regional communities, who not only have to deal with the damage to land and water from dangerous CSG mining, but now face escalating gas prices in a bitter double blow.

“Gas companies like Origin are making local consumers bear the cost of their plans to pursue world prices and massive profits. IPART is basically proposing to accommodate their profiteering, and NSW regional communities and consumers will pay the cost.”

Much smaller price increases, or even some decreases, are proposed for 2015-16. Over the next two years, customers of ActewAGL in the Australian Capital Territory will see the biggest increase of $226 a year on average.

The regulator is due to release its final ruling on gas price increases in June.

- ANGELA MACDONALD-SMITH

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