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Australia readies for price caps after soaring wholesale gas prices


AEMO sets $40 GJ price cap after dramatic rise

ReAmped Energy urges customers to switch to other retailers

Current price surge requires coordinated response from new government

  • Author
  • Surabhi Sahu    Eric Yep
  • Editor
  • Kshitiz Goliya
  • Commodity
  • Coal Electric Power LNG Natural Gas
  • Topic
  • LNG Commoditization

The recent unprecedented rise in wholesale gas prices in some Australian states has prompted the Australian Energy Market Operator, or AEMO, to enforce a cap on prices in the local energy market, but a continued systematic response was still needed as gas prices remained elevated and the market is set to embrace more pain, industry sources said.

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AEMO manages electricity and gas systems and markets across Australia.

This comes as the Russia-Ukraine war as well as the collapse of private local gas retailer Weston Energy amid propped up demand due to Australia's winter season, and outages at old coal gas plants, restrict availability.

"Apocalyptic rises in energy prices threaten chaos for industry and pain for households. They demand a national, integrated and strategic response," Innes Willox, chief executive of national employer association Ai Group said in a statement on May 31.

"The extraordinary price rises, including a 50-fold spike in wholesale gas prices in Victoria, have seen market price caps imposed in some of our largest local energy markets," Willox said.

According to media reports, the AEMO has set a $40 GJ price cap which is still more than four times average prices.

"The price pain is already intense for those businesses who've found themselves suddenly needing new energy contracts amid local and global turmoil," he said.

"Households will feel the punch from higher default electricity prices from July, and more pain is coming for all," he added.

Related blog: Global LNG contracting rush leaves Asian importers in tight spot

Separately, energy retailer ReAmped Energy, in a statement also released on May 31, urged customers to switch to other retailers and lock in better electricity rates.

"Several retailers have already started to pull up the drawbridge, so customers need to act fast to get themselves onto a better deal now before it's too late. There are still a handful of competitive deals in market," ReAmped Energy CEO Luke Blincoe said.

Tough task ahead

Domestic gas shortages and surging energy prices put the newly elected Australian government in the same boat as other countries who are struggling to ensure energy security amid volatile global markets, while keeping the pace on energy transition.

The new government will be under pressure to keep local energy prices affordable even as Australia seeks to maintain its position as a top LNG exporter, although it remains uncertain if there is a need to divert additional gas to the domestic market just yet.

"The new Albanese Government has an unenviable but urgent task in responding to this crisis. It is not one they can or should take on alone. The States hold many relevant levers, as do the energy market authorities, energy suppliers and energy users."

"The first task for the Commonwealth is to bring us all together. Any strategy will need wide participation to work," Willox said.