Joint media release: Gas price cap to take effect

Senator the Hon Katy Gallagher, Acting Treasurer 
The Hon Chris Bowen MP, Minister for Climate Change and Energy

The Albanese Government has today taken action to limit the worst impacts of gas price increases resulting from Russia’s illegal war in Ukraine by applying an emergency, temporary price cap to wholesale gas contracts.

Following passage last week of urgent legislation, the Acting Treasurer has today signed an instrument to bring the price cap into effect from tomorrow.

The Government has taken a responsible approach that will shield households, industry and manufacturers from the worst of the predicted gas price spikes and save jobs.

The price cap of $12 a gigajoule (GJ) will apply to new domestic wholesale gas contracts by east coast producers for gas to be supplied over the next 12 months from developed fields.

The ACCC advised that a cap of $12/GJ would be reasonable for the next 12 months, noting 96 per cent of domestic wholesale offers made in 2021 were below that level. This price takes into account the key costs of domestic supply, including a reasonable return on capital for gas sourced from developed fields.

Today’s order follows a public consultation process and takes into account valuable feedback from market participants.

The ACCC will continue to closely monitor the east coast gas market and will enforce adherence to the price cap. The ACCC’s ongoing monitoring role will highlight the cap’s impact on prices being paid by end users and inform a review to be conducted after the cap has been in effect for six months.

The price cap order and accompanying Explanatory Statement, which sets out the details of the order, will be available on the Federal Register of Legislation.

The Government will continue to consult on the proposed mandatory code of conduct, including the reasonable pricing provision, with submissions closing 7 February 2023, with the intention of the code coming into effect early next year.

The Albanese Government’s responsible and meaningful action on gas prices is about ensuring a stable and well-functioning gas market for the benefit of Australian households, industry and manufacturers.

The gas price cap, together with state government measures on coal prices, is expected to have the following impacts:

• Dampen increases in national retail electricity prices by around 13 percentage points in 2023-24;
• Dampen increases in gas prices by 16 percentage points in 2023-24; and
• Reduce inflation by around an estimated ½ percentage point in 2023-24. 

Without these policy interventions, the average family would be paying $230 more on their electricity bill next year.