Interview with David Lipson, ABC Radio National Australia, AM

DAVID LIPSON: The federal government is extending its controversial price cap on east coast gas producers. The $12 per gigajoule cap on wholesale prices is due to expire in December, but under a draft mandatory code of conduct the government wants to extend that until mid-2025. It is, though, offering exemptions for producers that pump additional supply into the domestic market.

Chris Bowen is the Minister for Energy and Climate Change. Chris Bowen, thanks for your time. Gas and electricity prices have risen substantially for households and businesses this past year despite the gas price caps put in place last year. The gas producers hate the price caps as well. Why are you extending them for two more years?

CHRIS BOWEN: Because we said after we had implemented a temporary price cap that we would also implement a mandatory code of conduct to ensure that this situation didn’t revert to normal. And this is all about, if you like, cutting the link between very volatile international gas prices and the prices Australian industries and households pay for Australian gas. And that’s what we’re doing in the consultation paper we’re issuing today. We’ve consulted heavily already with gas users, with big industrial users and with producers about the right balance, the right model, but now it’s time to broaden that consultation out to our wider group and to ensure that we can implement this code of conduct in a way which means Australian industry and households get access to Australian gas that’s under Australian soil and Australian waters at a reasonable price.

DAVID LIPSON: There are exemptions and exceptions that would be offered to gas producers if they divert gas supply into the domestic market. How is that going to work?

CHRIS BOWEN: Well, look, basically, there’s two types of exemption; there’s an exemption for very small producers who only supply the domestic market anyway, so they are not really the types of producers we’re trying to capture, never have been. Secondly, what we are seeking to do is increase the supply of gas into the domestic market, particularly in some of the years in which we’re facing projected shortfalls, like 2027. And if a domestic – or if a producer is able to provide a very tightly defined enforceable undertaking to the government that they will produce and supply gas into the domestic market at a price that the ACCC is satisfied is a reasonable price below – and this is all done ahead of time, so this is all sort of agreed between the gas company and the government ahead of time and we are satisfied with the level of supply that they actually will deliver in the domestic market to their customers, then they can get an exemption.

This has been carefully thought through. It’s out for consultation today. I think it strikes a good balance, but we want to see what the broader industry and Australian community think.

DAVID LIPSON: What do you think a reasonable price would be? Is it around $12?

CHRIS BOWEN: Well, we’ve got the $12 cap continuing. That indicates the government’s views. As we said before, 97 per cent of gas was produced and supplied in Australia below that cap in 2021. So, clearly, gas companies can be very profitable at that level. Clearly, you know, international prices are very volatile, but we listen to gas consumers as well who’ve said it’s very important to them price but also certainty and stability of that price and knowing that they can lock in contracts et cetera. So, again, I encourage people to look at this consultation paper that’s out today. There’s been a lot of effort put into it from across the government. Again, we’ve sought to strike a good balance, but we are interested in getting feedback over the next few weeks.

DAVID LIPSON: Bottom line: will this reduce energy costs for households?

CHRIS BOWEN: Well, as we’ve said all the way along, David, including when we announced our price cap, this was designed to take the sting out of the price rises. The Australian Energy Regulator was very clear with us that price rises we would have been seeing now would have had a 5 in front of them – ie 50 per cent or so price rises – absent intervention. We intervened. There will still be price rises but nowhere near as big as would have been. The Liberal Party opposed that intervention. Therefore, they voted for price rises much closer to 50 per cent than what we’ve seen.

DAVID LIPSON: As you mentioned, there is real concern about the supply of gas in the latter part of this decade, around 2027. And with coal generators coming offline as well, there’s concern about energy supplies more generally. Even with this new policy in place, will the government have to approve even more gas field extraction projects to keep the lights on?

CHRIS BOWEN: Well, we’ve been very consistent that gas is going to play a role in the system for many years to come. Even with moving to the energy grid being 82 per cent renewable by 2030, which is our policy and we will do, that still leaves you with 18 per cent fossil fuels. Coal-fired power stations are leaving the grid and will continue to do so and will not be replaced with new coal-fired power. So even with the very rapid uptake of renewable energy which the government is facilitating with all our policies, we are still going to see gas-fired power in the system.

We’re also going to see industrial users who use gas as a feedstock needing gas. We are seeing the Bass Strait fields in particular deplete and reducing supply. So it’s our job to ensure that the policy settings are in place to ensure that our gas-fired power stations and our industrial users have enough gas. It’s unacceptable entirely to the government to see any threats to the stability of energy supply. Of course, individual –

DAVID LIPSON: That sounds like more will be approved?

CHRIS BOWEN: Well, individual decisions will be made on the merits available to the relevant ministers at the time. But this government has been clear and consistent; we’re on a rapid path to renewable energy, but those who say we had a gas-fired recovery were lying; there was no such thing and never would be. But, equally, those who say we can take gas out of the system and we don’t need to ensure ongoing gas supply for the foreseeable future are equally misinformed.

DAVID LIPSON: That’s the Minister for Energy and Climate Change, Chris Bowen. You’re listening to AM where it’s 19 past 7.