Finalised gas market code comes into effect

The Competition and Consumer (Gas Market Code) Regulations was passed on 6 July 2023 (the Code). The mandatory Code is intended to facilitate a well-functioning domestic wholesale gas market with adequate gas supply at reasonable prices and on reasonable terms for both suppliers and buyers.

The key initiatives of the draft Code have been maintained, including:

• an east coast gas price cap to apply on an indefinite basis – set initially at $12 and subject to review and adjustment;
• small producers remain exempt from the gas price cap; and
• detailed ‘conduct provisions’ dealing with processes for EOIs (for supplies of 12 months or more) and good faith will apply to support gas buyers in negotiations (limiting the scope for withdrawal or changes in initial and final offers) and throughout the life of gas supply arrangements.

We previously covered the exposure draft of the Code in our alert on 27 April 2023 which can be found here.

Commencement and Effect

• The Code commenced on 11 July 2023. However, most provisions of the Code do not apply until two months after commencement of the Code to allow industry to adapt to new conduct provisions, record keeping and reporting obligations.
• The previous price cap order will continue to apply during the transitional period.

Key changes from the exposure draft

The key changes to the finalised Code from the exposure draft are:

1. re-gasified natural gas that was imported as liquefied nature gas is not regulated;
2. there is an express acknowledgment that the price for regulated gas does not include the price for the provision of transportation or storage services in relation to that gas;
3. there is a deemed exemption from certain negotiation requirements, and the record keeping and information publishing requirements, where there are 2 or fewer EOI targets;
4. there is a deemed exemption for (volume neutral) gas swap agreements, and mandatory government agreements;
5. there is a deemed exemption for foundational agreements from certain negotiation and procedural requirements. However this does not exempt foundational agreements from the prohibitions on exceeding the reasonable price; and
6. there is an enhanced framework for exceptions to be granted.

The Australian Government has stated that the exceptions framework is designed to incentivise suppliers to commit more gas to the east coast gas market in the short term, facilitate new investment to meet ongoing demand in the medium term, and to support buyers’ access to gas at reasonable prices and on reasonable terms.

More detail on the Code

Refer to our alert on 27 April 2023 which explains the Code, which can be found here.

Please contact Craig Rogers, Tim Sumner, Vishal Ahuja or Adam Black if you would like any further information on this matter.