In a move aimed at protecting consumers from rising energy costs, the Albanese government has announced that the gas price caps will be extended until mid-2025.
The move comes after the government set a temporary $12 a gigajoule limit on gas prices last December, amid warnings from Treasury that energy prices were set to rise by 50 per cent over the next two years.
The proposed extension also includes a draft code of conduct that ensures domestic prices are kept “reasonable.”
According to Energy Minister Chris Bowen, the new code includes measures to prevent gas producers from returning to their pre-regulation pricing levels, ensuring that they do not “revert to normal” when the current price cap expires at the end of this year.
“This is all about cutting the link between very volatile international gas prices and the prices Australian industries and households pay for gas,” Bowen tells the ABC.
“It means Australian industries and households get access to Australian gas that’s under Australian soil and Australian waters at a reasonable price.”
However, gas producers and analysts have argued that the “reasonable pricing” proposal was poorly designed.
“It’s amateur hour policy-making, focused on making things up as they go and trying to pressure the industry to be quiet about it, rather than actually delving into policy and market design,” Credit Suisse analyst Saul Kavonic said.
“Depending on Ministerial discretion, the policy could amount to being anything from a hard price cap for most of the market, through to a complete backdown from any meaningful price regulation. All to be decided case by case with no guidelines. Basically, it is ‘the Government will make it up as it goes’ policy.”
Australian Competition and Consumer Commission chair Gina Cass-Gottlieb had previously voiced her opinion on the government-imposed cap, saying it would only further inflate costs for consumers and won’t apply to new gas supplies.
“The emergency price cap, we have substantial data that it both covers costs and reasonable return on costs in relation to existing supply,” she said.
“An express policy objective that is stated in that consultation is that the reasonable pricing framework and the process under the code is to be consistent with incentives to invest in new supply.”
Countering their argument, Bowen claims the extended price cap will take the heat off the rising power costs.
“The Australian Energy Regulator was very clear with us, that price rises we would have been seeing now would have had a five in front of it, a 50 per cent or so price rise, absent of intervention,” he said.
“We intervened, there will still be price rises, but nowhere near as big as it would have been.”
The rising cost of energy bills will no doubt be of concern among seniors after recent data from the Australian Bureau of Statistics (ABS) indicated that older Australians are already suffering the most from the rising cost of living with pensioners experiencing an annual household living cost of 4.9 per cent.
Head of Prices Statistics at the ABS Michelle Marquardt said the main culprit affecting older Australians is the increase in grocery prices, but household costs also played a large role.
Last December, Federal Government committed $1.5 billion to offer temporary relief on power bills to eligible Australians.
The move was expected to save the average Australian household $230 a year, however, Australians are not expected to see the benefits to their bills “for some time”.
With the rising cost of living showing no signs of slowing down, there are certain things you can do to make your hard-earned money last longer.
One of the ways is to understand and take advantage of the energy concessions you are entitled to.
To see the energy concessions that are available in other states and to learn more about the other discounts available in areas such as transportation and health, download the free Starts at 60 2023 Seniors Concessions Guide today.