Energy market operator intervenes to prevent gas shortage as Victorian reserves fall

The Australian Energy Market Operator (AEMO) has stepped in to prevent a potential gas shortage in Victoria, the state’s energy minister said.

Key points:

• Energy market operator AEMO says guaranteed gas supply will ensure transparency in the market
• The Victorian government has ruled out lifting the wholesale gas price cap in response to pressure on supply
• State opposition calls for reduced gas exports from Victoria

Victorian Energy Minister Lily D’Ambrosio told ABC Radio Melbourne that AEMO triggered a gas supply guarantee on Tuesday afternoon, as reserves at storage facilities in the state’s southwest continued to fall.

“That means they will have greater visibility of gas sales and supply across markets including Victoria but in other states, to get transparency here,” he said.

“When you get more transparency in the market, the market starts to change its behavior, and to be honest, the market has slipped too much here.

“More visibility means, as it did in April [when the guarantee was last triggered]the gas goes where it’s needed.”

An AEMO spokesman said triggering the mechanism meant New South Wales would get its gas supplies from Queensland, not Victoria.

On Monday evening, AEMO sent a warning to industry players that gas reserves at the Iona storage facility near Port Campbell were low.

“Gas depletion at the Iona storage facility poses a threat to the safe operation of Victoria’s gas systems if it continues to empty at current rates,” AEMO said in a statement.

Market operators said they would intervene if reserve depletion did not slow.

A similar warning was issued to industry players on July 11.

Victoria currently has a price cap on wholesale gas, which prevents household consumers from being hit by large gas bills, but also provides no incentive to reduce use.

Gas supply problem ‘driven by greed’

Ms D’Ambrosio said Victoria had more than enough gas supply to meet demand, and that the price cap would not be removed.

“A lot of this is driven by greed across gas producers. They’re going to follow the dollar, and we’re going to protect consumers, making sure that they pay no more than what’s considered a fair price and that’s why the price cap was set there,” he said. .

“Frankly, a fair price has to be paid for gas. We have more than enough supply to be able to meet our needs and it must be provided at a reasonable price.”

Lily D’Ambrosio said Victoria’s problems were driven by greed from gas producers.(Channel 9)

Victoria has supplied gas to New South Wales, to meet unprecedented demand during the winter.

Victorian Opposition Leader Matthew Guy has called for tighter restrictions on gas exports from Victoria.

“Gas from Victoria, there must be a number of domestic reserves placed there,” he said.

“They are in Western Australia, they have 15 per cent, ours will be higher than that, and we will do that to ensure that there are domestic reserves for Victoria. Victoria gas for Victoria.”

Gas plant operator says supply problem ‘gets tighter’

Lochard Energy, which owns the Port Campbell facility, said it was operating “effectively and as designed”.

The company said Iona’s storage plant customers, particularly energy retailers and industrial users, store gas during periods of low demand and then withdraw it when demand increases, such as during winter.

“It is expected that Iona’s customers generally draw most of their gas in storage during the winter and refill after the season passes each year,” the company said.

“We are currently at the peak of winter demand and a high draw from Iona is expected.

“Current inventory levels are broadly in line with expectations given the facility’s objectives.”

A statement from Lochard Energy said it was one of the main facilities used to manage energy needs in Australia’s eastern state.

“This is a case of gas supplies and the peak of winter is getting tougher on the east coast,” he said.

“This year, unplanned coal-fired outages and especially cold winter weather have caused Iona’s customers to start pulling gas from storage earlier and in larger quantities than usual.

“Customers control their own inventory and are able to manage their own supply and demand, and Iona supports them to do this.”

The company said the storage plant will expand by 2023, and in the meantime is working with AEMO and its customers to manage supply.

Last month, AEMO intervened to suspend Australia’s east coast energy market after days of volatility put several states at risk of blackouts.

This is the first time in its history that AEMO has made such an intervention, backed by a federal government that admits energy markets have failed effectively.

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