The Coalition’s plan to create a domestic gas reservation for the east coast would drive down household gas bills by 7% and industrial gas bills by 15%, newly released modelling estimates.
The opposition’s long-awaited modelling by Frontier Economics, released on Tuesday evening, estimated the changes would bring down new domestic gas supplies to $9 or $10 a gigajoule, and came after experts shed doubt on whether the policy could drive down prices through a government market intervention.
The release, which coincided with the first leaders’ debate of the election campaign, forms part of a broader suite of energy pledges the opposition has said will bring down electricity costs before the proposed construction of nuclear reactors by the late 2030s.
Peter Dutton said the policy would be a “gamechanger” amid volatile international energy markets.
“By making the gas companies put more of our Aussie gas into our market instead of exporting it, we will get the price of gas down by 15% [for industrial consumers],” he said. “Our policy will be a gamechanger because we can then see the cost and therefore price of electricity, construction, food prices and many other goods start to come down.
“In times of global uncertainty, Australians need the confidence that comes from secure, affordable energy – and that starts with Australian gas working for Australians.”
The modelling estimated there would be a 23% reduction in wholesale gas prices and a 3% reduction in residential electricity prices.
Under the proposal, east coast gas producers would be forced to provide 50 to 100 additional petajoules to Australia’s east coast market – known as a gas reservation – in an attempt to bring down the average price from $14 a gigajoule to $10 a gigajoule by the end of the year.
Most of the gas produced on the east coast is exported overseas, with enough given to supply gas-fired power generation and industry, commercial and residential users in Queensland, New South Wales and Victoria. Additional gas produced forms part of the “spot market”, which can be redirected to the east coast if there is high seasonal demand or sold overseas.
Frontier Economic’s modelling suggested the reduction in the domestic price of gas would occur through the use of a gas security charge – an export charge for producers making exporting gas less financially attractive than selling gas domestically at a competitive price.
The report said the scheme would prevent producers and exporters from charging domestic users the rates sold for international exports, making prices more stable and lower over time.
“The decoupling arrangement that Peter Dutton announced as part of his budget in reply ensures that gas buyers pay no more than the price that would prevail in a competitive market – known as the long run marginal cost of gas – which includes a commercial rates of return for gas producers,” said Danny Price, the economic advisory group’s managing director.
According to the Australian Energy Market Operator, seasonal shortfalls in gas supply for the southern states could occur by 2028 “with annual supply gaps emerging from 2029”.
In the lead-up to the modelling’s release, gas industry leaders expressed confusion and concern about details of the plan and whether it could be delivered.
Australian Energy Producers, the body representing the gas industry, said Dutton’s plan to “artificially reduce prices” was a “damaging market intervention that will drive away investment and exacerbate the supply challenges in the longer term”.
The Albanese government introduced a domestic price cap of $12 a gigajoule in 2023 along with other mechanisms to push major gas producers to voluntarily offer surplus gas supplies to the domestic market before sending it overseas.
The Australian Competition and Consumer Commission’s latest gas inquiry report in March found average retail gas prices had moderated from $19.84 a gigajoule in 2023 to $14.51 in the second half of 2024.
