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Newcastle Herald
Newcastle Herald
Matthew Kelly

'Finally have the backbone': why Hunter Gas Pipeline backer supports price cap

Garbis Simonian

Hunter business identity Garbis Simonian has backed calls for government intervention to curb the price of gas.

The federal government is finalising plans for price caps on gas following a campaign by small businesses struggling to survive with soaring prices. Larger Australian manufacturers have also warned they cannot survive unless the government acts.

"We'd be very happy to see the federal government finally have the backbone to stand up to all the scare mongering that's been going on from the gas companies and gas retailers," Mr Simonian, who is the managing director of Weston Group and Weston Energy, said.

He suggested the cap should be set at about $11 per gigajoule.

In addition, he said deeper reforms were needed to the gas supply market to ensure a sustainable supply.

These included preventing gas retailers 'gouging' customers through huge margins, the second was the abolition of 'take or pay' arrangements where the buyer agrees to pay for the supplier's output whether or not the buyer needs the output at that time. This reduces the supplier's risk, as they have guaranteed sales revenue irrespective of the buyer's demand.

The third area was the reform of the Australian Energy Market Operator. Mr Simonian said the present highly bureaucratic structure prevented new players entering the market.

"For example, they won't give credit; you have got to come up with the money every day or the day before you buy the full amount. Everyone else gives credit but they don't. If you're a legit company and you've got assets what's the problem," he said.

Mr Simonian, who is a former director of the Hunter Gas Pipeline project, argued the infrastructure was essential to provide security to the energy grid in coming years.

The proposed 833 kilometre pipeline, valued at $1.2 billion, would run from Wallumbilla in Queensland to Newcastle via Narrabri. The project was sold to Santos in August this year.

"If you don't bring more gas into the market there are two alternatives: you have power blackouts or you have to keep the coal-fired power stations going. They are both bad options," Mr Simonian said of the need for the project.

The NSW Department of Planning has approved management plans for the pipeline and negotiations are presently underway with landowners to allow the pipeline to run through their properties.

If a majority agree a pipeline licence can be granted.

"Once they have that, they (Santos) can go to financial close. Hopefully that is 10 to 12 months away," Mr Simonian said.

A further 18 months would be required to build the pipeline meaning it would be online in 2025.

"If this project doesn't get built and the renewables aren't ready in time we are going to have blackouts in 2025," Mr Simonan said.

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