IPART review of gas prices

The Independent Pricing and Regulatory Tribunal (IPART) is currently conducting a review of regulated retail prices and charges for gas from 1 July 2016.  The Tribunal recently invited responses to pricing proposals put forward by the state’s three standard gas retailers (AGL, Origin and ActewAGL).  NCOSS is now drafting its submission and developing a strong case for making gas more affordable for people experiencing poverty. 

Gas customers have been able to choose their gas retailer and enter into market contracts for more than 10 years.  Around 80% of consumers have taken up this option.  Nevertheless,  IPART still has a significant role to play in regulating prices that standard retailers can charge the remaining 20% of customers who are still on standard contracts.

This is especially important in rural and regional areas where competition remains sparse.  In some parts of the state – such as Tamworth, Wagga Wagga and Nowra – there is only one retailer offering gas supply. It is in this context that the Minister for Energy has also sought IPART’s advice as to whether competition in rural and regional areas is sufficient so as to warrant complete deregulation of the market from July 2017.

Late last year, IPART released an Issues Paper which outlined its proposed approach to setting gas prices.  In accordance with past practice, IPART will determine prices as the sum of a Retail Component – comprising retail operating costs and a retail margin – along with a Network Component, including distribution costs.   

In their formal pricing proposals, the standard retailers have each proposed changes which for most areas of the state are either modest or represent no real increase, and in some cases, a reduction in prices.  However, these seemingly favourable proposals are reflective of recent reductions in the wholesale price of gas. 

It is NCOSS’ preliminary view that in light of the positive wholesale environment, prices ought to be even lower.  Retailers are still proposing prices which comprise an over-inflated retail operating cost component.  In particular, it is questionable whether retailers ought to be able to recover customer acquisition and retention costs (CARC) from consumers, especially given the need to invite more competition into the market.  Furthermore, NCOSS is concerned at proposed increases to fees and charges, including late payment fees, security deposits, account establishment fees and exit/termination fees. 

If members have any further views on gas prices, or examples of clients who are struggling to meet the costs of gas or who have been stung by excessive fees or charges, please email NCOSS’ Senior Policy and Advocacy Officer, Mike Bailey, at mike@ncoss.org.au