The Australian Energy Regulator (AER) has today published a report into the events of May – August 2022, when there were significant price variations in the Victorian Declared Wholesale Gas Markets, and Adelaide, Sydney and Brisbane Short Term Trading Markets (STTMs).
From 7 May to 3 August 2022 there were 84 instances where price variations breached AER reporting thresholds.
These significant price variation events, which started May 2022, are the first events since July 2021.
The AER investigates significant price variations as they may indicate that the gas markets are operating in an inefficient way. The efficient functioning of gas markets allows consumers and industry to be supplied with least-cost and reliable gas. In general, market outcomes are optimised when participants have access to information as early as possible.
The May – August period saw gas market prices at unprecedented levels which highlights counter price gas flows, scarcity of storage and high international prices. The significant price variations over this period are consistent with the broader gas market conditions of high volatility driven by unprecedented price levels and number of gas market interventions.
Background
The AER reports on significant price variations in short term trading markets in Adelaide, Sydney and Brisbane, and the Declared Wholesale Gas Market in Victoria.
This report is published by the AER in accordance with the requirements under Rule 498(3)(b) of Part 20 of the National Gas Rules (Gas Rules).
The following reporting triggers apply to each hub for any gas day:
- When there is a variation of greater than $7/GJ between the D-2 price and ex ante price
- When there is a variation of greater than $7/GJ between the ex-ante and the ex-post price
- When an ex-ante price is greater than three times the 30 day rolling average price and greater than $15/GJ
- When an ex-post price is greater than three times the 30 day rolling average price and greater than $15/GJ
- When daily market operator service payments exceed $250 000.
As a result of the unprecedented rate of threshold breaches in winter 2022, the AER advised stakeholders on 3 June of our intention to immediately revise the price variation reporting threshold from $7/GJ to $14/GJ to minimise reporting on multiple events. There were no concerns raised with this approach, and as such the thresholds for STTM schedule price variations were increased to $14/GJ from 22 June.