The applications by two major gas retailers to increase retail prices in NSW and the ACT by about 20 per cent will have a major effect on industry, according to Ai Group.
The ABC reports that Origin Energy wants to raise gas prices in the south-west of the state and AGL wants to do the same in the greater Sydney region and inland NSW.
According to Ai Group, such an increase would not only be unpopular with households, but also be disastrous for businesses.
“The sad part is with prices like that increasing, we are going to see businesses driven to the wall … we are going to see households less able to pay for basic supplies,” Ai Group chief executive Innes Willox told the ABC.
To deal with the problem, Willox proposed a national interest test to apply to all new gas field projects, as well as a ‘use-it-or-lose-it’ clause to speed up development.
He said that the development of new gas fields should be accompanied by the putting together of information about future projects and supply and demand.
“Then that would end up with the Treasury putting forward a recommendation to the treasurer for the field to go ahead, where that gas should be sold, and if any should be sold into the domestic market because there was a need,” he said.
According to Willox, a use-it-or-lose-it clause would be helpful because, as it is, some companies hold onto their entitlements for a long time and don’t use them.
Another solution often proposed is to reserve gas for domestic use. However, the gas industry does not want to go down this path.
It is likely that are trade-exposed manufacturing industries which consume a lot of gas won’t be able to afford gas if prices exceed A$10 a gigajoule.
In addition, high gas prices may force industry to revert to coal as an energy source. Such a move would compromise Australia’s ability to reach its carbon emission targets.