MELBOURNE, Dec 12 (Reuters) - Australia's Labor government promised when it was elected in May that power prices would fall by 2025 spurred by a rapid expansion of renewable energy, even as industry experts said power prices would head higher.
Instead in October, the government forecast power prices would rise by 56% and gas prices by 44% over the two years to 2024, reflecting soaring global coal and gas prices in the fallout from Russia's invasion of Ukraine.
Looking to beef up gas supply and lower coal, gas, and power prices, the government has taken extraordinary steps over the past six months.
Price caps
In December, the government announced it would cap uncontracted gas prices at A$12 per gigajoule (GJ) and cap coal prices for power producers at A$125 ($84.63) per tonne for one year.
Producers potentially exposed to the price cap include ExxonMobil Corp, Shell Plc, Origin Energy , Woodside Energy Group, Santos Ltd and South Korean steel giant POSCO International Corp's Senex Energy.
Coal producers that will be affected include Glencore Plc , Banpu Resources Australia, a unit of Thailand's Banpu PCL, Coronado Global Resources and Peabody Corp.
The government also proposed a "reasonable price" regime for gas after the price cap expires. That would require gas producers to set a price based on their production cost plus a reasonable rate of return, if they are unable to negotiate a price with a buyer.
No timeframe was put on the new regime that sparked a gas industry furore.
Export curbs trigger
In September, the government extended and revised the Australian Domestic Gas Security Mechanism (ADGSM), first put in place in 2017.
The mechanism will now be in place until 2030, and calls for the government to review quarterly whether the domestic market faces a gas shortfall. If it finds there will be a shortfall, it will issue export permits to the three east coast liquefied natural gas (LNG) exporters - APLNG run by ConocoPhillips , GLNG run by Santos and QCLNG run by Shell - limiting their uncontracted exports.
The export permits wil be determined by how much gas is needed to fill a shortfall, with each LNG exporter to contribute equally towards filling the gap.
Supply agreement
In September, the three east coast LNG exporters reached a a so-called Heads of Agreement with the government, in effect to the end of 2025, committing to offer any uncontracted gas to the domestic market at competitive prices before offering it to offshore buyers.
At the same time, APLNG, GLNG and QCLNG agreed to offer an extra 157 petajoules (PJ) of gas to the domestic market for next year, following a warning by the competition watchdog that the east coast market faced a shortfall of 56 PJ of gas in 2023.
Power crunch
In June the country was hit by a power crunch, as global energy markets rocketed after Russia's invasion of Ukraine, coal-fired power plants suffered outages, local coal supply was disrupted, and demand for gas in generation shot up just as homes needed gas for heating.
The government and energy market operator took unprecedented steps to cap gas and power prices and suspend the National Electricity Market, narrowly averting blackouts. ($1 = 1.4771 Australian dollars) (Compiled by Sonali Paul; Editing by Christian Schmollinger)
