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Gas market congestion charge due to Labor’s infrastructure failures

Hansard: 4 December 2007 ASSEMBLY

Gas: market congestion charge

Mr CLARK (Box Hill) — I raise with the Minister for Energy and Resources the gas market congestion charge that was imposed on customers of Simply Energy earlier this year. I ask the minister to take action to remedy the planning inadequacies and market design flaws introduced by the Bracks and Brumby governments that have led to Simply Energy’s customers being hit with this charge.

In one case drawn to my attention a customer was hit with a congestion charge of $77.81 on a bill with only $184.28 of regular charges, which amounts to a surcharge of more than 40 per cent.

These charges arose from gas shortages that occurred in June and July of this year, which led to the government’s gas market operator, VENCorp, being forced to pay compensation to gas suppliers whom VENCorp had ordered to supply gas which was additional to that supplied through the usual market in order to ensure that there was enough gas in the pipes. VENCorp recovered these amounts by imposing congestion charges on retailers, and one of those retailers in turn passed on the charges to its customers. Whether Simply Energy was entitled to do so under its customer contracts is another issue that needs to be resolved, but what is clear is that Simply Energy and other retailers would not have been hit with these charges in the first place had VENCorp and the government done their job of forward planning and designing market rules properly.

I understand Victoria had a serious gas shortage incident in July 2003, which resulted in a class 5 gas emergency.

However, VENCorp and the government failed to learn quickly enough the lesson that Victoria needs critical upgrading of its pipe network to meet demand peaks. It was not until October 2005 that modelling was completed for a preferred option, which is a pipeline upgrade known as the Corio loop, which is to run from Lara to Brooklyn. It was not scheduled to be available until March 2008. This is despite the fact that the government itself has been boasting about the increased amount of gas-fired electricity generation capacity being installed, which has been slowly growing despite the delays and deterrence caused by industrial disputes. This in turn has been reducing the gas available for other gas customers. It is the delays in the long-needed pipeline upgrades that have been the primary cause of the peak-demand gas shortages we have been suffering, the costs of which have been passed on to retailers under the government’s gas market rules.

I make the point that the Bracks and Brumby governments cannot blame any of this on the previous Kennett government, because the introduction of full retail contestability for gas occurred in October 2002 and a new wholesale market structure was introduced in early 2007. The current minister has received a hospital handpass from his predecessors on this issue, but it is up to the minister to exercise responsibility for his department and for VENCorp to make sure that future pipeline needs are identified and built in time to avoid these shortages, that market rules cope with demand peaks and that costs are allocated as efficiently and fairly as possible so that Victorian gas consumers are never again hit with these substantial extra congestion charges on their gas bills.