Jemena shuts down “price gouging” accusations

national gas rules

The Institute for Energy Economics and Financial Analysis (IEEFA) with Environmental Justice Australia (EJA) have lodged an amendment with the Australian Energy Market Commission (AEMC), accusing Australian gas pipeline operator Jemena of using a derogation of Part 23 in the national gas rules to “price gouge”.

IEEFA and EJA have lodged the amendment request with the AEMC and if applied, the amendment will constrain Jemena from the current practice of what the organisations have referred to as “price gouging” through its Northern Gas Pipeline project.

Financial analyst with IEEFA Bruce Robertson says Jemena is charging twice what is reasonably acceptable, and then some.

“The Chinese and Singaporean governments are reaping huge monetary benefits due to an exemption under the law allowing Jemena to charge in excess of what is reasonable for up to 15 years,” Robertson says.

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“They knowingly built an inefficient pipeline – the Northern Gas Pipeline connecting Queensland and the Northern Territory in Australia – and they are allowed to recover their costs. They can then duplicate the pipeline and again recover their costs. And under the exemption, they get 15 years grace where they can charge what they want, and nobody – not the government, the consumer, nor other pipeline operators – can appeal.

“We are asking for the amendment to be removed to better protect energy consumers bearing increasingly higher gas prices.”

Jemena received a special exemption from the National Gas Rules in 2017. The exemption applies to the current Northern Gas Pipeline and Jemena’s proposal to build another pipeline to transport gas from fracking operations in the Northern Territory.

David Barnden, Principal Lawyer with Environment Justice Australia, says Jemena’s pipeline enjoys an exemption built into the rules.

“The exemption allows Jemena to price gouge, potentially costing consumers over A$2 billion,” Barnden says.

“No other pipeline gets this special treatment. The exemption should be removed to improve the market.”

Jemena says the accusations are totally incorrect.

A Jemena spokesperson told Energy Source and Distribution, “These are very serious and factually incorrect claims which need to be called out for what they are – part of an attempt to ignore the science and force the decision to allow hydraulic fracturing in well-regulated circumstances in the Northern Territory to be remade”.

“Jemena has absolutely no ability to ‘price gouge’ or ‘charge what they want’ on the Northern Gas Pipeline,” the spokesperson says. “The pricing and access terms on the Northern Gas Pipeline were developed through a highly competitive tender process run by the Northern Territory Government.

“Further, the decision to grant an exemption to part of the National Gas Rules dealing with dispute resolution processes was made by COAG Energy Ministers on the basis that the dispute resolution processes already in place for the NGP provides similar protections to those brought in via the amendments to the National Gas Rules.”

The AEMC will invite comments on the exemption after November 15, 2018. Following consultation, a decision from the AEMC should be provided in the New Year.

Read the full amendment letter here.