Drastic move as gas supply dwindles at Victorian storage plant

The energy market operator has banned interstate businesses from buying gas from Victoria’s spot market as part of new measures to protect the state’s supplies.

The energy market operator has barred businesses in other states from buying gas from Victoria’s spot market in its latest move to ensure the state does not run out.

The market operator said that while gas supplied under existing contracts could still flow from Victoria to other states, it had asked market participants to stop buying Victorian gas on the spot market.

It has also asked for gas-fired power stations in Victoria not to buy further supplies.

“Gas supplies to consumers in Victoria are presently sufficient to meet demand,” the market operator said in a statement on Thursday.

“Steps taken by AEMO with industry are helping conditions as intended, despite high gas demand, with current electricity supply sufficient to meet forecast demand.”

A gas supply guarantee has been triggered for the second time this winter in an effort to pump more gas from Queensland to make up for depleting supplies at a key Victorian storage plant.

The energy market operator activated the mechanism – which was introduced in 2017 and had never been used before this year – on Tuesday night and said it would remain in place until the end of September.

“At this stage, there is no impact to gas supply in Victoria,” the market operator said, although chief executive Daniel Westerman warned the situation remained “fragile”.

The east coast has been in the grip of an energy crisis all winter, with outages at coal-fired power stations and freezing temperatures stretching gas supplies.

The national electricity market faces a fresh crisis with looming gas shortages in Victoria this winter.

Over the past week, the market operator issued two notices warning of a “threat to system security” because of depleting supplies at the Iona plant near Port Campbell.

It then moved to trigger the supply mechanism to secure more gas from Queensland, and said producers had “responded positively to the request”.

But Victorian Energy Minister Lily D’Ambrosio maintained Victoria produced more gas than it needed, as she blamed “greedy” gas companies for the supply crunch.

“We remain a net exporter of gas to other states,” she said.

“When you have a look at it, New South Wales is almost virtually reliant on Victorian gas supplies.”

“The market operator has stepped in and we’re very pleased to see them stepping because we’re seeing behaviour by the gas market participants that is not in the best interest of consumers, but is in their own best interest because they want to make super profits.”

The market operator issued two notices warning of a “threat to system security” because of depleting supplies at the Iona plant near Port Campbell.

Ms D’Ambrosio said the current gas price cap had been triggered because prices were too high, but that some participants in the market were profiting from the process by buying up gas in Victoria and selling it interstate where “they can make an absolute killing”.

She urged the market operator to keep the supply guarantee in place “until the permanent long-term solution for our gas supply is sorted out by the national government”.

The market operator said the mechanism would remain until the end of September, or until “the threat to gas supply caused by Iona storage inventory depletion has subsided”.

Lochard Energy, which owns the Iona plant, said it was operating “effectively and in the manner for which it was designed”.

“We are currently at the point of peak winter demand,” it said in a statement.

“The current levels of inventory are broadly in line with expectations given the purpose of the facility.”