Australian Energy Regulator charges gas giant, Jemena

Jemena has been hit with legal action after failing to comply with rules around the transportation of gas around the country.

The Australian Energy Regulator has charged Jemena after the watchdog said the gas infrastructure company failed to comply with rules that ensure the efficient transport of the fuel source around the country.

The legal action exposes Jemena to significant fines, and comes at a time of heightened scrutiny by regulators over the actions of gas companies amid warnings of shortfalls across the country’s east coast that will expose households and businesses to potentially higher bills.

The AER alleges four Jemena subsidies failed to declare accurate capacity across four of its pipelines to the Australian Energy Market Operator and did not also ensure auction services were correctly scheduled for three pipelines over a nearly three-year period.

The failures will not have financially benefited Jemena, but would have instead possibly resulted in gas pipelines not being used to full capacity for those three years during which Australia endured a major energy crunch. It would have also potentially curtailed the capacity of retailers from selling unused pipeline capacity that it had purchased from Jemena.

AER chair Clare Savage said the rules are vital to moving gas between markets on the east coast and reducing the cost of transportation.

“We are sending a clear message to market participants – you must have the appropriate checks and systems in place to ensure the information you provide to AEMO is accurate,” Ms Savage said.

“Alleged breaches of this nature and scale fundamentally undermine the integrity and confidence in the Day Ahead Auction – a process designed to improve gas market competition and increase gas pipeline transportation capacity for pipeline users.”

Australian Energy Regulator chair Clare Savage.

Jemena said the shortcomings did not result in any harm to the market or any company.

“In this instance we identified issues in our internal processes which saw this information not being provided as we would normally expect to. We have since self-reported to the AER and voluntarily refunded customers for any impacts, noting we did not benefit financially as a result of the error,” a Jemena spokesman said.

“We have continued to work collaboratively with the AER, and have taken steps to minimise the likelihood of similar errors happening again in the future.”

The legal action comes as Australia’s energy regulators are under heightened pressure to enforce the market rules amid forecasts for material shortfall in supplies of gas in the coming years.

The charges against Jemena, however, will do little to dampen criticism of regulators. The AER said Jemena had contravened the market rules for three years without detection, and the gas infrastructure company in the end self-reported.

Gas is particularly in the crosshairs of the federal Labor government amid mounting public anger at power bills and warnings from manufacturers about their viability as prices surge.

Labor last year introduced a $12 per gigajoule price cap and tasked the Australian Consumer and Competition Commission to introduce a mandatory code of conduct that governs supply agreements between gas producers and customers to “ensure reasonable pricing” and to improve transparency.

The government has also given the country’s energy market operator additional powers to govern market behaviour.

The behaviour of Australian energy companies has been widely criticised, especially after the chaos seen in the market last year following a surge in wholesale electricity prices.

The Australian Energy Market Operator was last winter forced to step in and take over the running of the country’s National Electricity Market after electricity generators stopped offering supplies into the market.

Politicians accused energy companies of looking to game the system, but industry executives said they were being hamstrung by archaic rules that had not envisaged a crisis like the one seen in 2022.