EnergyAustralia fined more than $400,000 for gas market distortion

The energy group failed to comply with a rule that requires market participants to detail their supply and demand intentions.

EnergyAustralia has been fined more than $400,000 for distorting the gas market for more than a year by failing to comply with a rule that requires market participants to detail their supply and demand intentions.

The Australian Energy Regulator said that between July 2020 and December 2021, EnergyAustralia failed to submit 376 bids in both the Adelaide and Sydney short-term trading markets.

By failing to bid, EnergyAustralia was indicating it did not intend to buy any gas on the relevant trading days when in fact it did purchase gas on those days, actions that the AER said would have distorted the market.

The AER issued six infringement notices related to six of those days, and EnergyAustralia was fined $406,800.

The fine will add to EnergyAustralia’s recent financial woes. In February, EnergyAustralia’s parent company CLP Holdings reported a loss of $1bn after what it described as unprecedented market conditions.

“While disappointed, we accept the AER’s ruling,” a spokesman for EnergyAustralia said on Monday.

“We have since introduced stronger controls, such as additional training, improved monitoring, and automated prompts to work to prevent this from happening in the future.”

The AER also fined Incitec Pivot, one of Australia’s biggest gas users – more than $200,000 for similar failures to EnergyAustralia.

Incitec – which manufactures explosives and fertilisers – failed to notify the market on 64 occasions between January and October 2021 of its intention to buy gas for its Gibson Island plant, the AER said.

Yallourn North looking towards Loy Yang A Power station. Picture: Jason Edwards

During that nine months, Incitec undertook six periods of plant maintenance during which gas usage was significantly lower than its bids, distorting the supply and demand dynamics of Australia’s gas market.

The AER issued four infringement notices related to four of those days, and Incitec Pivot was fined $223,400.

Incitec said it did not benefit or intend to impact the market through its actions.

“We co-operated with the Australian Energy Regulator’s investigation relating to historic events in 2021 at our now closed Gibson Island manufacturing plant,” a spokeswoman for Incitec said in a statement to The Australian.

“The four infringement notices relate to technical omissions during a period of unplanned changes to gas demand at Gibson Island. IPL did not benefit from the omissions and does not believe there was any impact to the market.”

Still, the fine intensifies pressure on Incitec, which has been beset by internal turmoil amid tepid investor response to the company’s plan to split the fertiliser and explosives divisions.

Former chief executive Jeanne Johns was ushered out of Incitec after she lost the confidence of shareholders.

The enforcement action of the AER will ease criticism of the regulator, which has been under pressure to demonstrate its stringent oversight of the industry amid a surge in prices and allegations of gaming the system.

“The penalties issued to both EnergyAustralia and Incitec for their alleged noncompliance should remind participants that we take these matters seriously and that they remain accountable for their conduct in these markets regardless of whether they currently trade in them or not,” AER board member Justin Oliver said.

Sources last week said Macquarie is in talks to acquire a stake of up to 50 per cent in EnergyAustralia, in a deal that should it proceed would give the country’s third largest retailer access to much-needed capital to accelerate its transition away from fossil fuels.

EnergyAustralia’s Hong Kong-listed parent company CLP Group has for months been seeking a partner for the retailer that provides electricity and gas to about 2.5 million Australians.

CLP Group said a partner would provide the necessary capital for EnergyAustralia to develop new renewable energy generation and storage projects, but no deal was believed to be close – frustrating the Hong Kong infrastructure owner which endured heavy financial losses of $1bn last year.