Leading players say ‘confusing price cap difficult to enforce’
Two of Australia’s leading competition lawyers say the Albanese government’s gas price caps have created uncertainty in the market.
Two of Australia’s leading competition lawyers say the Albanese government’s gas price caps have created uncertainty and confusion in the market and will be extremely difficult to enforce.
The comments from Gilbert + Tobin competition and regulation partner Jeremy Jose and King & Wood Mallesons managing partner Craig Rogers come after the Australian Competition & Consumer Commission last week issued guidance on the temporary $12-a- gigajoule wholesale cap introduced last month.
Multiple energy retailers across the eastern seaboard have stopped taking new gas customers and others are ramping up their prices, as they struggle to secure ongoing supply from producers following the imposition of the cap.
Mr Jose spent nine years working for the ACCC, including on its 2015 inquiry into the east coast gas market, and has since represented gas producers and their customers.
“I actually have some sympathy for the ACCC, because the government’s law is very simplistic, and doesn’t grapple with the fact that this is a very complex market,” he said.
Mr Jose said it was possible sophisticated gas buyers could use loopholes to get around the cap.
“The ACCC has made it clear it has power to and will investigate any deliberate action to avoid the price cap. However, the price cap itself creates a number of exceptions, and allows gas to be sold above $12 a gigajoule by many types of parties, including retailers, so if people take action which is lawful under the price cap, the ACCC will have no role in prosecuting that conduct,” he said.
“One of the reasons why we operate in a market economy where price caps are not common, is because centuries of economic history have taught us that price caps do not work.
“You can give a regulator all the enforcement powers you like, but at the end of the day, you can’t force people to sell something for less than the value they could get on an open market.”
Mr Rogers said of the ACCC’s guidance: “It’s good that the ACCC’s thinking about these things because these are the questions the industry’s asking and needs to know, but the complexity of issues, the permutations of outcomes and the serious consequences mean there’s still a lot of uncertainty, and the subjective nature of what the ACCC’s looking at almost puts more fear around it than not, and leads to a paralysis in the market.
“It’s created lots of uncertainty, lots of confusion, and great caution and concern.”
A spokesman for Treasurer Jim Chalmers said: “The design of the emergency price cap has been informed by the detailed knowledge of the market the ACCC has built up over recent years, including as part of its ongoing gas inquiry.
“The ACCC is monitoring closely and is ready to enforce its powers if there are contraventions of the price cap. We expect gas companies will adhere to their legal obligations.
“The cap will help take some of the edge off the forecast price increases over time. The change will gradually flow through to retail supply contacts, reducing the impact of price increases on consumers.”
ACCC chair Gina Cass-Gottlieb said the watchdog’s guidelines contemplated compliance “under a range of different contract models and are consistent with the contracting practices we have observed in the market, since the first gas inquiry commenced. The ACCC’s current gas inquiry has been running since April 2017.
“The ACCC expects gas producers with uncontracted gas for supply in 2023 to resume supply negotiations with their customers.”
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