The Albanese government has announced plans to extend its price cap on wholesale gas prices.

The cap will stay in place until mid-2025 in a bid to curb soaring energy costs. The move comes as part of the final consultation for a mandatory code of conduct for the gas industry. 

The code will ensure sufficient supply of Australian gas for domestic use at reasonable prices and provide producers with the certainty they need to invest in supply. It will also enable Australia to remain a reliable trading partner by allowing LNG producers to meet their export commitments.

According to the joint statement issued by the energy minister, Chris Bowen, resources minister, Madeleine King, and industry minister, Ed Husic, the gas price caps, coupled with the cap on coal costs for power generators, have nearly halved wholesale energy prices. 

However, the coal price cap will cease when its 12-month period ends.

Last December, the gas industry strongly objected to the government's intervention when it imposed a $12 per gigajoule price cap for domestic sales. 

The government also set a separate $125/tonne limit on black coal for Queensland and New South Wales, with both caps intended to work to curb the run-up in electricity prices. The size of the effect of the price caps on power prices is disputed, with wholesale prices typically accounting for only about a third of users’ bills.

Under the new measures, the Australian Competition and Consumer Commission (ACCC) will have “a strong enforcement regime” for the new gas code. 

The government has indicated that it is prepared to grant gas companies exemptions under certain conditions, with details of the code to be finalised before the end of June. 

The $12/GJ gas prices will be assessed by a review to start by 1 July 2025, implying the cap may extend beyond that time.

Small producers that direct their supply only to the domestic market will also avoid the cap. 

The mix of incentives and disincentives includes giving the ACCC the power to grant exemptions to companies that satisfy it with “court-enforceable supply commitments”. 

Companies and other stakeholders have until 12 May to make submissions, with one area of uncertainty being how the government determines and imposes its “reasonable” price test on new gas projects.

Industry reactions to the announcement have been mixed. 

The Energy Users' Association of Australia called the policy a “welcome step in the right direction” but noted that more work needed to be done for large energy consumers. 

The Australian Pipelines and Gas Association said the government's proposed mandatory code would “help rebalance the domestic gas market, but concerns remain that it will not do enough to alleviate underlying supply issues”.