The Australian gas market has been the subject of intense scrutiny in recent times, culminating in yesterday’s request by the Minister for Small Business that the ACCC conduct a public inquiry into the competitiveness of the Eastern Australian upstream natural gas market.

The inquiry is under s 95H(1) of the Competition and Consumer Act (CCA), which empowers the Minister to direct the ACCC to hold an inquiry into specified matters.  This section sits within Part VIIA of the CCA, which deals with prices surveillance, so the inquiry will generally be in relation to matters likely to have an impact on prices.  Prices surveillance inquiries have in the past been held in relation to groceries and fuel. 

Part VIIA also provides the ACCC with compulsory information gathering powers. In particular, Part VIIA gives the ACCC similar information-gathering powers in relation to a price inquiry as it has under s 155, including compelling the production of documents, the furnishing of information and the attendance of witnesses to answer questions, with the potential for criminal penalties for a failure to do so or for providing false or misleading information. 

The matter that has been specified as the subject matter for the inquiry is the competitiveness of wholesale gas prices and the structure of the upstream, processing, transportation, storage and marketing segments of the gas industry, including but not limited to Victoria, NSW, ACT, South Australia, Queensland and Tasmania, which the ACCC has described as an inquiry into Eastern and South Australian wholesale gas prices.

Matters to be taken into consideration are to include, but are not restricted to:

•  The availability and competitiveness of offers to supply gas and the competitiveness and transparency of gas prices;
•  The competitiveness of, and access to, and any restrictions on market structures for gas production, gas processing and gas transportation;
•  The significance of barriers to entry in the upstream production sector;
•  The existence of, or potential for, anti-competitive behaviour and the impact of such behaviour on purchasers of gas; and
•  Transaction costs, information transparency including gas supply contractual terms and conditions, and other factors influencing the competitiveness of the markets.

Retail markets are explicitly excluded.

The announcement of the ACCC inquiry follows in the wake of the Harper Review’s recent Review of Competition Policy final report (released on 31 March 2015) which recommended that a detailed review of competition in Australian gas markets be undertaken, and the Federal Government’s Energy White Paper (released on 8 April 2015) which flagged that an ACCC inquiry would be commissioned. 

The Minister has suggested that the ACCC liaise with the Productivity Commission, given its recent research into more efficient gas markets set out in its paper Examining Barriers to More Efficient Gas Markets (released on 31 March 2015). 

The ACCC has flagged that it will publish an Issues Paper, and will publish further information about the consultation process and key documents. It has indicated that it will be conducting both public and private hearings. ACCC Chairman Rod Sims has also stated that he considered previous inquiries of the gas market were significantly hampered by a lack of information, and has stated that “the ACCC has the tools available to gain information that is essential to complete the task given to us” indicating that the ACCC intends to fully utilise its powers to compel the production of documents and the appearance of individuals to give evidence at the inquiry.  

The ACCC’s Final Report is to be submitted to the Government within 12 months.