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Gas Cap Extension: What Small and Medium Business Owners Need to Know

Gas fireplace

The Climate Change and Energy Minister Chris Bowen is considering a gas cap extension to the $12/GJ cap on wholesale gas prices. This cap, set to expire at the end of the year, affects both energy producers and users. If extended, it could provide more certainty for businesses that rely on gas for their operations.

Energy producers are worried about how the cap extension might affect long-term pricing, as it may include a “reasonable pricing” clause. This means gas companies can only charge a price based on production costs plus a reasonable margin, without considering their capital investments during exploration and development. Gas buyers can challenge contract prices through a formal dispute process.

Gas producers are waiting for the government’s decision on the cap extension before finalizing new gas supply contracts for 2024. The federal government is also expected to introduce a Petroleum Rent Tax, potentially increasing tax revenues by $100 billion. This tax may cause concerns among gas producers, leading to fluctuations in energy prices for businesses.

The new regulations may allow for exemptions, especially for new projects that increase domestic gas supply. The Australian Petroleum Production & Exploration Association (APPEA) emphasizes the importance of gas in achieving a cleaner energy future, urging the government to create settings that encourage investment in new supply and put downward pressure on prices.

Australia must keep exploiting its gas resources to meet its net zero emission goals. In the long run, this should benefit the gas and electricity industry’s producers and end customers while assuring their security.

This is a summary article from Edge2020 – read the original article.

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
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