The AEMC today decided to not make a rule to introduce a forward trading market for gas traded on the Victorian declared wholesale gas market (DWGM).
Over the past year
- usage of existing industry-led risk management tools has increased
- the ASX Victorian gas futures have increased in trading, and the ASX has indicated it will introduce a market maker for its Victorian gas product in the near future
- brokers have entered the Victorian gas market, which is expected to facilitate more over-the-counter trading
- information transparency about gas contracts has also improved due to increased trades on publicly listed ASX products and data in the ACCC gas inquiry interim reports.
In light of these developments, and after consulting with market participants, the Commission found that there is no longer a clear need for an additional forward trading market to help manage spot price risk.
The Commission supports other developments that may address barriers to forward trading of gas contracts in the DWGM. The COAG Energy Council is currently considering improvements to transparency of short-term gas contracts including introducing mandatory reporting of contracts with a tenure of less than 12 months on the Gas Bulletin Board. Additionally, the Commission recommends the Gas Wholesale Consultative Forum consider other improvements to administrative processes that may act as a barrier to short-term trading. Finally, the Commission will also continue to monitor the liquidity of the Victorian gas contract market through its Biennial review into liquidity in wholesale gas and pipeline trading markets.
This rule change is one of three proposed by the Victorian Minister for Energy, Environment and Climate Change; all three of which were based on recommendations in the AEMC’s 2017 Review of the Victorian declared wholesale gas market.
Media: Prudence Anderson, Communications Director, 0404 821 935 or (02) 8296 7800