We invite public comment on this discussion paper which explores key design issues related to development of a virtual southern hub covering Victoria’s gas transmission system.

The discussion paper is part of the AEMC’s Review of the Victorian Declared Wholesale Gas Market which is being conducted concurrently with our East Coast Wholesale Gas Market and Pipeline Frameworks Review. Both reviews are being guided by the COAG Energy Council’s vision for the creation of a liquid wholesale gas market.

Today’s discussion paper is released to give stakeholders an opportunity to contribute to the next layer of detail proposed for Victoria’s Southern Hub model for trading gas before the review’s final report is submitted to the COAG Energy Council in mid-2016.

Your contributions are sought on; managing capacity at the Southern Hub; capacity allocation mechanisms; capacity pricing and revenue; and balancing.

Submissions are due by 29 March 2016.

The AEMC’s roadmap for improvements to the Victorian market are centred around augmenting existing market arrangements to transition from the compulsory trading model today where over 80% of the gas flowing through the system is simply participants selling gas to themselves, to a voluntary, exchange-based trading model more similar to Queensland’s Wallumbilla market.

In the Southern Hub participants wanting to buy and sell gas would post bids and offers to buy and sell gas over various time horizons depending on their requirements. This would allow the publication of a ‘market price’ which over time could be used as a reference price in bilateral contracts and can also form the basis of hedge instruments.

Importantly, the proposed Southern Hub would continue to safeguard the security of gas supply for Victorian consumers through the residual balancing mechanism such that, in the event participants do not balance their injections of gas to, and withdrawals of gas from, the system through their own trading actions, the system operator will take balancing actions to ensure that network pressures are maintained within safe operational limits, and that gas continues to flow to consumers.

Another discussion paper has been released today on issues related to broader reforms being addressed by the East Coast Wholesale Gas Market Review with particular focus on pipeline capacity market recommendations.

Media contact: Prudence Anderson 0404 821 935 or (02) 8296 7817