Gas charges set to climb 50%
AGL has begun notifying commercial and industrial users gas prices will rise to $9 a gigajoule from 2016, up from $6 in 2014. The price will be $7.63 a gigajoule for 2015.
Additionally, the cost of supplying the gas will rise 20 per cent over the five years to 2017.
The surge in prices comes as the pressures on gas explorers in parts of eastern Australia intensify with coal seam gas explorers facing rising community opposition and a tougher regulatory regime.
Metgasco, which has been exploring in northern NSW, has decided to halt all work in the area.
AGL is a large gas supplier to the main eastern states but its long-term supply contracts expire over the next few years, leaving it exposed to price rises being pushed by gasfield investors.
Surging energy prices were a key factor in CSR's decision this week to close one of its glass plants, at Ingleburn in Sydney, in favour of sourcing more product from imports and other domestic plants.
"We see significant price hikes for business contract gas rates over the next four years," the chairman of sector specialist Energy Action, Ron Watts, said. "This will impact directly and also indirectly through higher gas-fired electricity charges.
"It's hard to imagine increases in supply affecting this trend within four years, even if there was a favourable CSG environment."
Garbis Simonian, of Weston Aluminium, a large industrial user, said the the AGL price rise was "ridiculous".
"We can't pass that cost on to our customers - we couldn't even pass on the carbon tax," he said. "We've had to wear that cost rise."
Like many large gas users, Mr Simonian is looking at undertaking a round of heavy capital spending to cut energy use, potentially by as much as 40 per cent.
AGL has been developing its own gasfields at Gloucester, north of Newcastle, and at Camden, but it has been forced to abandon some of these plans as a result of changes to government regulations, which has left it confronting a potential $250 million asset write-down.
Even so, analysts estimate large gas retailers who are producers, such as AGL and Origin, will benefit significantly from the prospective surge in prices, which they estimate to be worth more than $2 a share for each company.
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The article says the rise is being driven by Queensland export gas projects pushing up domestic prices, intensifying pressure on eastern Australian gas explorers, rising community opposition to coal seam gas (CSG) and tougher regulation — all of which reduce supply flexibility and lift prices for large users.
AGL notified commercial and industrial customers that gas prices would rise from $6 a gigajoule in 2014 to $7.63 a gigajoule in 2015 and to $9 a gigajoule from 2016, according to the article.
The article notes the cost of supplying gas is expected to rise about 20% over the five years to 2017, and Ron Watts of Energy Action warned of significant business contract gas rate hikes over the next four years, which could also push up gas-fired electricity charges.
Surging energy prices prompted CSR to close a glass plant at Ingleburn and source more product from imports or other plants. A large industrial user, Weston Aluminium's Garbis Simonian, called AGL's price rise "ridiculous" and said the company can't pass the cost on to customers, mirroring concerns among manufacturers.
The article reports many large gas users are looking at heavy capital spending to cut energy use — potentially reducing energy consumption by as much as 40% — as a response to higher gas and electricity costs.
Metgasco's decision to halt all work in northern NSW signals growing challenges for gas explorers in parts of eastern Australia, reflecting rising community opposition and a tougher regulatory regime that could tighten future domestic supply.
Analysts cited in the article estimate that producers who also retail gas, such as AGL and Origin, will benefit significantly from the prospective price surge — potentially adding more than $2 a share for each company — although producer exposure varies with contract positions and project setbacks.
AGL faces a mix of risks noted in the article: its long-term supply contracts expire over the next few years (increasing exposure to price rises), it was forced to abandon some Gloucester and Camden gasfield plans due to regulation (creating a potential $250 million asset write-down), even as higher wholesale prices could benefit producers overall.
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