Victorians facing gas price shock

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http://www.smh.com.au/business/mining-and-resources/victorians-facing-gas-price-shock-20140901-10axo2.html?rand=9209194

Victorians are facing a bigger shock from higher gas prices – just as relief looms from electricity price rises – because they use a lot more gas than households in other states.

Victorians are facing a bigger shock from higher gas prices – just as relief looms from electricity price rises – because they use a lot more gas than households in other states.

Many Victorians use natural gas for home heating, as well as cooking and hot water. The average Victorian household uses about 55 gigajoules of gas a year.

That's three to five times as much as the average household in South Australia, NSW or Queensland, where heating is less of a problem.

If the wholesale price of gas jumps from the $4 a gigajoule maximum of the past three decades to the $9/GJ rate at which contracts are now being written, and all the other costs stay the same, that's an extra $5/GJ or $275 a year for the average household.

A larger family home can consume as much as 90 GJs, raising the annual increase to $450.

If the wholesale price goes to $10/GJ, as some predict, that's an extra $330 for an average household or $540 for a larger family home.

"Now that is a big number," said Grattan Institute energy program director Tony Wood.

Fortunately for the Napthine government, energy retailers have long-term supply contracts and the impact of wholesale gas price hikes will take three to five years to work its way through the system.

But bill shocks are assured during the next parliamentary term, raising the question: "What the hell is the ­government going to do about it?" Mr Wood said.

NSW gas consumers already face an 18 per cent price increase this year.

"Peter Reith did his [Victorian onshore gas] report and basically the answer is, you have really got to try and find some more supply to try and keep a lid on this price to some extent," Mr Wood said.

Gas price shocks are coming on the back of several years of double-digit increases in electricity prices.

"Just when you thought there might be some relief on the horizon with ­electricity prices courtesy the repeal of the carbon taxes and possibly some remediation of the increase in network prices – along comes gas," Mr Wood says.

"No one told them this was coming."

The question will become acute in Victoria because the government has continued to roll out gas networks to regional Victorians on the basis that gas is a good way to heat the house in winter.

"You've got to question – given the numbers we have just been talking about – is that actually a good use of public funding?" Mr Wood said.

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