Gas Week

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Australian Paper argues against GasNet’s proposed price increases; points the finger at gas-fired thermal power stations

Posted by gasweek on 2 October, 2007

Australian Paper argued in a submission to the Australian Energy Regulator (AER) on 29 June 2007 that its current level of gas consumption did not warrant GasNet’s introduction of price increases to the magnitude proposed.

A steady pattern of consumption: “Australian Paper has not significantly changed its gas consumption profile over the last 5 years; and had no plans for any significant change over the next 5 years,” said Dean Thompson, Procurement Manager of Australian Paper. In 2006-07, the Maryvale Mill consumed some 7.52 PJ of gas at an average Load Factor of 99 per cent. Similar load profiles have occurred throughout the last 5 years and were anticipated for the next 5 years.”

Identifying the real cost-drivers: “Our preliminary understanding of material in the GasNet proposals is that major cost drivers for GasNet’s business are linked to increasing demand from gas-fired thermal power stations,” said Thompson. “If that is the case, it would seem both prudent and rational for GasNet to allocate those costs to the parties that cause the cost drivers. This would send better pricing signals to generators and produce a more equitable outcome for other users.”

Staying competitive: “Australian Paper operates in a competitive market against imports from lower cost businesses in Asia and elsewhere. The business has limited capacity to pass on increased costs, much less increases of the magnitude proposed.”

Seeking viability: “Australian Paper’s long term survival depends on finding continuous productive improvements and cost reductions in all aspects of its business. As Victoria’s largest single industrial gas user, Australian Paper expects its energy retailer and GasNet to find better and more efficient ways to operate their businesses to our mutual benefit.”

Forced to consider an appeal: “Australian Paper understands that the gas Code provides opportunities for aggrieved parties to appeal decisions of the AER,” said Thompson. “We also understand that such appeals can be complex, costly and time consuming and require significant commitment of time and resources. However, the potential impact of GasNet’s proposals is so severe that, if accepted by the AER, we would have no option but to lodge an appeal.”

Reference: Dean Thompson, Procurement Manager, Australian Paper, Australian Paper in a Submission to the AER, 29 June 2007.

Erisk Net, 24/8/2007

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