This is the final of a series of three focus reports looking into the facilitated gas markets to assess how they support efficiency and competition in Australia's east coast gas market.
This third report covers the four downstream spot markets to trade gas: the Declared Wholesale Gas Market (DWGM) and the three Short-Term Trading Markets (STTMs).
The downstream spot markets allow participants to trade gas on a short-term basis and manage differences between their longer-term contracted positions and their immediate gas needs.
Key findings from the report include:
- There is substantial growth occurring in liquidity of net trading, and spot prices appear aligned between the downstream spot market hubs, which suggests a liquid market. Financial products that help participants manage price volatility are being used, but liquidity of DWGM futures is low.
- There has been growth in participation in offering Market operator services (MOS), a daily pipeline balancing service which manages deviations between actual and scheduled gas flows on a pipeline into the hub. On some pipelines this growth appears to have put downward pressure on costs, despite rising usage of MOS.
- Changes to ancillary payments and capacity certificates in the DWGM appear to have improved the system, however capacity certificates remain largely untested.
- Increased participation in the spot markets has placed more competitive pressure on prices as more varied participant groups are offering gas.
- Participants appear to have varied levels of reliance on net buying in downstream spot markets for demand requirements. Those with higher net buying can be more exposed to spot market prices, however, they can also hedge price risks.
- The downstream spot markets support arbitrage opportunities and enable a variety of market participants to move gas to where it is most valued.
Background
This series of focus reports, stemming from the AER’s new legislative functions to monitor and report on competition in Australia’s east coast gas markets, has been developed in the lead up to the AER’s first wholesale gas competition report due for publication in May 2026.
The first focus report on the Day Ahead Auction was released in October 2024 and the second focus report on the Gas Supply Hub was released in December 2024.