still keen, page-6

From todays Australian . (Note the 4th and 2nd last paragraph re gas .)
http://www.theaustralian.news.com.au/story/0,25197,22134913-5005200,00.html

Demand for more electricity

Nigel Wilson, Energy writer | July 26, 2007

THE national power regulator has warned that Australia is running out of generating capacity and urgently needs new private-sector investment.

Australian Energy Regulator Steve Edwell yesterday said rising wholesale electricity prices were a signal that new capacity needed to be delivered by the private sector, not governments.

Speaking after the release of the AER's first report on the state of Australia's energy market, Mr Edwell said there was "very clear evidence" that generating capacity was being stretched.

He said high international demand for liquefied natural gas had put pressure on domestic gas prices, with the forward markets suggesting that price pressure may persist for some time.

The agency's report says that while the more competitive electricity market has delivered lower energy costs for business customers since 1999, a combination of record demand and tight supply led to significantly higher prices this year, which have been mirrored in higher forward prices for electricity derivatives.

At one stage earlier this year, wholesale prices were briefly higher than retail prices.

The report says the introduction of competition has led to a rebalancing of household and business retail prices to reduce some the traditional cross-subsidies between these groups.

"This has meant that, to date, retail prices have fallen in real terms, but for business customers rather than for householders," itsays. "The benefit to households has been the flow-on effects of cheaper energy costs on prices generally."

The report says an emerging issue this year has been a sustained increase in electricity prices in the National Electricity Market over a period of several months, also with historically high prices in the forward market for derivate contracts.

"The main cause of high prices in April and May was that the drought constrained hydro-generating capacity in the Snowy, Tasmania and Victoria.

"The drought also limited the availability of water for cooling in some coal-fired generators, especially in Queensland."

Mr Edwell said the AER's report came at a challenging time for the energy market, which had recently undergone extensive ownership changes as well as legislative reform that was shifting regulation to a national framework.

The AER was formed in 2005 as part of an agreement between the states and the commonwealth to scrap up to 13 regulators in the energy sector.

"Investment in energy transportation networks has grown strongly with annual investment running at around $700 million in high-voltage electricity transmission networks and $3 billion in the local distribution networks that move electricity to customers," Mr Edwell said.

"Overall real investment will rise by around 40 per cent in the five years to 2007-2008, driven largely by transmission expansions and upgrades."

There had also been significant investment in gas, with about $2.5 billion being invested in new gas transmission pipelines and major expansions since 2000.

Mr Edwell also said there would be challenges for the energy market with the introduction of carbon trading.