The gas market needs to be overhauled as it is not meeting consumer needs, the head of the energy markets regulator says, pointing to opaque long-term gas supply contracts.
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The reallocation of unused gas pipeline capacity has also been flagged.
Speaking at an industry forum on Tuesday, Australian Energy Market Commission (AEMC) chairman John Pierce said the development of "a liquid wholesale gas market to provide participants with greater flexibility outside of long-term contracts when buying and selling gas" was essential as part of the reviews being conducted into the gas market arrangements.
"Put simply, the old way of doing business is not always working in the long-term interests of gas consumers," he said.
"The ability to trade gas on a liquid wholesale market, on an equal basis to other players, and hedge price risk, lowers barriers to entry and promotes competition.
"Trading gas through well-functioning markets is fundamental to consumers being able to know whether the gas price reflects underlying demand and supply, and, basically, to know that they're getting a fair deal, which, in turn, provides signals for the efficient allocation of gas across the economy."
Mr Pierce's comments follow those of Australian Competition and Consumer Commission chairman Rod Sims.
Mr Sims said recently that gas users were correct in arguing they faced difficulties in securing new supplies.
Both the AEMC and the ACCC are conducting inquiries into aspects of the domestic gas market at a time of surging prices as several gas export projects start up in Queensland.
For the AEMC, the focus was on establishing active domestic trading markets, which would be either modelled, in part, on the active physical trading of gas in the US, or the model in Europe, which was based more on "virtual" hubs.
"We don't yet have a fixed idea about the exact market structure; for example, the number and location of supply hubs or trading zones," Mr Pierce said. "We are also comparing physical and virtual hub designs, which both have their advantages and disadvantages."
As a result, gas trading could emerge as an alternative source of supply to existing purchase contracts, he said.
However, one issue had been the hoarding of pipeline capacity by some users.
The AEMC was considering steps aimed at boosting the trading of spare capacity or simply reallocating unused capacity, he said.
