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There has been considerable reform of the Australian natural gas industry. An element of this reform has been the introduction of ‘contestability’ — allowing customers to select their retailer of natural gas. The potential benefits and risks associated with this policy are presented and the key issues involved in the implementation of contestable natural gas market are explored. Aside from the potential risks, the policies that have been introduced in order to prevent potential difficulties are examined. It is found that, while increased retail competition is an important element of the reform process, the potential benefits are limited in the absence of further upstream reform.


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