With the path to electrification now clear, proactive planning will be key to ensuring consumers have the tools they need to make the move away from gas.
As the energy transformation continues, many organisations, including Energy Consumers Australia (ECA), have called for supports to help consumers electrify and realise the projected cost-savings this could mean for them.
Seeing these supports come to fruition in the next term of government will be crucial for households and small businesses.
In any transition, you are embracing something new and exciting – in this case, electrification – but you are also leaving something behind. And for most small businesses and retail customers, that’s the gas network. Failing to plan and manage that transition off gas effectively risks the social licence for the whole process.
Our 2023 ‘Stepping up’ report, which incorporated detailed modelling from CSIRO, found that without interventions to prevent consumers propping up the gas network, network prices alone on household gas bills could more than quadruple to $1170 in 2050.
This is because as households leave the network, the costs of maintaining and operating it will be shared by a decreasing pool of customers. These are likely to be those least able to electrify, such as low-income households or renters.
So how do we plan for responsibly winding down the gas network while ensuring those left using gas for longer do not face unaffordable bills?
ECA recently submitted four proposed rule changes to the Australian Energy Market Commission (AEMC) to adjust the National Gas Rules to do just that, and to help plan the future gas network with consumers’ needs in mind.
The first requires those connecting to the gas network for the first time to pay the full upfront connection cost.
It might sound strange that as consumer advocates, we’re arguing in favour of this process, as subsidising developers to connect new properties to the gas network reduces the cost to the consumer. However, this subsidy is eventually paid off by all customers.
We find that, in practice, this often means that new property owners end up with an increasingly uneconomic gas connection, while the rest of the customer base has paid for an asset that may strand.
Our proposal means consumers would see the real cost of a gas connection and could make the best decision for their circumstances which, in most cases, would be to electrify.
ECA’s second proposal would amend the criteria for approving new capital expenditure, helping ensure any new spending is necessary in the context of a declining network.
Our report with Dynamic Analysis, ‘Turning down the gas’, found that one of the most impactful things we can do now to minimise the risks posed by stranded assets is to stop unnecessary spending on the gas network.
The third proposed rule change would require gas distribution networks to make long-term plans about their network, including identifying areas where many disconnections are happening now and are likely to happen in the future, and where new spending might be required longer-term. Such information can help governments, community leaders and electricity networks identify opportunities for ‘strategic decommissioning’ of the gas network.
The final rule change would address the process of accelerated depreciation, which allows distribution networks to increase costs to consumers for the gas distribution network to reduce the losses network investors may face in the future. Our proposal would mean stronger conditions around networks’ ability to accelerate the depreciation of stranded assets, helping to ensure consumers aren’t picking up the tab to sustain these assets in a declining network.
These rule changes, developed with comprehensive engagement with the AEMC, Australian Energy Market Operator (AEMO), the Australian Energy Regulator (AER), federal and jurisdictional departments, industry, consumer advocates, and others, will require gas distribution networks to proactively plan for the future and make decisions that will minimise further non-critical investment.
They also aim to increase the tools and regulation that crucial stakeholders – including regulators, councils, governments and networks – have available to start actively planning for the transition away from gas.
ECA believes these are no-regrets proposals that will ensure a fairer, more affordable transition for Australians. If you do too, I’m asking for your support to back them in.
We have recently seen positive steps taken by the ACT and Victorian governments, which have implemented policies to support consumers to access the benefits of electrification.
Our research shows that these clear policy signals are resulting in a shift in consumer intentions; in December 2024, two in three homeowner households in the ACT told us they were planning to get off gas in the next 10 years. This shows that when consumers receive clear signals that the transition involves leaving gas behind, they start to make plans to do so.
But further work is needed to ensure all consumers can access the benefits. We believe our gas rule changes will go some way in helping to minimise costs to consumers and ensure the transition is well-planned and well-managed. However, federal, state and territory governments also have a clear role in planning and funding this future.
A household’s ability to transition off gas in an orderly manner should depend on its postcode. Most jurisdictions still currently allow consumers to connect to the gas network, which could put them at risk of rising gas prices and add to the overall cost of the network.
All state governments have a role in limiting new gas connections and ensuring Australia is working towards a future that supports electrification. But we also need fully articulated national plans for this transition, and a definitively communicated narrative that considers how to transition off the gas network in a fair and orderly way.
We believe this is a real chance for the Federal Government to provide clear guidance on what this looks like.
The energy sector has a unique and exciting opportunity to be bold on behalf of all Australians now to ensure that the net zero transition is fair for households and small businesses – and that’s what we’re advocating for.
Will you join us?
