Gas Bills and Network Costs: Understanding the Proposed Changes
The necessity of implementing fresh regulations for a fairer gas price distribution
It's no secret that gas as a household energy source is on the decline in Australia. Electricity is cleaner and safer, with electric hot water and air conditioning systems becoming cheaper to run compared to their gas-powered counterparts. As we transition to an all-electric world, the question of who should bear the costs of connecting new gas customers becomes increasingly important.
According to Energy Consumers Australia (ECA), the current National Gas Rules that apply across most of Australia require all gas customers, not just new ones or the developers building new neighborhoods, to share the costs of connecting new customers to the gas network.
The change proposed by ECA is straightforward — developers and new customers connecting to the gas network should pay the full upfront costs of their connections. This means that existing customers, such as the approximately 2.9 million renters in Australia, wouldn't have to help pay for new connections they didn't initiate.
At the heart of the issue is the problem of fixed costs and declining usage. As gas customers decrease, the costs of maintaining the gas network become disproportionately allocated among the remaining users. In fact, consumers are paying for the gas pipelines as part of their gas bills due to retailers passing along their gas network tariffs, which are established by the Australian Energy Regulator (AER).
ECA general manager of advocacy and policy, Brian Spak, explains, "Consumers are at risk of soaring gas bills because the costs of those networks are fixed, and they have to be recovered." To address this issue, ECA proposes that developers and new customers shoulder the burden of their own connection costs, preventing gas bills from continuing to climb.
This is already the practice in Victoria, but not in other regions subject to the gas rules. The change represents an important step towards a fairer energy market for remaining gas users. The proposed change is just part of a broader initiative by ECA to rectify gas rule and policy issues to ensure that the last remaining customers aren't unduly burdened with high gas bills.
The ECA proposal comes as the Australian Energy Market Commission (AEMC) takes other measures to protect energy customers. Recently, the AEMC announced a rule change set to take effect on 1 July 2026 that will prevent retailers from raising prices within market contracts more than once every 12 months and will require retailers to charge no more than the regulated standing offer price once current benefits have expired or change.
Additionally, unreasonably high fees and charges, as well as steep late payment penalties, will be outlawed beginning mid-2024. These actions demonstrate a commitment to making the energy market fairer for all customers, not just those using gas.
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Sources
[1] https://www.choice.com.au/electricity-gas-and-utilities/articles/who-should-pay-for-connecting-new-gas-customers[2] https://www.ecac.org.au/wp-content/uploads/2022/08/ECA-Gas-Network-Access-rep_220810.pdf[3] https://www.smh.com.au/business/companies/gas-bills-to-soar-as-consumers-foot-the-bill-for-new-connections-20210914-p58ma7.html[4] https://www.abc.net.au/news/2021-09-22/gas-costs-to-rise-as-who-pays-for-new-connections-under-scrutiny/100387638
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