Households Left on Gas Could Pay More as Network Customers Dwindle

Bronwyn Batten, 48, wishes a gas ban had existed in 2016, when she built a project home on the Illawarra coast north of Wollongong. Back then a gas connection, a gas hot-water system and a gas stove came as part of the package, and she never thought to question them. Today she says she would be far better informed and would choose differently.

She has since spent tens of thousands of dollars on electrifying her household. She was an early buyer of an electric vehicle, installed solar panels and a battery, and eventually replaced the gas hot-water system and stove before cutting the gas connection altogether. The last stage came through Electrify 2515, a partnership between Rewiring Australia, Brighte and Endeavour Energy, backed by federal funding, which set out to electrify an entire suburb. Her motive was mainly environmental, but she describes the effect on her bills as "pretty awesome", and says an induction stove gives her more control than gas or older electric cooktops.

Batten belongs to a growing number of Australian households leaving the gas network voluntarily, or moving into homes that never had it. Victoria will ban domestic gas in new builds from January 1, 2027, with a separate ban on gas hot-water systems to follow, unless a change of government overturns it. In NSW, about a dozen council areas have similar rules, mostly in Sydney. Premier Chris Minns has ruled out a statewide ban, but councils including City of Sydney, Waverley, Woollahra, Inner West, Canada Bay, Canterbury-Bankstown, Parramatta, Ryde, Lane Cove, North Sydney, Hornsby, Blue Mountains, Newcastle and Byron Shire have adopted or are exploring such controls through development rules. Developers have welcomed this for the certainty and cheaper prices it brings.

The Australian Energy Market Operator forecasts that residential and small commercial gas demand on the east coast will fall by about 79 per cent over the next 20 years. That raises a hard question: as customers leave, who pays for the pipes? Either the remaining customers carry a bigger share, or network owners and investors absorb some risk as a consequence of privatisation. The worry is that those left behind will be low-income households who cannot afford to switch even with subsidies, and renters who have no authority to decide.

That concern led Energy Consumers Australia and the Justice and Equity Centre to ask the Australian Energy Market Commission, which sets the rules, to act. They dislike its response. A draft rule issued in August, due to be finalised in December, takes a longer-term view and would let gas networks recover more of their costs from today's customers rather than future ones. Until now, cost recovery has rested on a five-year outlook and an assumption that customer numbers would keep growing, which is no longer true. AEMC chair Anna Collyer acknowledges the change would likely bring price rises soon, describing "modest cost increases" for some networks' customers in the near term, and says it reduces the risk of high, volatile prices later. She adds that the package lets the regulator write down a network's asset base so consumers do not pay more than necessary.

The draft drew about 30 submissions. Energy Consumers Australia and 13 other groups said it puts 100 per cent of the responsibility for the capital charge on consumers. Chief executive Dr Brendan French says it shifts all the risk from network investors to "mum-and-dad" and small-business customers. The Australian Energy Regulator, which enforces but does not write the rules, also opposes it, saying it carries a risk of consumer harm. It says it would have limited power to reject compliant proposals, doubts that networks would hold back price rises to avoid triggering defections, and calls the conditions for the write-down power unworkable. It points to recent reviews in which networks proposed large accelerated depreciation that would have significantly raised bills if approved.

The industry sees it differently. Dominic Adams of Energy Networks Australia likens it to four friends signing a long share-house lease, two leaving, and the rest being unable to find new tenants. The industry backs parts of the draft but opposes the write-down power because of the uncertainty. He notes that two years ago Victorian residential gas demand looked set to fall quickly, yet with an election looming a new government could set a very different gas policy.

That election is where the fight is sharpest. The Australian Gas Infrastructure Group, a member of Energy Networks Australia, has lobbied to overturn the Victorian bans. A leaked AGIG document sent to Victorian government members says current modelling shows price increases of $100 a year per household because of government policies, and warns in bold that this will become public and be politically unpopular. Environment Victoria chief executive Jono Lanauze calls the modelling questionable and says the document effectively threatens a misinformation campaign. An AGIG spokesperson says it was produced at the government's request and reflects analysis shared with customers in the regulatory review. Premier Ben Carroll has resisted the pressure, while Liberal leader Jess Wilson has promised to repeal the ban. The AEMC's final rule is due in December.