Households and businesses wishing to quit gas should pay the full cost of abolishing their network connection, the Australian energy market rule maker says, describing it as the “fairest” approach to mass electrification and avoiding a gas network death spiral.
But there must also be a strict and straightforward framework governing those costs, the AEMC says, including standard offers for basic connection removals reflecting “the actual cost” of the service, and state government support for consumers who can’t afford to pay it.
A draft determination from the Australian Energy Market Commission (AEMC) on Thursday has proposed rules to establish Australia’s first national framework for customers who want to stop gas supply to their property, including associated costs.
Action from the AEMC was requested by the Justice and Equity Centre (JEC), which argues that the current lack of any national framework around gas disconnection services is causing “regulatory uncertainty, inconsistent regulatory decisions and issues of inefficiency, inequitable cost sharing and potential risks to safety.
“To the extent current arrangements for disconnection disincentivise or delay electrification, there are also likely to be material emissions implications,” the rule change request says.
As the JEC notes in its request to the AEMC, its call for disconnection rules would complement rule for new gas connections that are being requested by the Energy Consumer Association (ECA), on which Renew Economy has reported here and here.
But with the huge push to electrification, driven by cheap rooftop solar and federal government-subsidised home batteries, the thorny topic of who pays what for gas disconnection needs urgent attention.
Currently, customers are required to pay to permanently disconnect their properties from the gas network, a procedure called abolishment, but the price of this service has been reported to vary wildly from one gas network provider to the next and from state to state.
As Renew Economy and its sister site One Step Off The Grid have reported, some households choosing to go all-electric and seeking to cut ties to the gas network have been advised of fees from around $1,000 to as high as $2,500.
Further, debate has arisen over whether or not it is the right thing to hit customers with a bill for hundreds of dollars, sometimes much more, for quitting the use of a fossil fuel, when both science and policy calls for rapid decarbonisation of everything, at every level.
A key concern is that the cost of abolishment will act as a major disincentive for many households to go electric, while others will make the choice to cap their gas supply at the meter – a temporary measure that costs much less but raises concerns around safety and emissions, and kicks the can down the road on full abolishment cost.
For its part, the AEMC proposes to clear up the confusion, first by declaring it should be customers who pay the full costs of gas network abolishment – or state governments, if customers can’t afford it; and second by setting some firm rules around what those costs are and how they are set.
In Victoria, where the state Labor government is part-way through an ambitious policy road-map to phase gas out of homes, a mandated upfront cost of $220 has been set for connection abolishment, with the remainder of costs incurred above that amount to be shared between all customers.
The AEMC does not appear to have a price in mind at this stage, but says it will seek to settle on a “standard offer” for basic connection removals that are simple and straightforward, reflecting “the actual cost of removing their connection (typically involving capping pipes and making the site safe).”
The AEMC says it will also seek clarity around what costs can be included in removing a customer’s gas connection, and the different service levels for complex situations, such as multi-unit buildings or where traffic control may be needed.
This is not likely to satisfy those electrification end energy efficiency advocates who argue that customers should pay exactly $0 to get gas out of their homes.
As Tim Forcey and Alan Pears write here on Renew Economy, “to assist stated aims of reducing fossil gas use, governments have already organised renewable energy credits and rebates for heat pumps. Why give with one hand and then take with the other?”
“Householders should not have to face a conspicuous mandated cost barrier standing in the way of having cleaner, safer, and more affordable homes,” they aruge.
AEMC chair, Anna Collyer, acknowledges that setting an upfront cost for gas abolishment might, indeed, act as “a barrier for some households wanting to electrify.”
“Some may simply stop their gas service rather than pay for proper abolishment, even when they have no plans to use gas again. This may create more dormant connections that could become a safety risk over time,” Collyer said in a statement on Thursday.
But, Collyer adds, “our analysis found that making a customer who is leaving the gas network pay the real cost of disconnection is more equitable than spreading these costs across remaining customers, who are often those with fewer choices about their energy supply.
“Networks continue to have obligations to maintain safety standards, and the costs of managing dormant connections may be spread across all remaining customers.
“That’s why we’re encouraging state governments to consider targeted support programs for households that need help with these transition costs.”
The AEMC is seeking feedback on the draft determination and proposed rules until December 11, 2025. A final decision is expected early next year and, if adopted, the new framework would be phased in from 2027.
