Gas customers will stop subsidising the cost of their electrified neighbours quitting the network over the next six years, as rules to make abolishments “cost-reflective” come in.
The headline change in the Australian Energy Market Commission’s (AEMC) final rules for handling the death spiral of gas networks will require consumers wanting to abolish gas connections entirely – removing the meter and ripping out all of the piping connecting a property to the network – to pay a “cost-reflective” rate.
Currently, some states cap this fee which means the rest of the cost of digging up pipes and removing meters is spread across the remaining customers in a gas network.
The other key change is that distributors will need to actively tell their customers how to quit gas, via term explanations and model costs on their websites.
The need for rules to manage the decline is becoming urgent.
Residential and commercial gas use is rapidly declining due to a combination of government policies, such as Victoria’s Gas Substitution Roadmap, and household electrification as rebates and high fossil fuel bills encourage people to make the switch.
The Australian Energy Market Operator’s (AEMO) most recent Gas Statement of Opportunities (GSOO) expects residential and commercial demand to fall by 80 per cent over the next two decades on the east coast.
The AEMC is urging governments to get their policy house in order, saying a plan to decommission gas networks will be more efficient than an ad hoc approach to disconnections.
The new rule also sets guardrails for how distributors price connection abolishments.
The new rule set up a platform for governments to plan for the decline of gas, and leaves the door open for governments to step into the gap between the cost of abolishment and what they want customers to pay.
It’s now up to those governments to put in place a full suite of electrification and energy transition policies, says Douglas McCloskey, a director at the Justice and Equity Centre which first proposed the rule.
“A key element must be subsidising the cost of getting off gas, particularly for households who would otherwise struggle to afford it,” he said in a statement.
“This rule change lays a foundation for efficient and safe disconnections from the gas network. It means people disconnecting from gas will pay the minimum cost necessary to do so safely.
“And people remaining on the network – which includes renters and people who can’t afford the upfront costs of switching – won’t be left paying unfair costs for other user’s disconnections.”
The new rule is one of six requests made by the Justice and Equity Centre and Energy Consumers Australia to manage the decline of gas use so it’s fair.
Price caps and high fees
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.
Until now, Victoria and, from July this year, New South Wales (NSW), set a cap of $220 and $250-260 respectively on gas abolishments, to encourage households to get rid of all of the gas infrastructure next to their house for safety purposes. The remainder of the cost of doing that is socialised across remaining customers on the network.
The AEMC says those rules will hold until they come to the end of their regulatory period – 2029 for Victoria and 2031 for NSW.
For the ACT and South Australia, which are firming up their own rules this year, that will be 2032.
“The AER [Australian Energy Regulator] has acknowledged that the approach to socialise a portion of the abolishment costs, where a customer chooses to abolish their connection, would be unsustainable in the future as the number of customers leaving the gas network and abolishing their connections increases,” the final rule says.
“Without change to the regulatory framework, the costs of abolishment, in addition to the costs of operating and maintaining the network, would be shared among a declining customer base.”
The AEMC says much like people wanting to connect gas to their homes, those wanting to get rid of it should pay a fair price for doing so as well.
AEMC chair Anna Collyer says the rules provide a pathway for people to quit gas “on fair terms” while making sure those left behind aren’t carrying the cost.
“These rules do not create a barrier for customers who want to switch away from gas.
“Customers can make the switch and then decide whether to disconnect or abolish their gas connection based on what is right for their circumstances.”
For elements such as information requirements, these will start in October this year for distributors and roll out in stages after that.
