Electrified homes are paying for the gas death spiral

Recently the Australian Energy Regulator (AER) announced that Victorian households directly and individually will be hit with a fee of $220 upon leaving the gas grid. The AER claimed this fee “supports” Victorian gas consumers. We ask, why are we putting up barriers for people who want to electrify their homes?

Granted, the gas industry asked the AER to levy $950, so getting kicked in the shin is better than a blow to the head.

But even a fee of $220 (with the balance of the gas-grid decommissioning costs to be collected via higher gas prices), if this is what degasification “support” looks like, we don’t want to see what non-support looks like.

Electrifying tide meets the wild west

In tens of thousands of homes across Australia, people are electrifying. They’re saving money and reducing environmental impact by turning on reverse-cycle air conditioners (heat pumps) for space and water heating, and turning off their polluting gas cooktops for the last time.

When a household stops burning gas, you would think they would also stop getting a gas bill. But no.

As long as your home is physically connected to the gas grid, you will be hit with a daily connection or “service” charge, which can be more than $1/day (and rising). If you have fully electrified your home, this is clearly a fee for no actual service.

You can ring up your gas retailer and say “I don’t use gas anymore; stop sending me a bill,” but here’s where the story takes on characteristics of a wild west cowboy film.

Years ago, if you wanted the gas meter off your property, the gas company would happily do that and often at no charge to you personally.

Back then, the industry wasn’t facing an existential crisis. They figured the only reason you would want the gas meter removed was because you were renovating your home.

The old gas meter was in the way of the project, and after the renovation was finished, sure enough you or your builder would ring up to have the service restored. Normal programming could recommence.

But what started as a dribble is now a tide. Electrified home after electrified home began inquiring about gas meter removal and funny enough, once the gas meter was gone, the gas suppliers never heard from these people again. What was going on?

Gas industry facing its death spiral

Eventually the industry twigged that the theorised gas-grid death-spiral was underway. Endless profits were no longer assured. What to do?

To slow things down a bit, one tactic has been to hit newly electrified homes with a “departure tax” similar to the seven hundred lempiras one pays when flying out of Tegucigalpa. Except that it is a lot more than seven hundred lempiras!

How did we get here? Let us take a tour around eastern Australia.

Currently in Canberra, Evoenergy charges $750.20 for gas “disconnection”, although even worse, a member at the Facebook group “My Efficient Electric Home” was quoted $1496.

In New South Wales, electrification advocate Saul Griffith famously paid $1151.70 to watch a ute drive away with his gas meter in tow, as have others in that state.

Not to be outdone, in South Australia it was deemed fair that a home be socked for $2,500.

In Victoria the charges haven’t been quite so egregious. Fees have ranged from as low as $0 for a number of homes, including a family member.

In another case, a plumber disconnected the gas meter which the householder then personally delivered to “The Meter Centre.” Meanwhile out in the street, the gas distributor undertook works to fully “abolish” at no charge.

But many homes have not been so lucky. A home in the Australian Gas Networks (AGN) distribution area of Melbourne was quoted $122.10 for either disconnection or abolishment (same price).

And then in contrast going up an order of magnitude, the gas distributor servicing the western side of Melbourne decided that to make an unused meter disappear, a fee of around $1,000 would suit them nicely.

AER slugs electrified homes with Great Barrier Fee

It was at this point that the Australian Energy Regulator (AER) stepped in, declaring that a so-called “split-the-difference” fee of $220 will be levied against all electrifying Victorian households. Eventually a similar fee is likely to apply in other jurisdictions.

Separately, the AER will allow network operators to charge an additional $700 or so to cover the full cost of removing the meter and pipes.

But rather than individual households being expected to pay these additional charges at the moment they leave the gas grid, the AER declared these costs will be “socialised”, meaning spread over the gas bills of all households that remain connected to gas.

This charge will grow dramatically and ultimately become untenable as fewer and fewer gas-burning households are left to foot the bill.

It is unclear why the AER opted to charge individual departing households a fee at all, rather than spreading the entirety of the costs over the remaining gas users. The opinion of one policy official was that “some” households would not have a problem paying the “small $220 fee”.

There is no doubt that it can cost a significant amount of money for qualified persons to cap off or remove a hazardous gas meter, or to fully isolate and decommission corroding and potentially leaky gas pipes.

There is no doubt we will see a lot of this happening as the count of newly electrified homes begins to number into the millions.

There is also no doubt that the generally foreign-owned gas-distribution businesses will be paid for the costs they incur (plus profit) to wind down their services. Nationally this could exceed $4 billion.

What is in doubt is whether the regulators will require the gas distributors to wind up in an optimised least-cost way, or to proceed in an ad hoc most expensive way. (* See John’s story below.)

And now we see what’s also in doubt is the amount of a fair and equitable fee, if any, that individual households should face at the moment they leave the gas grid.

Our view is that homes should not be individually slugged for any fee greater than $0. 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?

Let us compare this fee-on-departure arrangement with other common services. Do you pay a fee, for example, when you change a phone service or move your superannuation account?

Like the gas suppliers, these other businesses collect fees all along, but unlike the gas suppliers, don’t have the cheek and clout to hit you baby one last time.

When eventually we ditch our petrol cars, will the oil industry mandate that we chip in $220 to the local BP servo to rip out its pumps?

Winding up the gas grid at least cost

We need an approach to disconnections that is consistent with the expectation there will be an ongoing migration off the gas network.

As this progresses a coordinated approach to disconnections would minimise everyone’s costs, by taking a  street-by-street or suburb-by-suburb approach, rather than treating every electrifying household piecemeal.

Unavoidable disconnection costs should then be spread not across a dwindling body of gas consumers but more broadly and fairly across all gas and electricity consumers.

This would dilute the impact on any individual household, would not individually penalise those seeking to electrify, and would recognise that we are decarbonising the whole energy system, not just gas.

Householders should not have to face a conspicuous mandated cost barrier standing in the way of having cleaner, safer, and more affordable homes.

(*) John’s home had been all-electric for ten years. But still the gas meter sat dormant in his garden, until the other day when the gas company contractors arrived to fit a new meter. After a lengthy period where John stood in his drive-way jaw-boning the contractors, they eventually left with two gas meters in their boot instead of just the one. The cost of the contractor’s re-directed visit was paid not by John, but rather by all the Victorian households that haven’t yet left the gas grid.

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Tim Forcey is a home energy consultant and researcher and co-founder of Facebook page My Efficient Electric Home.

Alan Pears, AM, is one of Australia’s best-regarded sustainability experts. He is a senior industry fellow at RMIT University, advises a number of industry and community organisations and works as a consultant.

This article was originally published by The Fifth Estate. Republished here with permission. Read the original article here.