Households to pay full cost for their own new gas connections under proposed new rule

Households across parts of Australia will soon have to pay up front if they want a new gas connection to their home if a draft rule to protect consumers from the gas death spiral is implemented.

The rule would mean the rest of Australia’s east coast will follow the Victorian model from July 2026, which stopped gas companies from socialising the cost of new connections across their customers this year.

The Australian Energy Market Commission (AEMC) wants retail customers to pay a “cost reflective” charge for installing a gas connection to their home instead of this fee being spread across existing customers.

“This would ensure newly connecting customers receive the right price signals to enable them to make more informed and efficient choices about their energy sources and whether to connect to the gas network,” the AEMC draft rule says. 

That fee could be hefty and very effective at preventing new connections, if the Victorian example is a guide. 

In Victoria, the same rule went live at the start of 2025 under the state’s Gas Substitution Roadmap. 

New connections cost $2,000, gas distributor Australian Gas Networks says on its website.  It’s already had a noticeable impact on new connections, which slumped in the first quarter of 2025.

Gas connection requests halved in the first quarter, according to distribution network service provider (DNSP) Ausnet Services. 

But where the Victorian government’s rule is also aimed at emissions reduction and diverting scarce gas supplies to industry over households, the AEMC is more concerned with equity. 

Residential gas use is already declining as Australians switch to electric appliances supported by rooftop solar and batteries.

The Australian Energy Market Operator’s (AEMO) latest Gas Statement of Opportunities (GSOO) expects residential and commercial demand to fall by around 70 per cent over the next 20 years, with a 30 per cent reduction projected in the next 10 years.

The risk is that a smaller and smaller number of customers who can’t easily quit gas, such as renters and apartment dwellers, will be left carrying the cost of operating and maintaining aging networks. 

That may accelerate the decline in demand as customers who can quit gas, do so earlier than they would have. 

“Continuing to add new connection costs to the capital base that must then be recovered from customers would exacerbate the risk faced by customers who face barriers to leave the network,” the draft rule says.

“It would also increase the risks faced by distributors, who are seeking to accelerate the recovery of their capital base (including connection assets) through accelerated depreciation, which would place additional pressure on prices, increasing the risk for all customers.”

The risk is very real. 

In August, a regional energy utility told customers in 10 Victorian towns it will shut off the gas network by the end of 2026 because it can’t afford to keep running it. 

Solstice Energy told about 1100 customers in Terang, Maldon, Marong, Heathcote, Robinvale, Swan Hill, Kerang, Nathalia, Orbost and Lakes Entrance that it will help them to go all-electric or switch to bottled gas because it couldn’t keep raising prices.

Making the people who want gas connections pay for it up front will protect households which can’t easily get off gas from bearing the cost of new connections, said AEMC chair Anna Collyer.

“The existing approach was designed for growing networks, but it’s no longer fit for purpose in a context where gas demand is projected to decline,” she said in a statement. 

“Our preferable draft rule proposes ensuring that the people who benefit from new connections are the ones who pay for them while protecting existing customers from increased network costs.”

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