NSW gas bills set to fall $96 a year, as AER rules on network pricing

NSW energy consumers could be paying nearly $100 a year less for their gas bills, after the Australian Energy Regulator issued its final decision for Jemena Gas Networks, lowering their network charges almost 15 per cent more than Jemena, itself, had proposed.

AER chair Paula Conboy said the decision would result in lower gas bills for customers on JGN’s network, with the average annual gas bill expected to fall by around $96 for residential customers in 2015-16, and continue to fall over the following three years, before a small increase in 2019-20.

Jemena, which distributes gas to 1.2 million NSW households and businesses, had in March proposed changes to its pricing structure it said would save residential customers up to 40 per cent of the network part of their gas bill.

The proposal was welcomed by the NSW government as an endorsement of its plans to sell of the state’s electricity assets, declaring it proof positive that privately owned energy networks offered consumers a better service.

It was not quite so well received by the AER, however, which reiterated concerns that rising wholesale gas prices could undercut any retail savings customers might gain.

Instead, the AER’s final decision – which sets the revenue that will inform JGN’s charges over the next five years – will introduce a different rate of return and capital expenditure that will result in a 14.4 per cent further cut in the network charges, starting July 01.

“The perceptions of risk which increased during the global financial crisis, when the AER made its last determination, are now decreasing. This means that the lower cost of capital for debt and equity translate into the lower financing costs necessary to attract efficient investment,” the regulator said.

While the final decision allows greater amounts for operating and capital expenditure compared to what the AER provided for in the draft, the rate of return on capital is lower, the decision said.

“Our final decision will place downward pressure on bills during the 2015–20 period as distribution charges decrease,” said Conboy in a statement on Wednesday.

“However, the wholesale gas price is forecast to increase over the next few years which makes price predictions difficult.”

“The AER expects that consumers should only pay what is necessary for an efficient gas distribution service. Consumers that shop around after 1 July may find a better offer that reflects these efficient prices.”