The gas death spiral is here: Why “user pays” could create a zombie network 

If you have been listening to recent episodes of Renew Economy podcasts Energy Insiders or SwitchedOn, you will know that the gas “death spiral” is no longer theoretical.

Solstice Energy’s abrupt decision to walk away from ten Victorian towns was not a one-off anomaly – it was a preview of what an unmanaged exit could look like across the state. And as recent reporting shows, communities are already being pushed into costly short-term alternatives. 

South-east Australia is now at a crossroads. The direction is clear: fossil gas must be phased out. Victoria’s Gas Substitution Roadmap has set the destination, and the ban on new gas connections has set the pace. What is missing is a plan for the journey, not just the end point. 

Most current debate focuses on who pays to disconnect. The Australian Energy Market Commission (AEMC) has taken a step forward by ending cross-subsidies for new connections, as reported by RenewEconomy here.

But its proposed “user-pays” model for permanent disconnection risks creating something far worse: a sprawling network of live, unmonitored pipes with no revenue stream, a true “zombie network” fed by thousands of dormant connections. 

A simple price signal will not resolve this. Without a coordinated plan, Victoria risks locking in both higher costs and higher safety risks. 

The Victorian Energy Future Network (VEFN) argues that an orderly retreat requires three things: 

(1) risk-based engineering standards, (2) radical data transparency, and (3) a dedicated Gas Transition Authority. 

The dormant-connection trap 

Under the AEMC’s draft determination, households wanting to permanently abolish their gas service could be charged more than $1,000 for civil works, typically requiring the street to be dug up so the service line can be capped at the main. 

This may be tidy on paper, but it is inefficient and unaffordable in practice. With millions of gas connections across south-east Australia, the cumulative cost would reach into the billions.

What will households do instead? They will simply cancel their retail gas contract and leave the physical connection in the ground. That creates a dormant connection; a live, pressurised service line that is no longer monitored, inspected, or billed. 

Already happening in the ACT 

This is not hypothetical. In the ACT, where electrification is accelerating but abolishment fees remain high, close to 10% of residential connections have already been dormant for more than a year, according to submissions to the AEMC process. 

These dormant assets still sit live in the ground, degrading slowly and creating a growing safety and maintenance burden. As the customer base shrinks, the costs increasingly fall on remaining customers; often renters and lower-income households. 

VEFN supports the risk-based engineering approach proposed by Evoenergy in its submission. Instead of forcing every exiting household to pay for a pavement dig, the default should be a low-cost clamp-and-cap at the meter, which is safe in the medium term.

This buys time until enough households on a street have disconnected for the network operator to perform a single, coordinated decommissioning of the main that VEFN calls “pruning the tree.” 

A price signal is not a plan 

Even if the abolishment charge is set correctly (Level 1), Victoria still lacks Proactive Network Planning (Level 2). 

Key questions remain unanswered: 

• Where are pipes approaching end of life? 

• Where are replacement costs highest? 

• Where is the electricity network already strong enough to take additional load? • Which areas are already on the cusp of mass electrification? 

Without this visibility, regulators cannot assess whether proposals to replace ageing gas mains are prudent investments or misallocated capital that will strand assets within a decade. 

Electricity networks already produce detailed transition plans. Gas networks do not. The result: Victoria is planning a system retirement without the data needed to do it safely. 

Mandatory Gas Distribution System Transition Plans (GTPs) would bring the gas sector into line with electricity and make decommissioning decisions evidence-based.

Breaking the data deadlock 

The biggest barrier to planning is data. Gas networks hold the only comprehensive information on asset condition, service-line geography, and customer status—but rarely publish it at a scale that is useful. 

To fix this, VEFN has proposed a twin-custodian model to the Victorian government. 

Under the proposal, networks would provide three master datasets; asset condition, customer metering, and the link between them, to: 

AEMO (Technical Custodian): Receives raw data to ensure decommissioning does not compromise system safety. 

Essential Services Commission (Transparency Custodian): Publishes anonymised, aggregated data at a street or block level. 

This would enable a public planning portal where local councils and community groups, such as Electrify Boroondara or Geelong Sustainability, could identify streets where the gas network is already nearing natural end-of-life. 

Localised electrification campaigns could then target those neighbourhoods, aligning community action with infrastructure realities. 

The missing piece: A Gas Transition Authority 

Ultimately, neither the Australian Energy Regulator nor the Essential Services Commission can make the whole-of-system decisions required for a managed exit from fossil gas. These decisions are about infrastructure sequencing, equity, safety, and timing. These responsibilities properly sit with government. 

VEFN’s third layer, strategic governance, calls for the creation of a Gas Transition Authority (GTA). 

A GTA would coordinate two very different processes: 

• Gas decommissioning is subtractive: retiring and removing assets 

• Electricity augmentation is additive: building capacity for new load 

These processes operate on different cycles, overseen by different entities. Without coordination, one lags the other, and costs rise for everyone. 

A GTA would provide the policy shield needed for regulators to approve accelerated depreciation or targeted decommissioning in areas where replacement would otherwise lock in stranded assets. 

The Solstice Energy shutdown showed that the market will exit gas whether the state is ready or not; rapidly, and with collateral damage. Victoria has a choice: allow ad-hoc retreat that forces households onto LPG and leaves renters exposed, or build the structures required for an orderly, equitable descent. 

The death spiral is inevitable. Chaos is optional. 

John Godfrey, Victorian Energy Future Network