Gas network death spiral: Pressure mounts to protect consumers from cost of stranded assets

Pressure is mounting on the energy market rule maker to shield consumers from carrying the cost of an unregulated and mismanaged gas network death spiral.

Energy Consumers Australia is proposing four rule changes to rein in gas networks’ attempts to pump current customers for the future cost of redundant infrastructure.

The proposed new rules would require gas networks to identify areas likely to disconnect from the residential gas network and to add declining use as a criteria for deciding whether a capital investment should happen.

Suggested reforms also call for a tightening of accelerated depreciation rules so consumers aren’t charged if networks don’t have a plan in place to reduce the risk, and a plan to make users pay up front for new connections so the cost isn’t borne by existing consumers.

The goal is to prevent small business and consumers across Australia being left carrying the cost of stranded gas networks.

The ECA proposal notes that currently, consumers are exposed to future asset risk while also paying for accelerated depreciation on those assets.

Electricity network companies must justify their spending via tests such as the RIT for distribution and transmission, but there is no gas equivalent to share or even develop plans showing how their systems will be used or needed in future.

Gas network use is already declining, something AusNet admitted to the Australian Energy Regulator last year.

But despite that risk, gas distributors are still using regulatory processes to continue spending on their networks and asking customers to pay for the risk that these new assets will also be stranded.

Victoria capped disconnection fees in 2023 and requires new connections to be paid for up front. NSW is planning to have a gas roadmap similar to Victoria’s in place by 2026.

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