Going all-electric is a huge benefit to consumers, particularly in terms of cost and emissions savings.
It tends to better utilise the electricity network, so the fully electric household (with an electric car) puts downward pressure on electricity prices for its neighbours.
But the transition to all-electric homes and businesses needs to be delivered in a way that benefits all consumers, without unfairly penalising people who face greater barriers to electrification, and will thus be left using gas for longer.
These consumers will still need affordable, reliable and safe access to gas, which requires us to tackle a few key questions, significantly: how to responsibly wind down the gas distribution network.
From gas to electric: managing the shift
In Australia today, more than 90% of the revenue earned by gas distribution networks comes from households. And households with low incomes, those who rent, and those who live in apartments have a much harder time of going all electric, due to upfront costs, or inability to make changes themselves.
The challenge of how to responsibly wind down the gas distribution network, without placing undue costs on households or small businesses, is one of the more vexing aspects of the energy transition.
Our proposed solution
The current National Gas Rules are not fit for purpose in the context of a declining gas market. So we’ve identified four necessary rule changes to ensure a fairer and more affordable transition for consumers:
- Requiring new customers pay the upfront costs of connecting to the gas network
- Introducing new gas network planning requirements
- Making accelerated depreciation contingent on greater consumer protection
- Introducing new criteria to limit capital expenditure
Find out more at the AEMC’s website.
These rule changes won’t solve the whole challenge of the future of the gas network, but they will make it more solvable.
How changing the rules can help consumers
Our rule change proposals would stop making the problem worse by reducing additional, unnecessary capital to gas networks. One of our proposed changes would require new customers connecting to the gas network to pay the upfront costs of connection themselves.
Connection costs are currently socialised – so property developers have little reason not to include a gas connection for a new building as it costs them little or nothing to do so.
Our proposal to amend the criteria for approving new capital expenditure would also place additional scrutiny on gas networks’ requests for expenditure, and ensure any new spending is absolutely necessary in the context of a declining network.
The rule changes would also require gas distribution networks to make long-term plans about their network, including identifying areas where many disconnections are happening now and are likely to happen in the future – and where new spending might be required longer-term.
Such information can help governments, community leaders and electricity networks identify opportunities for “strategic decommissioning” (sometimes called “pruning”) of the gas network.
Finally, one of the rule changes would address “accelerated depreciation,” a practice whereby the Australian Energy Regulator has allowed gas distribution networks to require consumers today to pay more for the gas distribution network to reduce the costs network investors might face later.
Together, these rule changes can help play a fundamental role in ensuring the transition to electrification is fair and just for all Australian homes and businesses.