In May 2024, we engaged Dynamic Analysis to develop a long-term model that provides insight into the direction of network prices for Jemena’s gas customers in New South Wales.

The model reflects the ‘step change’ scenario in the 2024 Integrated System Plan (ISP) which forecasts a 72% decline in gas consumption for residential and commercial customers by 2043.

The analysis finds:

• Gas prices will spiral up – Based on our assumptions, we forecast that gas bills will spiral irrespective of policy settings or expenditure decisions made by Jemena. We found that network gas bills (in today’s dollars) would double by 2040 and be 5 times higher for remaining residential and commercial customers by 2055. The regulatory asset base (RAB) would still be $2.3 billion by 2055, leading to a high risk of asset stranding.
• Minimising new expenditure mitigates risks – If Jemena focused on minimising new discretionary expenditure, this would partially decrease price pressures. More importantly it would significantly reduce asset stranding risks. Figure 1 shows that a typical residential customer in 2055 would pay $130 less than under the base scenario. Figure 2 shows that the RAB would be about $500 million lower by 2055. Our modelling is based on banning new connections, avoiding investment in renewable gas, and reducing metering replacements.
• Accelerated depreciation is not a sustainable solution – Accelerating depreciation will result in a typical customer paying about $130 more over the 2026-30 period as seen in Figure 3. But this only leads to a 10% reduction in the RAB by 2055 from $2.3 billion to $2.1 billion.

This report has been produced by Dynamic Analysis on behalf of Energy Consumers Australia. It focuses on the NSW gas network operated by Jemena. While the report has broader implications, we note that there are idiosyncrasies in each state when it comes to gas networks.