Major change to gas connection fees

THE Australian Energy Market Commission (AEMC) will require newly connecting retail gas customers to pay the upfront cost of their connection, often more than $2000, moving away from the old system where these costs were often shared across all customers.

The recent final determination responds to a rule change request from Energy Consumers Australia and addresses challenges created by declining gas demand projected by the Australian Energy Market Operator.

“The rule aligns with the AEMC’s strategic narrative, which focuses on how the gas regulatory framework can best support consumers and the electricity system during the transition to net-zero emissions,” the AEMC said in a statement.

Under the old framework, when a new customer connected to the gas network, the connection costs were typically added to the gas distributors’ capital base and recovered from consumers over time.

However, as the outlook for residential and commercial gas use becomes increasingly uncertain, the costs of operating and maintaining the network may be spread across lower demand, meaning remaining customers increasingly bear the cost of connections that may not be fully paid off.

AEMC Chair Anna Collyer said the changes will protect lower-income households, renters and apartment dwellers and small and medium businesses – who often face barriers to electrification – from bearing the costs of new connections as other users decide to leave the network.

“The existing approach was designed for growing networks, but it’s no longer fit for purpose in a context where the outlook for gas demand is uncertain and is projected to decline, Ms Collyer said.

“Our final rule ensures those who benefit from new connections pay for them, while protecting existing customers from increased network costs.

“We’re pleased this beneficiary-pays approach achieved broad stakeholder support.”

The final rule is supported by AEMO’s Gas Statement of Opportunities and distributors’ demand forecasts, which projects distribution-connected residential and commercial demand will fall.
AEMO projects this will be by around 30 percent in the next 10 years and 70 percent over 20 years.

“This is about giving customers clear, upfront price signals so they can make informed decisions about their energy choices,” Ms Collyer said.

“Customers will still be able to connect to gas if they choose to, they’ll just pay the true cost of connecting upfront rather than having those costs spread across all gas users.

“This approach was supported by stakeholders because it protects consumers who may find it difficult to leave the gas network.”

The rule will apply to new retail customers connecting to the main gas distribution networks in the Australian Capital Territory, New South Wales, South Australia and some Queensland gas distribution networks from 1 October 2026.

Rewiring Australia has welcomed the decision, which it has argued has been rewarding developers at the expense of families.

“For too long, developers have been imposing higher bills and more emissions on people by building gas-connected homes just because it saved them a bit of money,” said Rewiring Australia CEO Francis Vierboom.

“This announcement fixes the economics.

“We can run our homes on electricity and we hope it marks the end of new gas connections nationwide.

“When you’re in a hole, stop digging.”

The latest figures from the Australian Energy Regulator show that gas has already slowed down, with only one new gas connection for every five new electricity connections across the country, and home gas usage declining by 15 percent last year according to the ABS.

“We need to focus on helping more families and households electrify their homes so that they can benefit from cheaper and cleaner energy, and we need to do this urgently so that renters, and low income households aren’t left behind and left stuck on gas,” Francis Vierboom said.