Consumer engagement drives Sydney gas network charges draft decision: AER

Gas distribution charges in the greater Sydney, Hunter Valley, Illawarra and other regional areas are likely to fall based on the Australian Energy Regulator’s draft decision on Jemena Gas Networks’ (JGN) 2020–25 revenues.

AER Chair Clare Savage said that ensuring customers pay no more than necessary for safe and reliable gas services is the cornerstone of AER revenue decisions:

“JGN’s customers said that energy affordability is a key concern and JGN responded with a revenue proposal that puts downward pressure on pipeline charges and customer bills.”

JGN’s high quality consumer engagement helped deliver a well-informed initial proposal and the draft decision allows JGN to recover $2,157.6 million from customers over the five‑year period from 1 July 2020.

If the AER’s draft decision is implemented, it is estimated that average annual retail gas bills for residential customers will reduce by between $34 (coastal areas) and $50 (regional areas), and $179 for small business customers, by the end of the 2020–25 period.

The key difference in dollar terms between JGN’s proposal and this draft decision is the movements in the rate of return allowed on capital.

There are still some disparities between JGN’s proposal and what the AER is willing to accept, particularly in terms of capital expenditure. JGN now has the opportunity to respond to these issues.

Ms Savage also addressed JGN’s proposal to accelerate the depreciation on new pipeline assets – recouping costs from customers more quickly – in the face of possible government action on carbon emissions and research on the potential of hydrogen as a fuel source.  

“JGN has raised issues it believes may affect the economic lives of its pipeline assets but we do not consider there is sufficient evidence to conclude that these issues will result in a significant decline in the utilisation of the network, especially as JGN continues to forecast growth in new connections.

“In addition, while there is still much uncertainty about the viability of hydrogen gas at this stage, we consider it could have a substantial positive impact in the future,” said Savage.

JGN’s share of the retail gas bill for a typical residential customer in its distribution network area is around 41 per cent in coastal areas and 33 per cent in regional areas.

JGN now has the opportunity to consider the AER’s draft decision and submit a revised proposal by 13 January 2020.

Interested stakeholders are invited to make submissions on both the AER’s draft decision and JGN’s revised proposal by 17 February 2020.

The AER will make its final decision by 30 April 2020.

About the AER

The Australian Energy Regulator (AER) works to make all Australian energy customers better off, now and in the future. 

  • We regulate electricity networks and covered gas pipelines, in all jurisdictions except Western Australia. We set the amount of revenue that network businesses can recover from customers for using these networks.
  • We enforce the laws for the National Electricity Market and spot gas markets in southern and eastern Australia. We monitor and report on the conduct of energy businesses and the effectiveness of competition.
  • We protect the interests of household and small business customers by enforcing the Retail Law. Our retail energy market functions cover New South Wales, South Australia, Tasmania, the ACT and Queensland.
  • We drive effective competition where it is feasible and provide effective regulation where it is not. We equip customers to participate effectively, including through our Energy Made Easy website, and protect those who are unable to safeguard their own interests. We use our expertise to inform debate about Australia’s energy future.
Issued date: 
25 November 2019
AER reference: 
NR 30/19
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