Issue date
AER reference
NR 11/23

The Australian Energy Regulator (AER) has published its final decisions on the 2023-28 gas access arrangements for the three Victorian gas distribution networks, AusNet Gas Services, Australian Gas Networks and Multinet Gas Networks, for the next five years.

Regulated gas networks must periodically apply to the AER for a ruling on what services they will provide and how much they will charge for doing so. The AER’s decisions outline the expected revenues and respective tariff structures for each gas distributor.

AER Chair Ms Clare Savage says the regulator has carefully reviewed the proposals put forward by distributors and its final decisions highlight the important issues of cost, equity and safety in the context of the transition to net zero emissions.

“In making our decision, we carefully considered the possible future decline of natural gas demand and potential safety concerns if unused gas assets remain in place,” Ms Savage said.

“As fewer customers seek connection to the network and usage by remaining customers falls, the ongoing costs of maintaining the network will be shared by a smaller number of customers over time.

“It is important that we start taking small steps now to manage the equitable recovery of those costs from what may be a declining, and sometimes vulnerable, customer base over time,” Ms Savage said.

The final decisions allow for a small start to accelerated depreciation of the networks. This balances recovery of asset costs between current customers, while the customer base is still relatively high, and a potentially smaller number of customers in the future.

Ms Savage said the AER has also chosen to narrow the price gap between temporary and permanent gas disconnection services by setting a charge of $220 for the disconnecting consumer, with the remaining costs of the permanent gas disconnection service being recovered through the networks’ haulage tariffs which are spread across all gas consumers.

“Socialising costs in this way helps to address the safety risk of leaving ‘live’ but unused assets in place by removing the incentive for customers seeking to avoid the high cost of permanent abolishment when a connection is no longer required.

“However, a socialised abolishment cost model is only an interim measure to address this public safety issue. Further work is required across the sector to develop a more sustainable solution. In the event that gas demand declines and the number of customers leaving the network increases, there will be upwards pressure on prices for remaining customers.

The economic regulatory framework is flexible. It allows the AER to take steps in these decisions over the next five years to manage the risk of current demand uncertainty. In the longer term, it may be that gas access arrangement reviews are not enough, or not the best avenue, to deal with these safety and equity issues.

“There is an important role for governments to continue to set clear policy direction on the future use of gas in order to facilitate a safe, reliable and affordable transition and for governments, networks, market bodies and investors to develop a long term strategy for taking gas networks forward,” Ms Savage said.

Note to editors

The AER’s final decisions on expected revenues for the 2023–28 period are ($nominal):

  • AusNet: $1,270.3 million, or $78.7 million (5.8%) less than in their revised proposal
  • AGN: $1,362.1 million, or $86.5 million (6.8%) higher than in their revised proposal
  • MGN: $1,154.9 million, or $43.6 million (3.9%) higher than their revised proposal

For illustrative purposes, and holding other contributions to energy bills (wholesale, transmission and retail costs) constant, the estimated impacts on the average annual gas bill for a Victorian customer are ($nominal):

  • AusNet: Residential: Ave. +$22 (1.3%) p.a.; Small business: Ave +$34 (0.3%) p.a.
  • AGN: Residential: Ave. +$13 (0.7%) p.a.; Small business: Ave. +$43 (0.5%) p.a.
  • MGN: Residential: Ave. +$21 (1.2%) p.a.; Small business: Ave. +$58 (0.7%) p.a.