EUAA Submission: Gas Distribution Networks – Connection & Permanent Abolishment Charges Rule Change
Emily Wood | July 9, 2025
With declining gas connections due to electrification, this proposed rule change looks at new connections funding 100% up front and disconnections being charged real disconnection costs. Without these, there is the potential that exiting consumers leave residual costs that remaining consumers will need to pay.
Submission excerpt:
‘…We agree with the way the Commission has presented the issues facing gas networks and their consumers. Network assets were built on a regulatory framework designed to support increased gas consumption to improve asset utilisation and put downward pressure on tariffs. Under the so-called ‘regulatory compact’, network owners believed that framework gives them the right to recover, from consumers, return on and of the prudent and efficient capex and opex approved by the AER for the technical life of the assets. Based on this AER approval, consumers implicitly promised to pay that return on and of capital. However, consumers are now changing their minds due to a combination of personal decisions and responding to Government policies designed to reduce gas consumption.
These consumers who are leaving the network are saying they do not want to be part of the compact and implicitly do not want to pay the full cost of providing the service they have been using. They want the mortgage discharged early and seem to expect the bank’s shareholders or other bank customers to bear the cost of early termination. Networks are realising that there is political and regulatory risk that they do not think has been reflected in historical WACCs. Networks want the compact to continue via existing consumers paying as much as they can e.g. though accelerated depreciation and cost reflective abolishment fees, before they leave. So, do those customers who are remaining connected who do not want to be left to pay for the other customers’ early termination.
In any debate about ‘who pays’, concepts of efficiency and equity are proffered to support particular approaches, though a definition of equity seems very much in the eye of the beholder. Our approach starts with looking at two related time periods…’
Please download attached document to read the full submission.
