Submission to Jemena Gas Networks’ Draft 2020 Plan

PIAC lodged a submission to Jemena Gas Networks’ Draft 2020 Plan. The document is part of Jemena’s early engagement to inform its formal proposal to the AER for determining its gas network prices for the 2020-25 period.

PIAC refutes any claims that gas is a ‘fuel of choice’, and therefore subject to competitive pressures from electricity (This has been an argument raised by industry to justify lessening regulatory oversight). For many consumers this is simply not the case. For some consumers, the cost of changing household appliances from gas to electricity may be too high, while for renters it is a decision they cannot make.

PIAC commends the consumer engagement which Jemena has conducted in the lead up to preparing its initial proposal for the 2020-25 access arrangement. This has included their use of its customer council, multiple rounds of deliberative workshops with consumers and targeted workshops more select groups of consumers – in particular the workshops held entirely in language with the support of the Ethnic Communities Council of NSW.

While PIAC supports Jemena’s intent to minimise its capital expenditure through the use of volume boundary metering for new high-rise sites with centralised hot-water systems, at this stage it is not clear to PIAC whether the overall consumer benefits outweigh the potential issues that this may raise. This is because the current frameworks for consumer protections, efficient cost recovery and access to choice and competition, are not well developed for consumers within the resulting embedded networks.

PIAC considers as a foundational principle that risk should be allocated so that those exposed to risks to have the ability and incentive to manage them. Jemena’s proposal to use accelerated depreciation for new network investments to address potential future asset stranding risk is a prime example of where this principle can be applied. However, it represents a transfer between consumers in the short-term and Jemena’s shareholders in the longer term. We urge Jemena to think outside the current regulatory framework and consider whether it is reasonable to expect consumers to wear this risk.