Submission to the AER Review of Gas Distribution Network Reference Tariff Variation Mechanism & Declining Block Tariffs

PIAC provided a response to the Australian Energy Regulator’s Review of Gas Distribution Network Reference Tariff Variation Mechanism & Declining Block Tariffs Issues Paper (the Paper).

Our response sought to bring a more holistic view of national gas laws, regulations and policies to the Paper in relation to the ongoing energy transition and electrification that will necessarily require the decommissioning of the gas network. 

We agreed that the existing regulations of gas businesses (including the tariff variation mechanism and tariff structures) are not consistent with jurisdictional policies, climate change policies and a contemporary understanding of what will be required to efficiently transition and decarbonise the energy system. However, we argued that isolated changes to the tariff structures and tariff variation mechanisms are unlikely to deliver the impact intended.

We provided recommendations for more comprehensive and effective ways to reduce gas use and reduce the risks and impacts of efficient electrification. These included:

  • Remove incentives for gas network businesses to increase new gas connections and replace gas appliances. This should include changes to monitoring and performance frameworks which focus on increasing gas demand and usage.

  • Clearly signal to gas businesses that future new investments (such as network conversions and augmentations to accommodate distributed hydrogen to households) are at their own risk and cost.

  • Implement reforms to allow businesses to refuse new gas connections.

  • Commit to protections for consumers to shield them from gas network asset risk they cannot manage.

  • Encourage or require gas businesses to identify areas of declining demand or ‘inefficient’ network utilisation as a basis for managed network retreat with sufficient signals to consumers and governments.

  • Implement strong standards regarding the advertising and marketing of gas and gas appliances, requiring them to be accurate (particularly in relation to relative cost, efficiency and emissions intensity). This should also include central provision of consistent information on the cost, emissions and health impacts of gas appliances.

  • More robust, accelerated reforms of building and appliance efficiency standards and programs to support efficiency improvements.

  • Enabling and providing targeted assistance to consumers experiencing vulnerability. This should include encouraging gas businesses to direct budgets for innovation, marketing (such as those currently used to subsidise new gas appliances) and demand management, towards supporting those consumers to efficiently disconnect from gas.

  • Consider measures to support the right down gas network business assets

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