The Australian Energy Regulator (AER) has released a draft decision on Jemena Gas Networks (JGN) (NSW) gas access arrangement for the period 1 July 2025 to 30 June 2030 (2025–30 period).
Distribution gas networks are required to submit access arrangement proposals to the AER outlining the services they will provide, the tariffs for those services, and other terms and conditions on which the services will be provided to their customers over the next 5 years.
The estimated bill impact of our draft decision for JGN, on the average annual gas bill as it is today, would be:
- a nominal increase of $54 (7%) by 2029–30, or an average of $11 (1.4%) per annum for a residential customer
- a nominal increase of $558 (3.6%) by 2029–30, or an average of $112 (0.7%) per annum for a small business customer.
JGN has prepared its access arrangement proposal at a time of significant uncertainty for the future of gas. While we acknowledge that demand for gas will decline as we move towards net zero emissions targets by 2050, there is uncertainty around how quickly this will happen in New South Wales.
Our draft decision looks to balance the uncertainty of gas demand, with an affordable access arrangement that provides for a safe, reliable, and secure service for an ageing network.
Our draft decision substitutes reduced estimates for both capital and operating expenditure (capex and opex). We consider that aspects of JGN’s capex and opex proposals require further information to demonstrate the benefits to consumers. This includes not accepting JGN’s capex for renewable gas connection projects, and opex step changes relating to climate change reporting and leak detection services.
Other elements of our draft decision include a reduction for abolishment cost tariffs for customers choosing to move away from gas through a permanent removal of the network asset and a reduced amount for accelerated depreciation. Our decision allows a measured start to accelerated depreciation, while maintaining price affordability for consumers during a time of demand uncertainty.
Our draft decision also approves JGN’s hybrid tariff variation mechanism that blends elements of its existing weighted average price cap with elements of revenue cap regulation. This is a mechanism that has never been applied before, which will reduce JGN’s incentive to grow the volume of gas carried by its network, while mitigating year-on-year tariff volatility associated with revenue caps.
Movements in market variables such as interest rates, bond rates and expected inflation are currently acting to increase the return on JGN’s capital base. Updates for these movement are a standard part of our decision-making process, and our final decision will reflect the latest available market information and therefore will be likely to be different to what is forecast at this draft decision stage.
Next steps
We will hold a public forum on Wednesday, 11 December 2024 at 1pm (AEDT). Stakeholders can register their interest at the following Eventbrite link. We consider this is an important opportunity to discuss our draft decision on JGN’s access arrangement with stakeholders.
Interested stakeholders are invited to provide submissions on the draft decision and revised proposal by Friday, 14 February 2025. Submissions and requests to make a submission via alternative methods should be emailed to JGN2025
aer [dot] gov [dot] au (JGN2025[at]aer[dot]gov[dot]au).
The AER’s final decision, which will be made by May 2025, will set tariffs that will form the basis for charges for the 1 July 2025 to 30 June 2030 period.