Gas in the Australian Capital Territory and some regional parts of New South Wales are set to increase over the next five years following the regulator’s approval to accelerate the depreciation of gas pipelines in the area.
The region’s distributor – EvoEnergy – is expected to collect $317.4 million in revenue from around 150,000 ACT gas customers, including neighbouring town Queanbeyan, in order to counteract the loss of consumers due to a declining demand for natural gas.
AER Chair Claire Savage said the price increase was a necessary approval in order to financially aid against the effects of mass transition to renewable energy sources by customers.
“As consumers make the switch to renewable energy under the ACT Government’s climate change strategy it’s expected there will be less demand for gas in the ACT,” Ms Savage said. “This means any remaining consumers who can’t or don’t yet choose renewable energy services are at risk of future bill increases because less homes and businesses can share the cost of maintaining gas network services.”
The decision comes after EvoEnergy proposed a significant decline in the residential gas demand over the next five years, estimating a drop of $1.3 million in revenue. The newly approved access agreement, which follows a five-year plan from 2021-2026, estimates a price increase of $14 for households and $127 for small businesses each year from 2022 in order to cover the drop in revenue.
Customers in the ACT however, will initially benefit from an estimated price decrease of $10 for households and $90 for businesses during 2021, in preparation for the increase slated for next year.
Why is the ACT gas market depreciating?
With the ACT Government pushing for zero net emissions by 2045, less sustainable power sources like gas and fossil fuels are being left behind for greener energy solutions. Additionally, the government has banned the production of new gas pipelines come 2023, in the ACT, leaving the maintenance and servicing costs to only the current distributors on the market.
As more households make the switch to cheaper, more accessible, renewable and environmentally-friendly energy options, gas inventively becomes a less accessible, more expensive commodity.
To offset this decrease in customers and resources, naturally, prices will increase, but the AER argues that these price changes protect gas customers from even higher bills in the future.
“To minimise future price increases, particularly for vulnerable consumers that might not be able to afford to switch, the AER’s decision allows EvoEnergy to accelerate the depreciation of new gas pipeline assets in NSW and the ACT. Faster depreciation means that some of the costs for gas network services can be recovered from more consumers today, compared to a smaller number of consumers in the future,” said AER Chair Ms Savage.
EvoEnergy predict that the demand for gas on the residential market will drop by nearly one quarter in the next five years. However, the AER predicts there will only be a 9.8 per cent drop.
I’m a gas customer in the ACT, what can I do to avoid higher prices?
Unfortunately, in this instance, there isn’t much to be done to avoid these higher prices, especially if you are in a position where other power sources are not easily accessible explained Canstar Blue Energy Editor, Jared Mullane.
“Gas customers in the ACT will rightly question these mandated price hikes, which is why bill-payers need to actively search for the best gas deals in town, particularly as there isn’t much competition in the area,” he said.
“It will be interesting to see how the retail gas market plays out in Canberra over this time period, and whether or not any new suppliers are attracted to the nation’s capital.”
A recent Canstar Blue survey revealed the average gas bills in each state, with residential customers in the ACT forking out roughly $295 a quarter.
Mr Mullane added: “While price increases are never welcome news, it’s better to find out now and act sooner rather than later. Now’s a timely reminder to shop around and compare gas suppliers on price, customer service and more. Rather than waiting for gas rates to inevitably go up, get ahead of the crowd and search for a better deal today.”
Image credit: Yevhen Prozhyrko/Shutterstock.com
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