A draft rule would let gas networks recover their pipe costs from households sooner. The regulator that would apply it warns of consumer harm

What the draft does

A gas network recovers what it spent on pipes through depreciation, charged to customers a slice at a time over the assets’ lives, usually in equal slices. When customer numbers are falling, equal slices stop working: the last customers on the network carry the most. Accelerated depreciation recovers more of the cost now and less later.

Four rule change requests started this. Energy Consumers Australia lodged three and the Justice and Equity Centre one, in 2025. Between them they asked for tighter conditions on when networks could accelerate depreciation, stricter tests for new spending and new planning reports. The JEC also asked that customers’ share be capped at half in any cost-sharing arrangement. The AEMC instead made what it calls a “more preferable” draft rule, published on 27 August 2026. It adds a 20-year outlook every network must publish, tougher tests for new spending, and changes to the tools for recovering capital.

The change that matters most for your bill is how depreciation proposals are decided. Under the draft, a network states how it wants to recover depreciation, and the regulator must approve it unless the regulator finds an alternative that would better meet the National Gas Objective. The AER reads the same test as applying to its decisions on inflation and on removing redundant pipes from the network’s asset base.

The AEMC does not hide the effect. Its draft says that bringing cost recovery into line with expected use of the pipes would result in capital recovery being brought forward and today’s gas consumers facing higher prices, and that using the tools early may result in higher prices for consumers in the near term than would otherwise occur. Its argument is that the alternative is worse: a disorderly transition with escalating prices, less reliable service, or a network closing early. Its premise is that a network facing decline has its own reason not to overcharge, because higher prices push more customers off gas.

What the regulator says

The AER regulates the gas distribution networks in New South Wales, Victoria, South Australia and the ACT. Its submission on the draft, signed by chief executive Matt Garbutt, says that if carried into the rules the draft would tilt the framework towards networks’ proposals and narrow when the AER could set a different depreciation profile. On the AEMC’s premise it is blunt: We do not believe it has been established that NSP and consumer incentives are aligned. NSP is a network service provider. It adds that its recent reviews included large accelerated depreciation proposals that would have significantly increased customer bills had they been approved, and that front loading capital recovery may increase near-term prices without guaranteeing better outcomes for customers over the longer term.

The draft’s protection for customers who stay is the “switching point”: the gas price at which a household that could switch to electricity would do so. The AER says that ceiling is loose. Network charges are typically only 20 to 30 per cent of a retail gas bill, and the estimate moves with wholesale prices, appliance costs and rebates. On an average Victorian residential bill of around $1,700 and the AEMC’s assumed range, the AER calculates that bills could rise by around 10 to 30 per cent in the first year, and stay there, without exceeding the switching point. On that bill, that is roughly $170 to $510 a year (our arithmetic). The AER asks the AEMC to stop using the switching point as a threshold for removing redundant pipes from the asset base, and to leave that to the regulator’s judgement.

Consumer and community groups made a similar case in a joint submission, and a coalition of groups repeated it on 28 October in a joint release published by Energy Consumers Australia. ECA’s chief executive, Brendan French, called the draft a blank cheque for gas monopolies.

What the networks asked for last time

The record is in the AEMC’s own March 2026 directions paper, which tabulates recent decisions. These are the six AER-regulated distribution networks that serve households:

The AER cut about 40 per cent of what was asked. Under the draft’s test, a cut like these would need the AER to show that its alternative better met the objective.

When it would reach your bill

Nothing changes before each network’s next five-year price review. The draft rule’s timetable for the networks that serve homes:

The Victorian networks would have to lodge their 2028-33 proposals with the AER by 1 June 2027, about five months after the final rule’s proposed start on 18 December 2026. Submissions on the draft closed on 8 October.

Our view

Our view, labelled as such. The AEMC is right about the problem. A network’s costs spread over fewer customers each year, and, as the AEMC itself notes, the customers who face barriers to switching include renters and low-income households. Recovering more while the network is still full is a defensible idea. What we do not find defensible is the premise for handing the networks the default. The AEMC’s own table shows the AER trimming five of six recent requests, by $331 million in total. That is not a record of networks pricing themselves cautiously; it is a record of the regulator doing the pricing. A rule that makes the AER prove a better alternative each time puts that work on the side with less information. The final rule should leave the AER its discretion.

For a household, the practical points are these. The rule changes no bill before mid-2028, and in NSW, South Australia and the ACT not before 2030 or 2031. If you are already planning to replace a gas appliance in that window, this is one more reason to price the electric option, because the draft is built on gas getting dearer for those who stay. Removing the connection itself has its own rules and charges (what disconnecting costs, network by network). We will report the final determination when the AEMC publishes it.