Australia's gas networks were built to last for decades, with costs spread across a customer base assumed to keep growing.
As household and small business energy choices shift, we’re proposing updates to ensure the regulatory framework keeps pace.
The Australian Energy Market Commission (AEMC) has released a Directions Paper proposing updates to the rules that govern how gas distribution networks are regulated. The AEMC is seeking stakeholder feedback before any rules are finalised.
Why this matters
As some customers choose to leave the gas network, the largely fixed costs of owning, operating and maintaining the pipes must be recovered from a smaller pool of remaining customers. Higher bills may prompt more customers to leave, which pushes bills higher again.
Without action, those with the fewest options risk being left with bills they cannot escape and cannot afford. The consumers most at risk of significant bill impacts are not those who can afford to switch. They are the consumers with the fewest options:
- Renters and apartment dwellers who don't control their own appliances or building infrastructure.
- Low-income households who cannot afford the upfront costs of electrification.
- Businesses with no practical alternative to gas.
The AEMC’s proposed package is designed to support an orderly transition. Service providers would have a reasonable opportunity to recover the costs of past investments, supporting their ability to safely maintain and operate networks for remaining customers.
At the same time, consumers would not pay for assets they are no longer expected to use. If demand falls significantly and assets become stranded, that risk is borne by the network - consistent with what occurs in competitive markets.
Chair Anna Collyer says the case for reform is straightforward - the longer the rules go unchanged, the bigger and harder the problem becomes to solve for consumers, networks and governments alike.
"Gas networks have served Australian households and businesses well for decades. But the rules were written for a world of growing demand - covering everything from how network costs are recovered to how new expenditure is justified and tariffs are set.” Ms Collyer said.
“That world is changing and without updating the framework, the consumers who rely most on gas and have the fewest alternatives could end up bearing the heaviest burden."
Regulatory reform alone cannot address all the impacts of an uncertain gas future. Governments also have a role to play – including supporting vulnerable consumers and those who face practical or financial barriers to transitioning to alternative energy sources.
What the AEMC is proposing
The Directions Paper proposes a balanced package of targeted reforms across four areas of the National Gas Rules:
- A longer-term outlook: Requiring service providers and the regulator to demonstrate how they have considered long-term energy transition risks.
- Capital cost recovery tools: Providing clearer guidance to support efficient recovery of past network investments, spreading costs more evenly between current and future customers – and ensuring customers are not paying for assets they are no longer using or are expected to use in the future.
- Capital and operating expenditure: Strengthening provisions to minimise expenditure, to better align investment decisions with uncertain demand conditions while ensuring safe and reliable services.
- Tariff design: Enhancing guidance on how reference tariffs are designed so they remain economically efficient and better reflect consumer impacts across a range of transition scenarios.
Ms Collyer says the consumers who stand to benefit most from this package of proposed reforms are not today's customers, but those who will still be on the gas network when the transition is further advanced and have no way off it.
"A modest and manageable increase spread across a large customer base today is far preferable to a sharp and unavoidable increase concentrated on a small group of remaining consumers in the future, many of whom will have no realistic option to leave the gas network,” she said.
“We are proposing to act now precisely because waiting makes the problem harder to solve and the costs harder to bear. This is about facilitating an orderly transition."
What happens next
The Directions Paper is part of a broader package of gas reforms being considered by the Commission, including changes to gas connections, disconnections and abolishments. Together, they are designed to make the gas regulatory framework more robust for an uncertain future.
The AEMC is now seeking stakeholder feedback on the proposed directions. This is a consultation document, no rules have been changed.
The Commission will consider all feedback before publishing a Draft Determination and Draft Rule, expected in August 2026.
Submissions are due 30 April 2026.
Visit the project page for the Directions Paper and supporting materials.
About the AEMC
The Australian Energy Market Commission (AEMC) is an independent statutory body that advises Australian governments on energy market rules and conducts reviews of the energy sector. The AEMC's work is guided by the long-term interests of energy consumers, including reliable, safe and affordable energy.
Media: Jessica Rich, 0459 918 964, media@aemc.gov.au