Submission: Gas networks in transition

24 April 2026

Australian Energy Market Commission Re: Gas Networks in Transition (GRC0082) – Directions paper

Thank you for the opportunity for the Institute for Energy Economics and Financial Analysis (IEEFA) to provide input to the Gas Networks in Transition directions paper.

IEEFA is an independent energy finance think tank that examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

We commend the AEMC for undertaking this detailed review of gas network regulations. Gas networks face a certain decline in demand across residential and small business customers in coming years, and recent regulatory decisions have exposed the gap in the regulations’ ability to address this.

While there are several positive steps in the proposed directions – including broadening the capital redundancy provisions and applying stricter requirements to expenditure proposals – we are concerned that key aspects of the proposed directions are misaligned with the National Gas Objective (NGO), and do not address the core problems identified in the JEC and ECA’s rule changes.

Chiefly, we are concerned about the proposal to use accelerated depreciation as the primary regulatory tool to address stranded asset risk. We disagree with the Commission’s characterisation that this will not shift costs or risks to consumers. We also disagree with some of the underlying logic behind this decision – including the premise of electrification as a primarily financially driven decision, and the premise that gas networks’ incentives align with the NGO.

We appreciate the Commission’s transparency about the boundaries of the regulatory system, and agree with the need for complementary policy reform alongside these measures. We also consider that the National Gas Rules cannot be used to fully mitigate the risk of gas network businesses ceasing to meet their regulatory obligations. Jurisdictional governments will need to play a role in managing this risk, as opposed to simply offering already profitable gas networks increased incentives.
We have provided a summary of our response below, in addition to specific responses to the consultation questions. Please do not hesitate to contact me to discuss this submission further.

Kind regards,
Jay Gordon, Energy Finance Analyst – Australian Electricity