ACT regulation to prevent new gas connections
Background
The ACT Government is seeking to regulate new natural gas connections as part of its broader commitment to becoming a net-zero emission city by 2045. This new regulation is part of the actions proposed by ACT Government under the ACT Climate Change Strategy 2019-2025 released in 2019.
In early March 2023, the ACT Government released an Issues Paper, ‘Regulating for the prevention of new fossil fuel gas network connections’, with the objective of obtaining stakeholder feedback to assist the Government to determine a number of issues on the proposed regulation. In particular, the Government seeks to identify when new connections to the fossil fuel gas network should be prohibited, and how the prohibition can be implemented while maximising the benefits for the ACT community.
The Issues Paper raises a number of questions as to how the regulation of gas connections should be introduced, including:
Implementation timing, including a phase-in of the prohibition to certain connection types;
The land use type and premises to which the prohibition (or staged prohibition) on gas connections would apply;
The extent to which exemptions to the regulation should be available to particular users;
The economic impacts of a prohibition;
Transitional arrangements for partially constructed premises, and renovations and rebuilds; and
Grandfathering arrangements that should be included for hard to transition industry.
Interestingly, green gas, renewable gas and hydrogen gas (green gases) are intended to be exempt from the regulation; however, the Issues Paper notes that, “the ACT Government does not currently view green gas as a viable widescale option to support the Territory’s emissions reduction targets.” It appears that the conversion to green gases would need to be at 100% to not be caught by the regulation.
Transport Emissions are not the focus of the consultation, with the ACT Government relying on the ACT Zero Emissions Vehicle Strategy 2022- 2030 to deliver corresponding emissions reductions in the state’s transport sector.
The enabling legislation, the Climate Change and Greenhouse Gas Reduction (Natural Gas Transition) Amendment Bill 2022 has not yet been passed by the ACT parliament, but is intended to provide power to the relevant Minister to make a regulation that limits gas distributors from providing new connections for natural gas in ‘certain areas of premises’.[1] Given the breadth of proposed drafting, the Minister will have significant scope as to how the prohibition is implemented.
Rennie Insight
There are extensive practical considerations for the ACT Government, or any Governments seeking to regulate to prevent new connections or otherwise make the economics of gas more difficult for gas network owners or for major customers through penalties. Natural gas pipeline economics are shared within regions and between customer classes, and gradual removal of load from a network through either prevention of new connections or subsidies to encourage churn to electricity chip away at these overall economics. In the short term, the loss of major gas customer revenue can be made up through price rises for smaller customers, but there is a point at which these options fall away. It would be folly to assume that gas companies will continue to supply once the overall economics of supply have been eroded, especially where this erosion has been a consequence of policy.
Removal of natural gas from a city will involve a coordination effort never seen before in the supply of essential goods to households. Rennie analysis suggests that household costs of between $20,000 - $30,000 per residence accompany the removal of household gas connections and substitution with electricity, an insurmountable hurdle for most. How Government will not only impose these costs on customers, but coordinate the step off from gas to electricity on a street by street basis, will be the exam question of the 2030s.
Community consultation on the matters raised in the Issues Paper will close 20 April 2023.
If you would like support navigating the gas transition, please contact Simone Rennie at srennie@rennieadvisory.com.au.
[1] Climate Change and Greenhouse Gas Reduction (Natural Gas Transition) Amendment Bill 2022, s 13A(1)
Photo by Sven Brandsma on Unsplash
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