The Australian Energy Regulator (AER) has released its final decision on Jemena Gas Networks’ (JGN) gas access arrangement, setting the framework for service delivery, tariffs, and revenue recovery in New South Wales from 1 July 2025 to 30 June 2030.
Under the new arrangement, JGN will be permitted to recover $3,106.7 million (nominal) from consumers — $139.7 million (4.3 per cent) less than requested in its revised proposal, but $394.2 million (16 per cent) more than the current arrangement.
The increase is attributed to factors outside JGN’s control, including a higher rate of return and elevated inflation expectations compared to the previous regulatory period.
AER Chair Clare Savage emphasised that the decision seeks to balance the uncertainty of gas demand during the transition to net zero with the need for an affordable, safe, and reliable service.
“This decision has been made in the context of anticipated declining demand for gas network services while ensuring the gas network can efficiently and affordably support the current and future needs of consumers.
“This underpins the approach to several elements of our final decision,” Savage said.
The regulator also highlighted the importance of a measured approach to accelerated depreciation, approving only $115 million of the $230 million proposed by JGN, reflecting current policy signals about the future role of gas networks in NSW.
The final decision cuts JGN’s capital expenditure forecast by $120.7 million (14 per cent) to $717.4 million for the 2025–30 period.
The AER also declined to allow JGN to recover $78.9 million from consumers to fund renewable gas connections, citing uncertainty around these investments.
“There are potential benefits of connecting biomethane to the gas network for some users. However, there is currently significant uncertainty around these investments.
“Our decision doesn’t prevent Jemena Gas Networks from undertaking the capital expenditure during the access arrangement period and seeking funding once these supply arrangements are more certain.
“The decision proposes an alternative pathway for investment in renewable gas connections that places less risk on consumers,” Savage said.
The AER commended JGN for its customer engagement efforts and innovative tariff approach.
The regulator approved a hybrid tariff variation mechanism for JGN’s gas transportation service, combining elements of weighted average price cap and revenue cap regulation.
This mechanism aims to reduce JGN’s incentive to expand gas volumes while mitigating annual tariff volatility, supporting more stable prices for consumers.
The decision also endorses tariff reforms that align with emissions reduction goals under the National Gas Objective.
Overall, the AER’s final decision provides a forward-looking regulatory framework that seeks to address the challenges of the energy transition, protect consumers from unnecessary costs, and encourage prudent investment in network safety and reliability.
The approach reflects a careful balance between current network needs and the uncertainty of future gas demand as Australia moves toward net-zero emissions.
