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Gas Distribution Pricing 

Gas distribution in Victoria is regulated by the Australian Energy Regulator (AER). Under a wider national framework, AusNet Services submits a pricing proposal to the AER every five years as part of a process known as the Gas Access Arrangement Review (GAAR).

Our current regulatory period expires on 31 December 2017. In December 2016, we submitted our proposal for the upcoming 2018-2022 regulatory period.

Our 2018 - 2022 Gas Distribution Plans

We have prepared a plain-language overview of our plans for the 2018-2022 regulatory period. The purpose of this document is to assist our customers and stakeholders in better understanding our gas business and plans for the future. 

Our ambitions, values and priorities for the gas network (see figure below) have driven many of our plans for the upcoming regulatory period. Specifically, we will continue to deliver outstanding levels of safety, reliability and customer service so that we are trusted and valued by the customers that we serve every day.   

 

Gas diagram

 

Customer and Stakeholder Engagement 

To help us better understand our gas customers and stakeholders, AusNet Services launched a comprehensive engagement program in April February 2016. Insights learned from the program’s four studies have been used to will inform key decisions for the our Gas Access Arrangement Review (GAAR) proposal, to ensure it reflects customer and stakeholder preferences.

AusNet Services would like to acknowledge and thank all of our customers and stakeholders who took part in this program.

For a summary of findings from our Customer and Stakeholder Engagement Program, please read our Energy Research Summary Report.

An overview each of our four engagement studies is also provided below. 

Study 1 – Focus groups

Study 1 involved five focus groups with regional and metropolitan customers from our gas network. Each focus group lasted approximately 2 hours and covered a range of issues.

Key insights from Study 1 were as follows:

  • Customers value gas as an immediate, extremely reliable and reasonably priced energy source
  • Although safety-related incidents are uncommon, customers consider safety to be a major concern due to the potentially serious implications of a breach
  • Customers see themselves using gas into the future despite an expected decrease as renewable energy sources become more affordable.

For more information, please read the findings of our Study 1 Report.

Study 2 – Customer surveys

Study 2 involved an online survey of 600 regional and metropolitan gas customers to further explore insights identified in Study 1.

Key findings of Study 2 were as follows:

  • Around one-quarter (26%) of customers are aware of AusNet services, but only half (51%) of this group understand that we are a gas distributor
  • Most customers believe our network is reliable (79%), safe (72%) and well maintained (69%)
  • In regards to price, customer sentiment is mixed, with around half feeling that gas is good value for money (49%) and reasonably priced (44%)
  • Most customers (80%) have no plans to disconnect from our gas network in the future, with only 10% expecting to disconnect in the next 5–10 years

For more information, please read the findings of our Study 2 Report.

Study 3 – Customer advocate workshops

Study 3 involved a workshop with representatives from a range of organisations with different socio-demographic profiles to:

  • Confirm the findings from Study 1 and 2
  • Apply these findings to key business decisions for our gas network.

For more information, please read the findings of our Study 3 Report.

Study 4 – Stakeholder focus groups and interviews

Study 4 was designed to ensure that our engagement program represents all stakeholders within our gas network. To achieve this, Study 4 included:

  • Focus groups with small-to-medium business customers
  • One-on-one interviews with other non-residential customers, including representatives from local council, large industry and land developers.

For more information, please read the findings of our Study 4 Report

GAAR Regulatory Process 

Date

Activity

Dec 2016

Submission of our regulatory proposal to the AER

Jan 2016

AER public forum

Feb 2017

Submissions on our proposal close

Jul 2017

AER draft decision

Aug 2017

Submission of the revised proposal 

Sep 2017

Submissions on draft decision and revised proposal close

Nov 2017

AER final decision

Acceptance of the AER's Draft Decision on the 2018 - 2022 GAAR Proposal 

Following the Australian Energy Regulator's (AER) release of its draft decision on AusNet Services’ 2018 - 2022 Gas Access Arrangement on 6 July 2017, we have advised the AER that it will accept the draft decision. 

The draft decision was in response to our proposal, which outlined our gas network expenditure and revenue requirements over 2018–2022, with a focus on safe and affordable services. This proposal was submitted to the AER on 16 December 2016.

The draft decision approved total revenues of $1,045M (nominal), an 8.7 per cent reduction on our initial proposal. This results in an average price reduction of 10% from 1 January 2018 to the distribution component of a customer’s bill. For the average residential customer, this means a saving of $23 in 2018, and for small business, a saving of $37. 

A significant proportion of the AER’s revenue reduction relates to different assumptions regarding tax costs and inflation. The AER is reviewing its inflation methodology and the findings of this review may impact on the final decision. 

The AER considered our gas marketing proposal as a business-as-usual cost, and therefore rejected it. This decision was consistent with the AER’s decisions for the other Victorian gas distributors, which had also sought additional marketing funding.

The AER acknowledged that AusNet Services’ customer engagement program was well-designed and effective.

AusNet Services submitted its revised proposal accepting the draft decision to the AER on 11 August 2017. To read the revised proposal summary, click here

Engagement in the Review Process 

We are committed to supporting our customers and their advocates in better understanding the GAAR process and outcomes.

If you have any questions about our acceptance of the draft decision, we will strive to meet all requests for information.

We will also continue to work closely with our Customer Consultative Committee to develop our final response.

The draft decision has been published on the AER’s website.

The following table summarises the AER's draft decision.  

 

(Nominal terms)  Proposed  AER Draft Decision Var. %
Total Revenue   $1,145M  $1,045M  (8.7)
Total Capital Expenditure   $521M  $502M  (3.6)
Total Operating Expenditure  $320M  $289M (9.7) 
Rate of Return (WACC)  5.63%  5.94%  

Upcoming key dates in the GAAR 2018 - 2022 Process 

15 September 2017 | Invitation for submissions 

Submissions to the AER should be sent by 15 September 2017 to ensure they are considered in the AER’s final determination.

The final decision is expected on 29 November 2017. 

 

More information

To learn more about the Gas Access Arrangement Review (GAAR) and our engagement program more generally, please read our fact sheets below:

For more information on the AER's Draft Decision, please contact the GAAR Project Team Lead, Robert Ball, on (03) 9695 6281 or by email Robert.Ball@ausnetservices.com.au.