Lower distribution charges will be one of the keys to keeping gas a competitive fuel choice in NSW during challenging market conditions over the next few years, Jemena MD Paul Adams said today.
In a speech to the Australian Domestic Gas Outlook conference in Sydney, Mr Adams outlined the gas distributor’s vision for growing the NSW gas market, passing on savings from lower funding costs and efficiency gains to enable customers to keep using or connect to clean and efficient gas.
To offset the impact of rising wholesale gas prices, Jemena is proposing to reduce network charges over the 2015-2020 period for its 1.2 million residential and small business gas customers by up to 40 per cent in real terms.
If the Australian Energy Regulator (AER) accepts Jemena’s proposal, a typical residential customer would save around $563 over this period. Distribution costs currently make up around 50 per cent of a typical residential customer’s bill.
Mr Adams said despite higher wholesale gas prices and tighter gas supply over the next few years, Jemena was forecasting more than 35,000 new connections (both residential and business) on average each year between 2015 and 2020 – a total of 185,000 over the next five years.
“We want more customers in NSW to enjoy the benefits of gas, so we’re keeping our distribution costs as low as possible to help reduce any bill shock from higher wholesale prices,” he said.
“Keeping our network charges low will encourage new connections. Despite more difficult market conditions, we’re anticipating a ‘connections boom’ over the next two years, driven by construction in the greater Sydney area.
“Already, a large proportion of these new dwellings are deciding to connect to gas because it’s a premium product that has real advantages over electricity for cooking, heating and hot water.
“In the long term, growing our gas network will help drive our charges down as we can spread the largely fixed costs of distribution across a larger customer base.”
Mr Adams said gas market conditions would be challenging over the next few years and he urged the Government to rethink policies restricting the development of gas in NSW so that new supply could be bought to market to help ease price pressures for NSW’s gas consumers.
“To address supply and cost challenges, we need a sensible, scientific approach to unlocking gas resources. Securing affordable gas supplies is crucial for our 1.2 million gas customers in NSW,” he said.