The Hidden Cost of Australia’s Gas Decline: How Consumers Are Inheriting the Pipeline Burden

The New Energy Reality: Gas Usage in Freefall

Over the past two decades, Australia’s energy market has undergone seismic changes.

As the country pivots toward greener alternatives, one key trend is reshaping the industry: residential gas usage is steadily declining.

This shift is not only influencing energy consumption patterns but also dismantling the foundations upon which gas pipeline regulation was built.

According to Clare Savage, Chair of the Australian Energy Regulator (AER), the traditional regulatory approach was rooted in growth, a growing customer base, growing consumption, and, ultimately, shared infrastructure costs.

Now, however, as homes transition to electric appliances and governments push for net-zero emissions, that model is rapidly becoming obsolete.

Reform in Motion: How the Decline is Rewriting the Rulebook

Gas pipelines, whether newly constructed or acquired, come with significant capital investment.

These networks were expected to generate returns through long-term usage. But with a shrinking user base, those calculations no longer hold.

Data from the Australian Energy Market Operator (AEMO) paints a stark picture:

• Nearly 5 million households currently use gas.

• That number could drop to just 4 million by 2030.

• By the 2040s, only 1.5 million households may still be connected.

This trajectory presents a major challenge for both regulators and infrastructure owners.

The underlying issue? Who pays for a system built for millions when only a fraction will remain connected?

A Broken Model: Cost-Shifting and Accelerated Depreciation

Traditionally, pipeline owners were allowed to recoup their investments, along with a margin of profit, by charging a regulated price spread across all users. But as users leave the system, those left behind are being saddled with higher per-capita costs.

To safeguard their financial interests, companies have adopted a controversial accounting strategy known as accelerated depreciation.

This allows them to recover the value of their assets more quickly — essentially shifting the burden onto current users before the system becomes underutilized or obsolete.

Industrial Users: The Last Holdouts in a Dwindling Market

While residential demand drops, industrial gas use remains steady. Factories, plants, and commercial facilities still rely heavily on gas as an input for production.

According to Jeff Dimery, CEO of Alinta Energy, this industrial demand could persist for several decades, far outlasting household use.

Mr. Dimery argues that pipeline companies are acting too hastily in writing off their assets.

Let’s not rush this transition, he warns.

Let’s walk down the hill, not run — especially during a cost-of-living crisis.

Regulating the Decline: AER’s Balancing Act

The AER finds itself in a difficult position. It must balance consumer protection with the financial viability of energy infrastructure.

Ms. Savage emphasizes that the regulatory body is doing all it can within the current legal framework, but also signals that more fundamental reform is necessary.

She outlines three core concerns:

1. Shrinking Customer Base: Fewer users mean higher costs per customer.

2. Equity Concerns: Remaining users are often those who can’t afford to electrify.

3. Long-Term Planning: Today’s decisions must account for the next 50 years.

We need to rethink how we regulate an industry in structural decline, she explains.

Pipeline Owners Defend Their Position

From the other side, pipeline companies assert they are simply recovering their investment.

Steve Davies, Chief of the Australian Pipelines and Gas Association, insists that:

• These companies are not price gouging.

• Regulatory returns are already modest and risk-adjusted.

• Infrastructure was built with the understanding of a 40+ year lifespan.

He believes that the regulatory system itself must evolve, especially since it was never designed for a future where usage contracts rather than expands.

We’re facing challenges we’ve never seen before, he says.

It’s time for a system-wide rethink.

Who Gets Left Behind?

One of the most troubling consequences of this shift is the inequitable impact on vulnerable households.

Those unable to afford electric appliances or renovations to fully transition away from gas are left footing the bill for a deteriorating network.

These consumers, already under pressure from rising living costs, are being asked to pay more for a service fewer people use, all while others exit the system entirely.

What Comes Next? A Regulatory Crossroads

While the AER continues to operate within its legislative boundaries, all signals point to the need for structural reform. Ms. Savage is clear: long-term solutions require collaboration, political will, and forward-thinking policy.

We’re not just managing today’s consumers.

We’re protecting those of the next generation, she concludes.

Key Takeaways

✅ Gas usage is rapidly declining in Australian households, disrupting traditional infrastructure economics.

✅ Accelerated depreciation is being used to shift asset costs to current consumers, sparking widespread concern.

✅ Industrial gas use is expected to persist, potentially cushioning the decline — but only partially.

✅ Consumers least able to transition are bearing the highest costs, raising equity issues.

✅ Major regulatory reform is inevitable, as current frameworks are unfit for a future with falling demand.

Final Thoughts: The Bigger Picture

Australia’s energy future is being written now, not just in kilowatts and megajoules, but in the rules, incentives, and regulations that shape the very foundation of its infrastructure.

This transformation from a gas-reliant society to an electrified, low-emissions nation is far more than a technical pivot; it represents a profound economic, environmental, and social realignment.

It affects how businesses plan their investments, how governments allocate public resources, and most importantly, how everyday Australians experience the cost and convenience of energy in their homes.

The transition is not occurring in a vacuum. It is unfolding during a time of economic uncertainty, housing pressures, and rising living costs.

As such, the question is not just who pays, but who can afford to transition, and who remains trapped in legacy systems due to income, geography, or lack of policy support.

If the regulatory and financial models do not evolve to meet these realities, the most vulnerable consumers, including renters, low-income households, and older populations, may be forced to bear a disproportionate share of the costs.

For Australia to truly lead the global shift to clean energy, justice in transition cannot be an afterthought.

It must be built into the architecture of reform, ensuring that support mechanisms, funding programs, and infrastructure investment reflect equity, accessibility, and long-term planning.

Without this commitment, the road to net-zero risks becoming a path of widening inequality, where only some benefit from innovation while others are left behind to fund the past.