Consumers funding gas lobbying
Some thoughts on the complexities of funding monopolies for non-monopolistic things
But first, TRIVIA!
You might have missed it in our last post, but we’re hosting a trivia event in conjunction with Australian Energy Week. The trivia night will be 6 pm Tuesday 9th June, at The Decks at The Boatbuilders Yard, just outside the Melbourne Convention and Exhibition Centre where the conference is being held.
Tickets are available here: https://events.humanitix.com/aew-currently-speaking-trivia. These events have all sold out, so don’t wait to get your ticket!
Normally, our trivia nights have coincided with conferences, but for the first time we’re actually working with the organisers. Australian Energy Week gets the biggest speakers from across the industry and is always very well attended. We’re also huge fans of the pre-conference masterclasses for participants looking to up-skill in some of the niches and vagaries of energy markets.
The other exciting announcement is that AEW have very generously set aside 10 complementary tickets to the conference for early stage career and recent graduates. In order to be eligible for a free ticket, you must be a recent graduate in the energy industry (five years or less post-qualifications), able to attend the conference in Melbourne on the 10–11th June 2026.*
All you need to do to enter is to fill in your details at the linked form below and provide a short paragraph on why you’d like to attend! If you’re not eligible but know someone who might be interested, please share this with them
🔗 https://forms.gle/YehYH4JdgivUbj2L8
Ticket winners will be announced by 14 May 2026.
Okay, on with the show!
Gas lobbyists have been out in force this past month. A campaign to levy higher taxes on gas exports has built enough momentum to warrant a multi-million dollar campaign against it. While this lobbying is a high profile example, there is plenty of lower profile gas lobbying.
At the end of 2025, the Victorian government made regulations that start in 2027 and essentially require new homes to be all-electric (i.e. no gas for cooking, heating, hot water) and existing homes to replace gas appliances with electric equivalents at the end of their life. This is an existential risk for gas networks in Victoria. Households going all-electric means less gas customers. Naturally, the gas network owners would like customers to stay on their network as long as possible. So gas lobbyists got to work.
The Energy Networks Australia (ENA) is the peak lobby for electricity and gas networks.1 In early 2025, they published a report arguing against the proposed regulations alongside a report from L.E.K Consulting.2
This was interesting for two reasons:
Firstly, it drew attention to a natural tension amongst ENA members. The network businesses comprising the ENA membership have a lot of common interests, but the differences between the electricity and gas networks are increasingly important. Electricity networks (also referred to as the “poles and wires” companies) want to push electrification because it increases reliance on their networks, whereas the gas networks push renewable gas and try to slow electrification to prolong reliance on gas networks as much as possible. This report was much more in the interests of the gas network members of the ENA.
Secondly, this raised questions about how the lobbying is funded. The ENA is funded by network businesses, who are in turn approved by the regulator to recover revenues from consumers. Therefore, it looks like regulator approved funding recovered from consumers indirectly funded a lobbying effort supporting Victorian gas networks.
This second point shouldn’t come as a shock. Pretty much all lobbying is indirectly funded by a consumer somewhere along the chain. However, its always a bit trickier when it comes from regulated monopolies because they effectively have their revenue signed off by regulators. This poses the question - how do we decide how much network businesses are allowed to recover from consumers to go lobbying? This turns out to be a difficult question to answer. Using the lobbying on the Victorian proposal, I’ve tried3 to elucidate some answers.
How does the ENA get funded and what do they do?
The ENA lobbied against the Victorian government’s proposal to accelerate electrification of households. It is an industry group and its operations are funded by its members.4 The full members are all of the electricity and gas network businesses, across both transmission and distribution. There are also affiliate memberships, available to non-network businesses. The affiliate members are mostly consultancies and suppliers that work with networks.
The ENA does not publish annual reports, so it’s difficult to get a sense of how much funding they receive, or if they receive any other sources of funding. Nonetheless, the ENA has a big footprint. They have 20+ employees, run large conferences and host annual parliamentary receptions.
From a policy and advocacy perspective, the ENA tends to focus on big ticket advocacy and coordination across networks. The key advocacy areas over the past few years have included:
AER rate of return calculations and incentive scheme design,
Supporting biomethane, hydrogen and other forms of gas transition,
EVs, particularly advocating for greater roles for DNSPs in owning EV chargers (starting with their Time Is Now report).
The ENA are influential and well-funded, but there are plenty of influential and well-funded industry and special interest groups across the energy industry, including the Clean Energy Council and Smart Energy Council. All of these industry groups work similarly - they collect membership fees from like-minded businesses with common interests and support them in policy and advocacy. Industry groups need to offer value for money, because there’s an opportunity cost for most businesses spending revenue on memberships i.e. could the money be better spent elsewhere, such as growing business, winning customers etc.?
However, amongst industry groups, the unique aspect to the ENA is how the the individual networks fund their ENA memberships.5
Lobby money in a revenue determination
Recap on revenue determination
Network businesses don’t compete for revenue in the same way as businesses in competitive markets. Instead, network businesses are revenue regulated monopolies.
Network businesses get to monopolise part of the network in exchange for being heavily regulated. In five-yearly cycles, they apply to the Australian Energy Regulator (AER) for the level of revenue they are allowed to recover. The AER assesses this based on what it believes an efficient business would need to meet its obligations and make a reasonable profit.
This five year process is called the regulatory control period reset. It starts with networks making their proposal to the AER. In their proposal they include an operating cost (called opex) component. This component is typically set through the base-step-trend method. Networks submit their operating costs from a base year (if it’s considered efficient), and apply step changes in operating costs (typically to cover something new and material) and then apply a trend (such as a wage price index).
When the AER reviews the opex proposal, it assesses each component. From looking at their guidelines and revenue determinations, the AER seems to focus its attention on:
was the base year was efficient?
are each of the step changes in opex justified?
In addition, the AER uses alternative methodologies to calculate each network’s opex as a sense check.
Membership fees and lobbying in opex proposals
The AER’s job is to determine how much money network businesses can recover from consumers to operate an efficient business. Which begs the question: What’s the efficient amount for consumers to pay so that network businesses can lobby? What’s the efficient, prudent benchmark that should apply here? From the information available, it’s unclear how this decision is made.
Somewhere in that opex being proposed and approved is an amount that the network business is going to spend over the next five years on its industry memberships, including the ENA. However, from the outside looking in, its unclear if the AER’s assessment of opex is granular enough to see what this line item actually is.
There’s two important factors to consider when looking at operating costs and membership fees.
Firstly, the AER’s best benchmarks for reasonable operating costs are other networks. If one network is exceptionally more expensive to operate compared to the rest (even after adjusting for unique factors), it’s an indication to the AER that this network may be operated inefficiently and should have its opex reduced. However, if all networks are paying the same membership fees, this would obviously not stand out in the AER’s assessment.
Secondly, the scale of small operating costs get swamped by the revenue determinations. For example, Ausgrid’s approved operating costs are almost $500m/annum. These operating costs cover a massive range of activities, and would swamp industry membership fees. The AER has limited time and resources to assess the revenue applications, and would naturally focus on the higher value components of the determinations.6
In theory, the revenue determination process should put downward pressure on corporate memberships.7 However, given the scale of the costs and their consistency across network business, the mechanisms in the revenue determination process to put downward pressure on operating costs seem unlikely to put much pressure on industry group membership costs.8
Any constraint the AER might want to put on lobbying spending is made more complicated by the grey area that lobbying sits in.
Network businesses need staff who can translate the complex technical and planning process into regulatory processes. Network staff are also industry leaders in a range of regulatory fields and their engagement is key to pricing reforms, distributed energy facilitation and network planning processes.
Sometimes lobbying, such as the paper commissioned to argue against household electrification, is clearly lobbying. Other times, lobbying could be used to describe the important work of communicating the expertise of network staff in regulatory forums. The networks themselves primarily benefit from the former but the whole electricity industry benefits hugely from the latter.
How do you distinguish the two? The good news for trying to unpack this question is that there is at least some precedent.
Funding for lobbying has been rejected before, kinda…
In its latest revenue determination, Australian Gas Networks included a request for funding on the dystopian sounding “Renewable Gas Communication and Education.” AGN wanted $3m for an education campaign with a focus on schools because they “want to build awareness around renewable gas to build customer confidence.” I’m assuming they wanted to start with primary school students because they’d be the most likely to fall for a self-interested promotion campaign that defies physics, economics and common sense…
This request stood out in the revenue determination because it was a step-change in opex. The AER rejected this part of the AGN’s determination, saying “there is insufficient evidence to justify the additional expenditure as being prudent and efficient, and, in the case of the education program, strong stakeholder opposition.” It’s clear the AER has an appetite to reject clear requests for funding that clearly fund self-interested lobbying.
Cruelly, when the AER did their alternate assessment, they found efficient opex for AGN (which rejected the education campaign) was not materially different from the original AGN application, so AGN got to recover the amount it originally applied for.
To make it worse, as far as I can tell, the AER does not audit where the opex is actually spent in the period, so there was nothing stopping AGN running the campaign the AER had rejected anyway.
Exactly how much AGN spent on its advertising campaigns in schools I don’t know, but they’ve definitely been happy to push renewable gas. I’ve previously written about these bad ad campaigns a couple of years ago.
This shows that the AER does have an appetite for rejecting funding for lobbying when it’s presented with a clear opportunity to do so. In rejecting it, the AER decided it was not prudent and efficient, and there was strong stakeholder opposition.
However, it also highlights that cnce revenue determinations are made, there don’t appear to be avenues for the AER to restrain spending on lobbying and advertising.
Recap time - where does that leave us?
The ENA lobbies on behalf of networks. It’s funded by network businesses. The AER approves the operating costs for network business. Sometimes the AER rejects explicit requests for funding that would be used for advertising/education campaigns/lobbying. However, even if the AER rejects it, the network business might just run the campaign anyway. And in the normal course of events, it’s hard to tell if the AER pays any attention to a network business’ corporate memberships.
Does it matter?
Prudent and efficient businesses definitely need money to manage regulatory engagement and maybe some to support advocacy. Networks need to be able to engage in regulatory conversations and advocate for themselves and they’ve got staff who play critical roles keeping the system working.
Industry memberships make sense as well. An industry group like the ENA also play an important role in trying to coordinate the network businesses and get them to be consistent across their various patches.
But what happens when it crosses the line into lobbying? Naturally, networks want to lobby, they have significant interests to advance. Some examples of prominent lobbying campaigns include:
Fighting the limited merits review
Fighting changes to the rate of return methodology
Promoting blending hydrogen into natural gas networks
Expanding the remit of monopoly businesses into things like EV charging and community batteries.
Networks and the ENA would argue some or all of these campaigns are in the long-term interests of consumers. However, consumer representatives wouldn’t agree on all fronts. They are absolutely in the long-term interests of the network businesses and their owners. So, should these campaigns be at least partially funded by consumers? Why?
To be clear, the network businesses should be allowed to lobby alongside every other business. It would be an extreme step to restrict their ability to advocate to regulators and governments and not what I’m suggesting.
But, at the same time, these are huge, profitable businesses and they are going to advocate in their own interests. If they want to lobby governments, why don’t they or their shareholders fund this out of their profits? If that’s not reasonable, a smaller step could at least be some more transparency and guidelines around how consumer funded operating costs end up paying for hydrogen-fuelled cooking on Masterchef.
Summing up
I’ve got plenty of friends working for networks businesses and a couple in the ENA,9 and these people all care about consumers and the energy transition. But you can’t get away from the fact that network businesses are multi-billion dollar businesses with a profit motive. Some are publicly-owned, some are private. Particularly in their advocacy, it is clear that the motive is the same as every other business - deliver value to shareholders.
Should networks be allowed to recover funding for lobbying? If the lobbying is an ultimately consumer funded operating cost (and consumers don’t have a say), where would you draw the line? I surely have some bias here because I’ve tended to disagree with the lobbying pushed by the ENA, but well-funded campaigns to extend the use of gas in households feel like a cost that the owners of gas networks should be ponying up for.
Where does a report arguing against electrification in favour of prolonging gas sit with you? How does that answer change if you’re a gas network, or the Victorian government, or a Victorian consumer?
If you want a refresher on monopoly networks in the NEM, have a read of this post from a few years ago.
Also, the LEK report’s second page says “The L.E.K. Report and L.E.K. Commentary are strictly confidential” - do they know the ENA uploaded it?
As per usual, tried doing some heavy lifting here.
Best I can tell - this isn’t explicit anywhere though. This is how most other industry groups are funded, although some of the groups may take funding from third parties that aren’t members. I can’t tell, but I don’t believe the ENA is funded outside of the membership fees from its members.
As well as memberships of other industry bodies.
For example, in Ausgrids 2024-29 determination, the AER found the efficient opex was $2,344.0 million, but decided this was not materially different from Ausgrid’s proposal of $2,364.8 million, so the AER approved Ausgrid’s proposal. I get it, it’s not material in the scheme of the overall opex, but that’s also $20m given to a network business because it’s a rounding error.
It’s more complicated than this, but essentially networks are allowed to keep any savings they make on opex in the five year period. If they are approved to spend $100M and only spend $90M, they get to keep the $10M. The upside for consumers is that the $90M should be the new benchmark for the next reset period.
Clearly there are some forces constraining the level of lobbying networks do, otherwise they would be spending hundreds of millions on advertising campaigns.
Hopefully still!
You also need to consider that there is regulated and unregulated revenue. Networks may be funding this through unregulated (shareholder or profits from contracted works).
In my years attending ENA meetings it was never an easy fit between gas and anybody, transmission and distribution, any generation/retail and distribution ( which is where retail sat) right up until the brain fart that saw retail competition introduced before the dust had settled on the wholesale NEM.