Energy retailers charge us around $1 per day for the privilege of having gas connected to our properties. We pay for the gas we use, but we’re also paying around $350-$400 per year for simply having a gas connection.

I thought it would be interesting to analyse the savings from removing gas from the property. How much can we save over different timeframes by removing gas?

And how much will we save assuming these prices continue to increase? I believe many people are underestimating future gas price increases, including increases to the daily service fee.

 

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Let’s start with the current daily service fee. A recent bill shows a fee of $1.01 (this varies from retailer to retailer).

Looking at a gas bill in March 2018, the daily gas fee was 71c. The daily service fee has therefore increased 42.5% over the last 7 years, around 5% per year.

(I should also mention the gas price has increased far more over the same time frame – 134% or around 12.3% per year).

I think the increase in gas prices is often underestimated when we’re considering the costs and benefits of electrification. The daily service fee has increased 5% per year since March 2018, and the gas price itself has increased nearly 2.5 times (12.3% per year). As people consider the up front costs of electrification, I think many underestimate how much they will save with more efficient electric appliances and by removing gas from the property.

Putting my finance hat on, I put together the following table.

 

 

 

If the daily gas fee does not change, people can expect to save around $3,700 over the next 10 years. If we take a much longer view, that number increases to $11,081 over thirty years.

But the daily gas service fee is certainly not going to remain the same, so I’ve included a few different scenarios. Please note, these numbers are discounted using a risk-free rate of 3%, so they are in “today’s dollars.”

The savings are modest in the early years. Most people won’t notice a saving of $400 over one year.

But it’s a different story over the long-term, especially when we factor in increasing prices.

I think 7 to 9% is a realistic yearly increase in the daily gas fee. As mentioned above, the fee has increased by 5% over the last 7 years, but I firmly believe this number will increase more over the long term due to the broader energy transition. Gas will continue to be phased out and gas companies will extract every last dollar possible as their assets becoming worthless.

Over 10 years we are looking at savings of $5,500 to $6,600.

Over 20 years, $16,000 to $23,000 and over 30 years $36,000 to $63,000.

When we take a long time frame, we realise that these savings will pay for a huge chunk of our electrification works. Over the long run, the investment case behind electrification is as clear as the air we breath in our electric homes.

The message is clear – it is a “no-brainer” to get off gas for anyone looking to stay in their home for a long period of time.