A typical annual gas bill in NSW households will rise by between $155 to $225 over the next financial year as local suppliers try to recoup the cost of entering the global market.
The Independent Pricing and Regulatory Tribunal (IPART) has given local gas suppliers the green light to increase prices by an average of 17.8 per cent in 2014/2015.
However, IPART says prices will remain relatively stable in 2015/2016.
This would mean that from July 1 the typical annual gas bill would rise by between $155 to $225 a household.
IPART chairman Dr Peter Boxall said the increases were necessary because local gas suppliers would start exporting gas from eastern Australia next year and wanted to recoup the costs.
"We are aware that these increases are significant and acknowledge concerns about affordability," he said on Tuesday.
"However, as gas starts to be exported from eastern Australia for the first time, the rising costs faced by retailers to supply gas to consumers need to be recouped."
Dr Boxall said local wholesale gas prices would be influenced by international prices because local gas reserves would be used for exports.
"The ability to export Liquid Natural Gas is driving a fundamental change in eastern Australia's wholesale gas market," he said.
"With gas reserves being directed to these exports, eastern Australia is becoming part of a single global market for commodity gas, and wholesale gas prices are being influenced by international prices."
Dr Boxall said the increases would only apply to small gas consumers on a regulated tariff and those already on market tariffs could expect smaller price rises.
IPART has also recommended a review of NSW government rebates to ensure they assist the most vulnerable customers.
NSW Opposition Leader John Robertson said it was bad news for families.
"For those families who are already struggling to pay their bills, life is going to get tougher because of this increase," he told reporters in Sydney.
Mr Robertson reiterated calls for a gas-reservation scheme to quarantine domestically produced gas from export.
"If we're going to stop prices skyrocketing because now we're exposed to the global market, the only way to address that is to put in place a gas-reservation policy in this country."
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