Tasmania's gas market could collapse if the Government does not provide more incentives for people to connect, a new report has found.

Only about 30 per cent of potential customers are using gas — there are about 43,000 customers with access to the state's gas network but only 12,000 have connected.

Combined with soaring prices across Australia, the market is under increasing pressure.

Report author and energy analyst Mark White said the State Government needed to make gas a more attractive proposition.

"We need gas to become more competitive, we also need electricity to be competing on a level playing field," he said.

"With those two things in mind, just to re-ignite the gas market, it may be reasonable to have some short-term incentives again."

The Small Business Council commissioned the study.

The council's Robert Mallet said it was important for small operators for the gas market to be competitive.

"If that's no longer possible and the gas is no longer available they will end up having to completely re-gear with electrical energy — a very expensive proposition — with no assistance," he said.

About 700 of Tasmania's 12,000 connected gas customers are small businesses.

Tasmania's gas pipeline network. ( Supplied: Tasmanian Gas Pipeline )

Pressure on Hydro to sign gas deal

Hydro Tasmania is under increasing pressure to sign a contract to supply the Tamar Valley Power Station and prevent price hikes for other customers.

The current contract expires at the end of 2017 and it is unclear whether they will sign an extension.

If it does not, the cost of gas for existing customers will skyrocket.

Marc White said it would mean the transmission cost could double.

"The current cost of gas in the delivered cost for small businesses is around 15 per cent ... the worst case scenario is it's up to double that," he said.

Big industrials could be 'pushed to brink'

Labor leader and former Energy minister Bryan Green said he was concerned about what that would mean for big industrial users.

"There's no way that small business and large business in Tasmania can cope with the sort of increases in gas prices that the one decision would make," he said.

Mr Green said many of the big users would be pushed to the brink.

"Grange [Resources] would face an increase in gas charges of over 100 per cent," he said.

"That is massive weighed against the difficulty a company like Grange, for example, is having staying in the marketplace."

In a statement issued late today, Energy Minister Matthew Groom said there had been recent national discussions about gas pricing.

"The Tasmanian Government has actively supported a national market-reform package which was approved at last week's COAG Energy Council meeting in Canberra," he said.

"This reform package has a focus on actions designed to put downward pressure on prices such as increasing gas supply."

A spokesman for Hydro Tasmania said Tasmanian Gas Pipelines had an open invitation to negotiate.