Bid to raise gas prices snuffed

Vector has backed down in its attempts to increase gas pipeline charges for its domestic customers.

The Auckland-based energy network company had been trying to use a directive by the Commerce Commission - to reduce its gas pipeline charges - as a way of increasing its charges to home gas users.

In July, Energy Minister Trevor Mallard agreed with the commission that abuse of market position meant the energy network company Vector would reap monopoly profits of $76.9 million from its gas pipes between 1997 and 2008 and Powerco would gain just over $50 million.

Company chief executive Mark Franklin has downplayed the financial impact of price regulation, saying it only affected an "incremental part of one of our small businesses, which is the gas business in Auckland". Vector was told to cut its prices 9.5 per cent. The commission hopes the gas retailers - which include Mercury, Genesis and Contact - will pass on the price reductions.

Vector was given "provisional authorisation" by the commission, allowing it some flexibility in the way it introduced its price cuts. The company responded with its suggestion to actually increase prices for domestic gas customers.

Prices for commercial and business users would go down, but those using gas in the home would face a price rise of 5 per cent.

But the commission told Vector it expected the price reductions to be applied across the board and include all customers.

Franklin said yesterday that Vector would now cut its pipeline charges 9.5 per cent across all customers.

In the longer term, Vector wanted to "rebalance" its pricing to remove a distortion that favoured residential customers "at the expense of commercial and industrial gas users".

Commission chairwoman Paula Rebstock said last week that it wanted to ensure all Vector customers received the benefits of control.

"The commission considers Vector may be discriminating against its largest, and arguably its most vulnerable, customer base, preventing those customers from receiving the benefit of regulatory control."

The commission said that unless it heard from Vector, it would amend its provisional authorisation and impose a 10.4 per cent price cut on its gas pipelines from November 1.

Powerco has refused to say what plans it has to reduce gas pipeline charges.

The New Plymouth-based company is the second-largest energy network company in New Zealand.