What lies ahead: Energy

The sharemarket listing of Auckland's Vector looks set to be the biggest story of the energy sector next year - unless the hydro lakes run low again.

Vector, owned by Auckland power users through an elected community trust, will float up to 24.9 per cent of itself in an initial public offering expected to raise at least $500 million.

The money will be used to pay for its $1.28 billion takeover of natural gas transmission and energy metering company NGC.

Vector could face pressure from several directions next year, starting with the regulators in Wellington.

This month, the Commerce Commission said the two big gas transmission companies had abused their monopoly positions. It found the monopolies would earn excess profits over 10 years of $76.9 million (Vector) and $50 million (Powerco).

Vector says any attempts to regulate away these profits will harm attempts to make the business more efficient and the high rates of return on gas pipelines reflect efficiency, not rip-offs.

Government energy policy, after years of turmoil and change, appears to be on a fairly stable path and 2005 is set to be the year the Electricity Commissioner truly comes into his own.

Furnished with powers to run the whole sector should he choose, Roy Hemmingway may just choose to start imposing his authority.

The big five power companies - Meridian, Contact, Genesis, Mighty River and Trustpower - will be watching Hemmingway closely to see how carefully he chooses to wave the big stick he has been given by Energy Minister Pete Hodgson.

It is hoped the worst of the power price rises of the past two years are over, with only minor adjustments expected in 2005.

More generation is available next winter than in the previous dry winter of 2003, thanks to a new diesel-powered reserve station in the Hawkes Bay. A new gas-fired turbine has just been installed at Huntly, also adding to the country's generation capacity.

Meanwhile, the decline of the Maui gas field will loom large. There is an urgent need for the discovery of new gas supplies. Genesis and Contact have decided to push for planning work on the importation of liquefied natural gas (LNG) as a backstop in case no new domestic supplies are discovered.

Contact has, say its critics, been "softening up" the public through its advertising campaigns, as it makes a move towards LNG imports seem inevitable.

Meridian, the Government's largest power generator, is heading down a different track entirely, saying LNG is not needed and it will only generate electricity from renewable sources - hydro and wind.