KEY POINTS:
The Commerce Commission has ordered energy companies Powerco and Vector to cut - by a further 11.1 per cent and 3.7 per cent respectively - the amount they charge for gas distribution.
But it will be up to gas retailers how the savings, if any, will be passed
to consumers.
The cuts, announced yesterday, were in addition to average price reductions imposed in 2005 of 9 per cent for Powerco and 9.5 per cent for Vector.
Since those reductions were imposed, prices had been held constant in nominal terms. As a result, real price reductions under control to date were about 19 per cent for each business.
The latest reductions, which come into effect from January 1, will result in average total price cuts of 30 per cent for Powerco and 22 per cent for Vector.
The cuts relate to the distribution component of gas bills, typically about 40 per cent of the total.
Commerce Commission chair Paula Rebstock said gas retailers would be free to determine how the reductions will be passed to private consumers, though that could see some customers paying less, some paying more, and others paying the same.
The commission would be keeping an eye on gas retailers, to ensure any savings were passed on to consumers "in a timely manner", she said.
Yesterday's announcement was the culmination of a process that started in 2005, when Energy Minister Trevor Mallard asked the commission to conduct an inquiry into concerns about gas consumers being overcharged.
It found that Powerco and Vector had been earning significant excess profits and that control would be likely to result in significant reductions in gas distribution prices.
Vector group chief executive Simon Mackenzie yesterday told the Weekend Herald the company had problems with the Commerce Commission's "choice of methodology" in preparing its report.
The commission had failed to account for the financial crisis and impending recession, or the company's need to invest in infrastructure.
Mr Mackenzie said the ruling would be of little help to consumers, who would be unlikely to benefit from any "noticeable decrease" on their bill.
Powerco was yesterday making no comment until it had had time to digest the ruling, which came in at almost 600 pages.
The price reduction will remain in place from January until October, when both companies will be permitted to increase their prices with inflation.
A spokesman for gas retailer Contact - which has customers on both Powerco and Vector networks - said the company would need to wait for official word from the two distributors before formulating a response. -
The Big Two:
Vector: New Zealand's largest gas and electricity company is responsible for the design, development and maintenance of the lines and cable network to more than 300,000 residential and business customers in Auckland, Manukau and parts of the Papakura district.
Powerco: New Zealand's second-largest electricity and gas distribution company. Services some 400,000 consumers across the central and lower North Island.
- Additional reporting NZPA