Gas firms braced for fight over price controls

New Zealand's biggest gas transmission companies are poised for battle this morning, with the expected release of a Commerce Commission plan to impose price controls on their industry.

NGC, Vector and Powerco are all in the commission's gun.

It said in a draft report in May that all three should be subjected to official control over their monopoly businesses.

Today's news may also cast a shadow over the Vector-NGC takeover, which will bring a vast swathe of gas pipelines under the control of one company.

In April last year, Energy Minister Pete Hodgson asked the commission to launch the inquiry, which was designed to report "on whether goods and services supplied by persons in markets directly related to either a gas transmission system or a gas distribution system or both should be controlled".

A 2001 study by economic analysts Simon Terry Associates found gas consumers were paying about $60 million a year too much.

The study said revaluations of the pipeline assets had left the companies earning rates of return at least twice what was reasonable.

Any move to control the gas transmission companies will be based on the lack of competition in the sector.

The gas companies say this is unfair and the commission is defining the market too widely, since gas is a "discretionary fuel" - that is, chosen as an alternative to other fuels such as electricity.

With the commission expected to recommend control, Vector and others will now shift focus and try to convince Hodgson that any new regulation of the gas business will cost too much.

There are two types of gas pipelines: those for transmission (long distances between provinces) and distribution (smaller pipes to homes and businesses).

The commission may order the bigger, transmission lines to be opened up for all other companies to use, while price and quality "thresholds" could be imposed on the companies running the smaller, local distribution networks.

* Genesis Energy, the state-owned power retailer and generator, said yesterday it would increase its gas prices charged to all residential customers by an average of 14.4 per cent, a jump of just under $100 a year.

The new prices would come into effect from February 6.

Transmission and distribution costs, with rising wholesale prices, were blamed for the price rise.