Watchdog inquiry may slash gas bills

Gas bills for householders could be cut by up to $155 a year if price controls are imposed following a Commerce Commission inquiry.

The commission has criticised pipeline companies Vector and Powerco, saying they earned millions in monopoly profits.

It said the Government should impose price controls, forcing the two companies to cut their prices to consumers.

Price controls could save the average Vector gas customer $155 a year.

After looking at the industry for the past 19 months, the commission yesterday announced that Vector and Powerco were earning excess rates of return on their gas pipes and there was a lack of competition.

From 1997 to 2008, Vector would earn monopoly profits of $76.9 million a year and Powerco would earn $50 million.

The commission said price controls would mean cuts of 18.5 per cent for Vector customers and 12.2 per cent for Powerco's 107,000 gas users.

There is no guarantee that gas retailers, such as Mercury, Contact and Genesis, would pass on any cuts.

Vector said it should be judged on the prices it charged, not the rate of return earned. It said its prices were lower than others and that natural gas competed with other fuels.

Vector, which is owned through a trust by Auckland power users, is planning to partially privatise and float on the stock exchange next year.

It is in the middle of a $1.2 billion takeover of fellow gas transmission company NGC.

State-owned enterprise Genesis is increasing its gas prices for residential customers by an average of 14.4 per cent from February 6.

Yesterday it accepted it was wrong to claim that "distribution charges" from Vector were partly to blame for the price hike.

It is understood the retraction has been prompted by complaints from the gas distribution companies.

Genesis chose to reveal its price rise on the eve of the commission's announcement.

This followed a similar case in April of rival company Contact Energy misleading customers about the real reasons for a price rise.

Contact told 8250 customers: "Your local network company Powerco has also recently announced a change to their network pricing for the area. As a result we have had to review our pricing."

Network prices had actually dropped, and after complaints were made to the commission, Contact apologised and paid a $30,000 donation to the Citizens Advice Bureau.

GAS INQUIRY

The Commerce Commission report was sparked by complaints that gas charges were excessive and operators were abusing their monopoly positions.

It cost $2 million and took 18 months to prepare.

Energy Minister Pete Hodgson says he will consider the report's content and make a final recommendation next year.