Cheaper gas delivery bills in pipeline

Gas bills for Vector's Northland customers could fall by $55 a year under proposed regulations announced by the Commerce Commission.

The commission last week released draft proposals for the maximum gas prices that gas pipeline businesses can charge customers from July 2013.

The proposals relate only to the charges for delivering gas, not the cost of gas itself.

Vector has 1081 residential and 202 commercial customers in Northland.

Under the proposal, the maximum charge should fall by 16 per cent for Vector's distribution network that also delivers gas in Auckland, Waikato, Bay of Plenty, Taupo, Gisborne and Kapiti. This would equate to an average saving of $4.60 a month or $55 a year.

Commission deputy chairperson Sue Begg said it was the first time that some businesses had been subjected to price-quality regulation.

"We are now bringing the prices these businesses can charge their customers more into line with the costs of providing those services. You could conclude from that, that in the past they've been charging too much."

The proposals did not scrutinise investment plans, and Vector had a $50 million capital investment plan which would fall outside the commission's allowance of a 20 per cent increase in investment.

Vector could apply to have customised pricing if it wished, Ms Begg said, although even if it were allowed the increased investment, the commission's formula would see prices cut by 23 per cent.

"Even on their own numbers, we're looking at significant over-pricing."

Vector chief executive Simon Mackenzie said the proposed cuts to its pricing were "frustrating" because it had already cut the price of using its gas distribution pipeline by 20 per cent "in real terms" since 2005.

The proposals, he said, were based on "flawed methodologies" for asset valuations and cost of capital assumptions, and an "incomplete regulatory package".

"The commission is relying on asset valuations which are nearly 10 years old, having rejected more up-to-date valuations."

Last week Vector defended its legal challenges to commission decisions, saying it was doing so to protect shareholder value.

Some gas customers will see increases, particularly those in Napier, Hastings, Southern Hawke's Bay, Taranaki, Manawatu, Levin, Foxton, Hutt/Mana and Wellington, supplied by Powerco.

They would pay $7.20 more a year.

Customers of GasNet, which supplies Wanganui and surrounding areas, would see a saving of $1.10 a month, or $13.20 a year.