Vector, Powerco gas price cuts ordered

The Commerce Commission has ordered Vector and Powerco to further reduce their gas distribution charges.

In its Authorisation for the Control of Supply of Natural Gas Distribution Services, the Commission has accused them of "earning significant excess profits," and ordered Powerco to reduce its prices by 11.1 percent. Vector is required to make a 3.7 percent reduction.

These cuts come on top of price reductions of 9 percent for Powerco and 9.5 percent for Vector imposed when the Ministry of Energy announced its decision to declare control over those services.

"When combined with earlier price reductions imposed by the Commission in October 2005, the reductions announced today as part of the Authorisation will result in total price cuts of 30 percent for Powerco and 22 percent for Vector on average," Commerce Commission Chairwoman Paula Rebstock said.

"The commission expects gas retailers to pass on the full effect of any price reductions to gas consumers and will be monitoring this to ensure it happens in a timely manner," Rebstock added.

Gas distribution charges typically comprise 40 percent of consumers' bills.

The commission said its key public policy concerns underpinning regulatory provisions in the Commerce Act were based around the potential for abuse of market power by suppliers of monopoly services where competition was limited. 

In November 2004 the commission recommended to the Minister of Energy that Powerco and Vector's gas pipeline services should be controlled. And in July 2005 the Minister of Energy announced the decision to declare control over those services. 

The commission can accept an undertaking from a gas supplier instead of making an authorisation.  In April 2008 the commission received offers of from both Powerco and Vector.  However, the commission says those offers were not good enough.

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