Gas bills in the upper North Island could fall by $55 a year under proposed regulations for gas pipeline services, which would hack a major chunk off Vector's prices.
The Commerce Commission this morning released draft proposals for the maximum 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 the gas itself.
The proposals vary for different companies, but for Vector Distribution - which delivers gas to customers in Auckland, Northland, Waikato, Bay of Plenty, Taupo, Gisborne and Kapiti - the commission has proposed the maximum charge should fall by 16 per cent.
According to the commission this would equate to an average saving of $4.60 a month for the more than 140,000 affected customers. "This is the first time that some of these businesses have been subject to price-quality regulation," Commerce Commission deputy chairman Sue Begg said in a statement.
"We are now bringing the prices these businesses can charge their customers more into line with the costs of providing those services."
It was the first time Vector's distribution business has been subjected to this type of regulation, Begg said.
"You could conclude from that, that in the past they've been charging too much."
The forward-looking 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, 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."
Shares in Vector were down 3.1 per cent, at $2.81, at 3pm.
Vector chief executive Simon Mackenzie said the commission's gas pipeline proposals, like its recently released electricity proposals, 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 ten years old, having rejected more up to date valuations," he said.
Last week Vector defended its legal challenges to commission decisions, saying it was doing so to protect shareholder value.
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.
"We also find it difficult to reconcile the commission's position against the Minister of Energy's view of the criticality of the gas infrastructure in New Zealand and the need to ensure that those assets remain in excellent condition."
Some gas customers will see increases.
Customers of Powerco - which supplies Napier, Hastings, Southern Hawke's Bay, Taranaki, Manawatu, Levin, Foxton, Hutt/Mana and Wellington - would see an increase of 60c a month, or $7.20 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.
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