Commerce Commission sets prices and quality standards for gas pipeline services
The Commerce Commission has released its final decision on the first default price-quality paths for gas pipeline services.
These paths set the maximum prices and minimum standard of quality that gas pipeline businesses must comply with from 1 July this year. The affected businesses and their respective price adjustments are set out below. An estimate of the potential effect on residential customers’ gas bills is attached.
The overall price adjustments from 1 July 2013 are: a 2.0% increase for GasNet (distribution), a 4.0% increase for Powerco (distribution), an 18% reduction for Vector Limited (distribution), a 1.2% reduction for Maui Development Limited (transmission), and a 29.5% reduction for Vector Limited (transmission).
The Commission has limited future price increases to no more than the rate of inflation from 2014 through to 2017.
Commerce Commission Deputy Chair Sue Begg said that in setting the price-quality paths, the Commission has aimed to achieve an appropriate balance between providing incentives for suppliers to invest in their infrastructure services, and ensuring that customers are charged prices that are better aligned with the cost of the services they receive.
“This is the first time that some of these businesses have been subject to price and quality regulation. We are bringing the prices these businesses can charge their customers more into line with the costs of providing those services,” said Ms Begg.
“Although substantial price reductions are necessary for Vector, we do not expect this to limit its ability to maintain and invest in its network. The default paths provide for increases in investment of up to 20% above what a business has spent historically,” she said.
Ms Begg said the gas pipeline companies could apply to the Commission for a customised price-quality path if the default price-quality paths did not meet their individual circumstances.
“We’d expect that companies with a default price-quality path that didn’t meet their need for investment would come to the Commission for a customised price path as provided for by the legislation.”
Ms Begg noted that the input methodologies, which influence the default price-quality paths, are currently under challenge in the High Court. The outcome of this challenge could affect the price adjustments provided by the default price-quality paths.
The decision on the default price-quality paths for gas pipeline services can be found at: http://www.comcom.govt.nz/initial-default-price-quality-path/