Mallard announced the move last night and said gas consumers should expect to see price decreases as a result of regulation under the 1986 Commerce Act.
“The (Commerce) Commission in its inquiry found that gas pipeline prices are only subject to limited competitive pressures, and that the gas pipeline companies Powerco and Vector are charging excessive prices and taking excessive returns,” Mallard said.
The commission found Powerco and Vector were earning after-tax returns on capital of 12.7% and 13.5% respectively, while a fair return would have been about 8%.
The commission estimated the average Vector pipeline customer could see a drop of 18.5% in pipeline prices (an average annual drop of NZ$114), while the average Powerco pipeline consumer could receive a 12.2% decrease (a NZ$51 reduction) from price regulation.
“The commission is pleased the government accepted our recommendations,” said Commerce Commission chair Paula Rebstock.
"Moving to control Vector and Powerco means the companies will no longer be able to take advantage of their market power. There will be benefits for consumers, with the potential for significant price drops."
Boulton - who now heads Powerco’s parent company Babaock & Brown Infrastructure – told EnergyReview.net from the Channel Islands this morning that he was very disappointed the government had decided to regulate Powerco and Vector.
"The only result of regulation will be a continuation of a lack of investment in new gas pipelines as there will be insufficient incentives for us to extend our networks," he said.
“We believed some of the government’s analysis was inadequate and initiated a judicial review of the commission’s conclusions. We are therefore very disappointed the government should move to regulate the industry before the High Court has given its ruling.”
Vector spokesperson Charlene White told ERN that Vector had yet to decide if it was going to comment on the matter.
Price control of Vector and Powerco will be effective from August 25, with the commission granting provisional price authorisations until it investigates, consults and determines final authorised price levels.
