Mallard accepted Commerce Commission recommendations to impose price control on Vector and Powerco from August 25 because of their “excessive” after-tax returns on capital regarding their gas pipeline operations.
Auckland-based Vector yesterday afternoon said given that it was challenging the commission’s findings through the courts, it was disappointed with Mallard’s decision.
Vector chief executive Mark Franklin said Mallard and the commission had made mistakes about the expected drop in prices from regulation and it was misleading for them to imply Vector’s residential gas customers would benefit by about NZ$114 a yearfrom price control.
“Even if you accept the analysis, which Vector does not, the residential price reduction would be less than a dollar per week," Franklin said.
"This also assumes that these benefits would be passed on but, as we have seen in the electricity industry, this is not generally the case. We will be further assessing our options regarding this issue."
Meanwhile, NGC Holdings last night said it was pleased to have remained price control-free, though it too criticised the process that led Mallard to impose targeted threshold regimes for its majority owner Vector.
NGC chief executive Bryan Crawford said the commission’s final report on its gas control inquiry had found controls on NGC's transmission and distribution pipelines to be unnecessary. This confirmed that NGC’s prices reflected the service it provided to customers and the investments it had made in its gas delivery systems.
However, Crawford said the commission's inquiry was not robust or thorough; the commission had not consulted or analysed the targeted threshold regime under a cost-benefit framework; and had last February advised the Economic Development Ministry that it had not fully analysed the proposal, suggesting MED officials consult on the merits of any proposed regime.
“The first NGC knew about the commission's 11th hour recommendation for a thresholds regime was when it read the final report . . . although we were able to make a submission (to Mallard)we were constrained by the absence of detail. It was no substitute for an opportunity to properly address a matter of crucial importance to pipeline owners.”
NGC was also concerned Mallard had decided on a thresholds regime against the advise of Treasury, which had identified NGC transmission customers would be worse off under price control.
"The Minister's decision to impose a threshold regime is an unnecessary rush towards regulation, and it too-lightly dismisses the effect this may have on energy infrastructure investment at a time of growing consumer demand."
NGC was further surprised the MED had told Mallard of no new large investments in gas transmission or distribution pipelines when it was well known NGC was seeking a transmission pipeline route designation to reinforce gas supplies into Auckland. Genesis’ proposed Kaipara power station would also require significant transmission investment.
Former Powerco boss Steven Boulton - now head of Powerco parent company Babaock & Brown Infrastructure - yesterday said he was very disappointed with Mallard's decision.
He argued the policy would only result in a continued lack of investment in new gas pipeline facilities.
The High Court has yet to rule on Powerco’s request for a judicial review of the commission’s gas network findings.
