In its first use of its price control powers, the commission has ordered Auckland-headquartered Vector to drop its average prices by 9.5% from October, and New Plymouth-headquartered Powerco to cut its average prices by 9%.

The new prices must be lower than the average prices charged at the end of June.

The impact of the commission’s moves on the share price of newly-listed Vector is not yet clear, as the commission issued its price control statement after the NZX closed last night. Since the August 15 list date, Vector shares have soared in value from the NZ$2.38 IPO price, finishing yesterday at NZ$3.34.

Commission chairperson Paula Rebstock last night said its provisional authorisation struck an appropriate balance, taking into account the interests of all those affected.

“The decision on price reductions has been made with due regard to issues identified in the Gas Control Inquiry final report, submissions made to the Ministry of Economic Development on that report, and subsequent submissions made to the commission by Powerco and Vector," she said.

Rebstock said the commission would be writing to the gas retailers contracted to Powerco and Vector, seeking information on how the price reductions would be passed on to consumers.

The country's biggest gas retailer, Genesis Energy, says it will pass on any price cuts imposed by the commission, while Contact Energy expects to drop its prices to customers if transmission charges fall.

The commission acted following yesterday’s High Court rejection of applications from both Powerco and Vector for urgent interim orders directing the form of control to be implemented by the commission.

In dismissing the applications, Justice Goddard said any granting of interim relief would frustrate the regulatory process, to the detriment of direct and indirect consumers, and would delay the commission implementing the decision of Energy Minister Trevor Mallard.

Mallard last month recommended the commission implement price control for Vector and Powerco after it found the two were earning “excessive” after-tax returns on capital of 12.7% and 13.5% respectively and said Vector pipeline customers should see an average drop of 18.5%, and Powerco pipeline consumers a 12.2% decrease, from price control.

Former Powerco boss Steven Boulton - who now heads Powerco parent Babock & Brown Infrastructure in Sydney – has already slammed the commission’s decision, saying the NZ energy industry desperately needs an independent third party to review the decisions of such regulators.

Companies needed the opportunity to have the merits of different systems and outcomes reviewed by an independent body, not just a judicial review of the legality of decisions taken, said Boulton. Babcock & Brown’s initial assessment of price control was a NZ$5.5 million impact on Powerco’s net revenues.

Vector chief executive Mark Franklin has said the new regulations were not a huge deal, affecting only an incremental part of group business, Auckland gas pipeline services, but he objected to the principle of price control.