The commission has not recommended direct control for NGC’s transmission or distribution networks, Maui pipeline owner Maui Development Ltd, Wanganui Gas, Todd Energy-controlled Nova Gas or individual transmission pipelines located in Taranaki.

The gas industry had been bracing itself for this final report as the commission’s May draft report recommended control for NGC, Vector and Powerco.

That report estimated the net benefit to buyers (gas retailers) of price controls on gas transmission and distribution networks to be nearly NZ$20 million a year.

“The commission’s inquiry found Vector and Powerco each have substantial market power and are earning excess returns above their cost of capital to an extent that the commission is satisfied that it should recommend direct control,” commission chair Paula Rebstock said in Wellington today.

Direct controls on Auckland-based Vector would achieve a net benefit of NZ$6.9 million per annum; control on New Plymouth-headquartered Powerco would deliver NZ$3.7 million. The net benefits equated to average distribution charge reductions of 18.5% and 12.2% for consumers on the Vector (73,000 customer) and Powerco (107,000) networks.

The commission also found NGC Transmission, NGC Distribution and Wanganui Gas earned significant excess returns, and that direct control would achieve net benefits of NZ$2.4 million for NGC Transmission, NZ$1.6 million for NGC Distribution, and NZ$155,000 for Wanganui Gas.

But the commission did not recommend direct control for this trio, although it said constraints on these businesses and MDL should be strengthened and suggested the government impose a regulatory regime similar to that applied to electricity lines companies.

Industry commentators say today's news may also cast a shadow over the proposed Vector-NGC takeover as that would bring a vast gas pipeline network under the control of one company.

Rebstock said requiring businesses to disclose consistent and robust information through an enhanced information disclosure regime would also deliver substantial benefits. She urged the government to strengthen that regime.

“During its inquiry the commission was particularly concerned about common cost allocations by the gas businesses, and as a result, the commission adjusted the common costs of Powerco and Vector in the base case analysis,” she said.

Genesis Energy yesterday announced its residential gas prices would increase by an average of 14.4% from February, citing rising wholesale gas prices, transmission and distribution costs as reasons for the price hikes.

Energy Minister Pete Hodgson released the commission’s final report this morning and called for industry comment by February 15 before making his final recommendations by mid-2005.

If the government accepts this report it will be the first gas industry price control since 1992.