The Commerce Commission has given the thumbs down to undertakings from Vector and Powerco for their natural gas network.
In 2005 the Minister of Energy placed the pair's gas pipeline under regulatory control, enforced by the commission.
The commission sets the price and other conditions under which thecompanies supply gas.
A provisional authorisation has been in place since August 2005 and the commission has been working on a final authorisation, though the commission can accept an undertaking instead of making an authorisation.
The commission received an such offer of undertaking from Vector on April 21 and Powerco on April 23.
The commission said in a preliminary view today that it would not accept the undertakings and it was seeking submissions on this position by September 18.
Vector chief executive Simon Mackenzie said the decision, which covered Vector's Auckland gas pipeline, was disappointing.
"We believe that our offer was appropriate given the history of this matter and the principle of forward looking regulation.
"We believe it also struck the right balance between consumer interests and investment incentives."
He said the commission had not said in detail why it turned the offer down.
"This further highlights the need for a robust and transparent process," he said.
The commission expected a decision on the authorisation to be made by October 2008.
