Warning of cost to consumer if Govt pushes for gas regulation

By CHRIS DANIELS energy writer

Government plans for reform and possible regulation of the gas sector have met a mixed, if muted response from the industry.

Powerco chief executive Steve Boulton said the big users of gas directly negotiated their own prices and contracts and any Government regulation of distribution companies would have an unnecessary impact on consumers.

Gas, said Boulton, was an elective energy option where fewer than one in eight New Zealand consumers had access to both electricity and gas.

"This clearly suggests that regulation should be more concerned about encouraging additional investment than regulating existing assets."

NGC's chief executive Phil James said Energy Minister Pete Hodgson's announcement had been "generally in line with expectations".

"NGC has long organised itself to address industry issues as they arise and we will be participating fully in the process."

Contact Energy's general manager of corporate affairs, David Hunt said the review was welcome and built on a number of initiatives that were already under way.

Open access to the Maui gas pipeline was a priority, he said, and Contact looked forward to working with others to achieve it.

It was not sustainable to have only gas from the Maui field going through that pipeline.

"It is declining and we need to be able to fill that gap from other sources," he said.

Hodgson this week opened the tap on a range of measures designed to prepare the industry for the challenge facing the sector by the looming depletion of the Maui gas field, which has dominated the energy industry for the past 20 years.

The Commerce Commission will investigate whether the owners of gas pipelines - primarily listed company NGC - are charging monopoly rents for others to use their transmission.

Hodgson has also "invited" gas industry players to set up a self-governance body to regulate the sector.

Natural gas provides 23 per cent of electricity generation in normal years, rising significantly in a dry year - during last year's cold, dry winter, this figure increased to 30 per cent.

More than 80 per cent of natural gas is used to either make petrochemicals or by big power companies to generate electricity at thermal power stations.