Mallard turns down gas costs

Gas consumers could be in line for something not seen for years - cheaper energy bills, with the Government's decision to impose price controls on New Zealand's two biggest gas distribution companies, Vector and Powerco.

An average annual price cut of $114 for Vector's 75,000 customers and a $51 reduction for Powerco gas users has now been mooted, with Energy Minister Trevor Mallard endorsing a Commerce Commission call for regulation.

The commission told the minister last year that the companies, both of which also run powerline networks, were abusing monopoly powers and overcharging customers. It said Vector would reap monopoly profits of $76.9 million from its gas pipes between 1997 and 2008, and Powerco would gain just over $50 million.

Now, possibly with one eye on the September election, Mr Mallard has decided to accept the commission's advice and impose price controls.

Both companies have protested long and hard against any regulation of their gas pipelines business. They say that they do not have a monopoly, since anyone can decide to use electricity instead of gas.

Vector chief executive Mark Franklin said "the timing was interesting" and he was surprised the Government had not waited for the results of a judicial review of the Commerce Commission's original recommendations.

Mr Mallard rejected any suggestion of electioneering, saying he had only just received advice from his officials on whether to accept the recommendation to regulate.

Only 25 per cent of people who can get gas through a Vector line actually do so. The lines companies say natural gas use should be encouraged by the Government since it reduces the demand for electricity.

News of the minister's decision comes at a particularly sensitive time for Vector, which is on the brink of a partial privatisation and stock market listing.

It is raising $593 million to pay for its takeover of gas wholesaler and transmission company NGC.