28 Feb 2013

Changes to gas network charges

2:07 pm on 28 February 2013

Vector will have to cut its gas network charges from July, after the Commerce Commission finalised future price rises.

The commission says Vector will have to slash its gas distribution charges by 18% and transmission charges to larger users by 30%.

Maui Development will have to drop its prices by 1%, while Powerco could raise its distribution charges by 4% and GasNet of Wanganui by 2%.

The commission has limited future price increases to no more than the rate of inflation from 2014 to 2017.

Deputy chair Sue Begg said the changes ensure prices are closer to the cost of providing those services.

She said the reductions should not limit Vector's ability to maintain and invest in its network.

But Vector disagrees: chief executive, Simon Mackenzie said a High Court merits review over the methodologies used to set the prices, which is due in May, will decide who's right.

Mr Mackenzie said the cost of capital remains the biggest hurdle, with the commission arguing 7.4% is the right rate, while Vector says 10% is appropriate.

Under the new prices, Vector's 144,000 residential gas customers could have their bills cut by more than $5 per month, while Powerco's 102,000 users could pay 30 cents more. GasNet's 10,000 customers will see no change.

The commission says Vector could apply for a customised pricing path to enable it to carry out costly projects, but it would be subject to scrutiny.