Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Gas retailers respond to distribution reductions

Media Release

Issued 23 March 2006/109

Gas retailers respond to distribution price reductions

In August 2005 the Commission issued a Provisional Authorisation requiring the average price for the distribution component of gas prices to be reduced by at least 9% and 9.5% for Powerco and Vector respectively. The Commission sought a response from gas retailers as to how they proposed to pass on these savings to their customers.

The majority of gas retailers had passed on the reductions but advised that several factors affected their ability to pass on the reductions to all consumers at the same time. These included the need to comply with contractual terms in fixed-term contracts, set periods of notice and the need to amend billing systems. Where the implementation of price reductions has been delayed, some retailers have applied a retrospective adjustment (‘wash-up’) to achieve the full effect of a pass-through.

Auckland Gas Company informed the Commission that it intends using the reduction in distribution costs to offset their planned future residential price increases. The impact of this upon pricing is unclear. In the case of Nova Gas the approach to pricing upon contract rollover is also unclear.

Commerce Commission Chair Paula Rebstock expressed general satisfaction that most retailers had endeavoured to pass on the price reductions in a timely fashion but was concerned future price changes need to be communicated to customers transparently.


On 27 July 2005 the Minister of Energy announced the decision to impose control over the gas distribution services of Powerco and Vector. A Provisional Authorisation was subsequently issued on 27 August 2005 by the Commission pending a final authorisation being prepared. The Provisional Authorisation required that the average price for controlled services be reduced by at least 9% and 9.5% from 1 October 2005 for Powerco and Vector respectively.

Gas distribution companies have a direct contractual relationship with gas retailers rather than consumers. Accordingly, for the Provisional Authorisation to affect prices paid by consumers, gas retailers would need to ‘pass on’ the reduced distribution charge to their customers.

In a contestable market, the Commission considers that effective competition would see a transparent reduction in prices across retailers that matches the reduction in the distribution component of the price although the effect may be masked by the bundling of transmission, distribution and retail components of prices

The Final Authorisation is due later in 2006.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Media Mega Merger: StuffMe Hearing Argues Over Moveable Feast

New Zealand's two largest news publishers are appealing against the Commerce Commission's rejection of the proposal to merge their operations. More>>


Approval: Northern Corridor Decision Released

The approval gives the green light to construction of the last link of Auckland’s Western Ring Route, providing an alternative route from South Auckland to the North Shore. More>>


Crown Accounts: $4.1 Billion Surplus

The New Zealand Government has achieved its third fiscal surplus in a row with the Crown accounts for the year ended 30 June 2017 showing an OBEGAL surplus of $4.1 billion, $2.2 billion stronger than last year, Finance Minister Steven Joyce says. More>>


Mycoplasma Bovis: One New Property Tests Positive

The newly identified property... was already under a Restricted Place notice under the Biosecurity Act. More>>

Accounting Scandal: Suspension Of Fuji Xerox From All-Of-Government Contract

General Manager of New Zealand Government Procurement John Ivil says, “FXNZ has been formally suspended from the Print Technology and Associated Services (PTAS) contract and terminated from the Office Supplies contract.” More>>