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

 


Vector to cut gas distribution prices by 18%

Vector to cut gas distribution prices by 18%

Feb. 28 (BusinessDesk) - Competition regulator the Commerce Commission has confirmed that gas distribution network owner Vector will have to cut its prices by 18 percent, and cut its wholesale gas transmission charges by 29.5 percent.

The final determinations are in line with earlier drafts, and remain the subject of a High Court merits appeal led by Vector and supported by a range of monopoly service providers such as electricity, port, and airport operators who believe the commission is using the wrong inputs to determine regulated pricing.

In the meantime, Vector chief executive Simon Mackenzie argued to journalists this morning that the reduced pricing, while contested, was a tribute to Vector's operational efficiencies.

Mackenzie said it was a "paradox of regulation" that if a regulated company managed its costs well and improved its profitability within the limits of its mandated pricing, it could effectively suffer a penalty by being required to cut its prices further.

Vector is objecting particularly to a "massive swing" in the assumed cost of capital being used by the commission to determine pricing. While the reductions reflected lower international interest rates, risk premiums were rising.

"If you look at recent decisions in the UK, in the low interest rate environment, the regulator has kept their weighted average cost of capital at the same level because of a need to adjust the market risk premium," Mackenzie told BusinessDesk.

The new price reductions hit Vector hardest. Other gas distributors face decreases of between 2 percent and 4 percent.

"Although substantial price reductions are necessary for Vector, we do not expect this to limit its ability to maintain and invest in its network," the commission's deputy chair, Sue Begg, said in a statement. "The default paths provide for increases in investment of up to 20 percent above what a business has spent historically."

Companies could also apply for a customised price path to replace the commission's default settings.

A decision from the merits review is expected in the second quarter of this year and could, depending on its outcome, lead to further adjustments to gas and electricity network pricing.

At its half year result announcement last week, Vector warned earnings in the second half of the current financial year would suffer as cuts to network pricing took effect. The company achieved a 10.8 percent lift in tax-paid earnings to $118 million in the six months to Dec 31.

Vector shares were unchanged in early trading this morning on the NZX, at $2.84.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Media: Fairfax Moves To Create Modern Newsroom

Fairfax Media New Zealand continues its newsroom transformation this week, with a proposal to further organise its editorial operations into focused, local teams and specialist national topic areas. More>>

ALSO:

Dairy: Fonterra Forecast For 2015/16 Season

Fonterra Co-operative Group Limited has today reduced its forecast Farmgate Milk Price for the 2014/15 season to $4.40 per kgMS. Along with its previously announced forecast dividend range of 20-30 cents per share, the change amounts to a forecast ... More>>

ALSO:

BusinessDesk: SkyCity Lifts Minimum Convention Centre Investment To $430M

SkyCity Entertainment Group, the casino operator, has lifted the minimum it will invest in the Auckland International Convention Centre to $430 million and said total costs including land may be $450 million to $470 million. More>>

Statistics: Drop In Dairy Prices Leads Fall In Exports

Total goods exports fell $240 million (5.5 percent) to $4.2 billion in April 2015 compared with April 2014, Statistics New Zealand said today. More>>

BusinessDesk: APN's NZME Sees Future In Paywalls, Growth In Digital Sales

APN News & Media has touted a single newsroom concept for its NZME unit in New Zealand, similar to what Germany's Die Welt uses, saying an 'integrated sales proposition' is helping it win market share, including ... More>>

Labour Party: Global Milk Prices Now Lowest In 6 Years

The latest fall in the global dairy price has brought it to the lowest level in six years and shows there must be meaningful action in tomorrow’s Budget to diversify the economy, says Labour’s Finance spokesperson Grant Robertson. “Dairy prices ... More>>


BusinessDesk: NZ Inflation Expectations Creep Higher In June Survey

May 19 (BusinessDesk) - New Zealand businesses lifted their expectations for inflation over the next two years, sapping any immediate pressure on the Reserve Bank to cut interest rates, and prompting the kiwi dollar to jump higher. More>>

BusinessDesk: Lower Fuel Costs Drive Down NZ Producer Input, Output Prices

May 19 - Producer input and output prices fell in the first quarter, mainly reflecting lower fuel costs and weakness in prices of meat and dairy products. More>>

Media: Fairfax Media NZ Announces Senior Editorial Team

Fairfax Media New Zealand has today confirmed its new editorial leadership team, as part of a transformation of its newsrooms aimed at enhancing local and national journalism across digital and print. More>>

Science: Flavonoids Reduce Cold And Cough Risk

Flavonoids reduce cold and cough risk Research from the University of Auckland shows eating flavonoids – found in green tea, apples, blueberries, cocoa, red wine and onions – can significantly reduce the risk of catching colds and coughs. The research, ... More>>

BusinessDesk: RBNZ House Alert Speech The Catalyst For Government Action

Prime Minister John Key all but conceded that pressure from the Reserve Bank of New Zealand for concerted action on rampant Auckland house prices was one of the main catalysts for the government's weekend announcements about tightly ... More>>

BusinessDesk: How To Fall Foul Of The New Housing Tax Rules: Tips From IRD

Just because you rented out your investment property doesn't absolve you from paying tax, says the Inland Revenue Department in a summary of commonly made mistakes by non-professional property investors when it comes to their tax liability.More>>

Legal: Superdiversity Law, Policy And Business Stocktake Announced

Mai Chen, Managing Partner at Chen Palmer New Zealand Public and Employment Law Specialists and Adjunct Professor of Law at the University of Auckland, today announced the establishment ... More>>

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news