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

 

Scoop Business: Equity Crowd Funding Carries Risks, High Failure Rate

Equity crowd funding, which became legal in New Zealand this month, comes with a high risk of failure based on figures showing existing forays into social capital have a success rate of less than 50 percent, one new entrant says. More>>

ALSO:

Scoop Business: NZ Migration Rises To 11-Year High In March

The country gained a seasonally adjusted 3,800 net new migrants in March, the most since February 2003, said Statistics New Zealand. A net 400 people left for Australia in March, down from 600 in February, according to seasonally adjusted figures. More>>

ALSO:

Hugh Pavletich: New Zealand’s Bubble Economy Is Vulnerable

The recent Forbes e-edition article by Jesse Colombo assesses the New Zealand economy “ 12 Reasons Why New Zealand's Economic Bubble Will End In Disaster ”, seems to have created quite a stir, creating extensive media coverage in New Zealand. More>>

ALSO:

Thursday Market Close: Genesis Debut Sparks Energy Rally

New Zealand stock rose after shares in the partially privatised Genesis Energy soared as much as 18 percent in its debut listing on the NZX, buoying other listed energy companies in the process. Meridian Energy, MightyRiverPower, Contact Energy and TrustPower paced gains. More>>

ALSO:

Power Outages, Roads Close: Easter Storm Moving Down Country

The NZ Transport Agency says storm conditions at the start of the Easter break are making driving hazardous in Auckland and Northland and it advises people extreme care is needed on the regions’ state highways and roads... More>>

ALSO:

Houses (& Tobacco) Lead Inflation: CPI Up 0.3% In March Quarter

The consumers price index (CPI) rose 0.3 percent in the March 2014 quarter, Statistics New Zealand said today. Higher tobacco and housing prices were partly countered by seasonally cheaper international air fares, vegetables, and package holidays. More>>

ALSO:

Notoriously Reliable Predictions: Budget To Show Rise In Full-Time Income To 2018: English

This year’s Budget will forecast wage increases through to 2018 amounting to a $10,500 a year increase in average full time earnings over six years to $62,200 a year, says Finance Minister Bill English in a speech urging voters not to “put all of this at risk” by changing the government. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news