Gas form of control discussion document released

Gas form of control discussion document released

The Commerce Commission has released its proposals for the form of control to be imposed on the gas distribution services of Powerco and Vector.

The discussion paper provides a comprehensive review of the issues that the Commission considers are relevant to determining the final form of control. At present control is administered by way of a Provisional Authorisation.

Submissions are invited from all interested parties, including economists and lawyers working in the regulatory area, and major gas consumers.

The Commission has considered the following broad forms of control to determine the appropriate form of control for the Authorisation:

 rate of return regulation;
 total revenue cap;
 average revenue cap;
 weighted average price cap;
 disaggregated price cap; and
 sliding scale regulation.

The Commission’s preliminary view is that the weighted average price cap is the preferred form of control for standard consumers. For the non-standard customers and metering services the total revenue cap is the preferred form of control.

A table in the background section of this media release is a summary of the proposed control terms for the three types of control groups.

The discussion paper poses specific questions in relation to the Commission’s proposals, and the Commission also welcomes wider comments. Questions posed by the discussion paper include:

 Are there any other options for the form of control that the Commission should be considering?
 Are there issues with a five year initial control period of the Authorisation, starting on 25 August 2005?
 Are there issues with using financial incentives to regulate quality?

Submissions on this discussion paper are due by 7 August.

A conference on the form of control is now planned for 5 and 6 September. The conference allows key interested parties to present their submissions to the Commission. The submissions, conference, and cross submissions will inform the Commission’s decisions. The Commission’s draft decisions will be presented for further consultation in early 2007.

The document’s full title is Authorisation for the Control of Supply of Natural Gas Distribution Services by Vector Ltd and Powerco Ltd Form of Control - Discussion Paper.

It can be found on the Commission’s website www.comcom.govt.nz under Regulatory Control Enquiries / Regulated Gas Control.

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