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First Gas faces prosecution for Papamoa pipeline purchase

Thursday 10th January 2019

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Pipeline operator First Gas is being prosecuted for anti-competitive behaviour in its purchase of new pipelines in the Bay of Plenty.

The Commerce Commission has begun proceedings in the High Court related to the firm’s 2016 purchase of 9.5 kilometres of steel and plastic pipelines that Whanganui-based GasNet laid in a new subdivision in Papamoa.

The commission says First Gas, which operates the country’s trunk transmission pipelines and is the third-largest gas distributor after Powerco and Vector, bought the assets without a clearance or authorisation from it.

The commission said the firm also behaved anti-competitively when – having initially been turned down by GasNet – it started laying its own pipelines in the areas where GasNet had installed its assets.

GasNet also contractually restrained the Whanganui-based company from operating in the Bay of Plenty for five years.

First Gas chief executive Paul Goodeve said the company accepted the commission’s finding that the purchase was likely to have reduced competition and will pay a financial penalty accordingly.

At the time of the acquisition it believed the transaction complied with the relevant regulations but now accepts “it had not fully considered the possible impact on other developers laying gas distribution networks,” he said in a statement.

“This was an oversight on our part and we accept we should have applied to the Commerce Commission for clearance of the acquisition at the time, which would have uncovered the issue before any breach occurred.”

GasNet, which is owned by Whanganui District Council, declined to comment, given the matter is before the court. Neither First Gas, nor the commission, would comment further.

The assets First Gas acquired, including a regulator station, lie inland from Papamoa Beach and are close to the existing First Gas network.

The value of the purchase hasn’t been disclosed, but in an update to its 2017 asset management plan, First Gas noted that capital spending in the 2017 financial year had been about $5.8 million higher than forecast at $20.3 million. That was due to the Papamoa purchase and a $3.5 million development at Titanium Park in Waikato.

First Gas said it acquired the assets to keep pace with the rapid commercial and housing growth in the area. The investment would also avoid the need to reinforce its existing assets.

“This acquisition is consistent with our desire to give consumers the choice of reticulated natural gas in the areas that we serve,” the New Plymouth-based company said.

“Other initiatives that we have implemented that are consistent with this strategy include offering free household connections - for households within 20 metres of our networks - and not requiring capital contributions from developers in certain circumstances.”

While the proposed purchase had not been included in First Gas’s 2016 asset management plan, the company noted that the Commerce Commission had considered it in its final determination of pricing for the company.

(BusinessDesk)

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