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Vector faces 25 percent price cut for gas lines

Wednesday 24th October 2012

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Vector, the Auckland network owner, would have to accept a 25 percent cut to its transmission charges for gas pipelines under proposed default price-quality paths proposed by the Commerce Commission.

The regulator has released the proposed changes which would establish the biggest adjustments that would start on July 1 next year. After that, prices would be adjusted by the rate of inflation through until 2017, it said in its revised draft decision.

Vector has been battling the changes with a court challenge. The changes provide some winners and some losers. Powerco, for example, could raise prices in its distribution by 5 percent.

Vector's distribution prices for its Auckland network would be cut by 16 percent, while GasNet would face a 2 percent distribution cut and Maui development would enjoy a 2 percent transmission increase.

For customers of Vector, the reduced distribution charge would amount to a $4.60 cut to the monthly bill for the 143,602 residential gas users in Northland, Greater Auckland, Waikato, Bay of Plenty, Rotorua, Taupo, Gisborne and Kapiti. Powerco's users would face a 60 cent increase and those of GasNet in Wanganui would enjoy a $1.10 decline.

"This is the first time that some of these businesses have been subject to price-quality regulation," said Sue Begg, commission deputy chair. "We are now bringing the prices these businesses can charge their customers more into line with the costs of providing those services."

Begg said that while the reductions for Vector were "substantial" the commission doesn't expect this to limit its ability to invest in or maintain its network.

Vector chairman Michael Stiassny said this month that the commission was imposing price cuts on Vector using a flawed methodology that risks undermining investment in critical public infrastructure.

"Price cuts as the commission is suggesting, if sustained over the long term, threaten continued investment in our network and therefore the infrastructure to support growth in Auckland and the broader economy," said Stiassny.

Parties have until Dec. 7 to make submissions on the revised draft decision.

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