Gas pipeline monopolies under investigation

The Government will request the Commerce Commission to report on whether increased regulatory control should be introduced for gas pipelines.

"There has been significant debate over whether gas pipeline prices are excessive," said Energy Minister Pete Hodgson. "Some commentators believe that there is evidence that monopoly rents have been received by at least the main pipeline owners. However the issues are not straightforward, and there is room for debate.

"A formal inquiry by the Commerce Commission under section 56 of the Commerce Act offers the best way of dealing with the various monopoly issues, including appropriate asset valuation. The Government will be asking for an inquiry covering all gas transmission and distribution pipelines, including the Maui pipeline. Such an inquiry is expected to take 18 to 24 months."

The Government has decided to beef up the Gas (Information Disclosure) Regulations 1997 in the meantime. This will improve the ability of interested parties and the Government to monitor industry performance. This type of information will be necessary even if firmer regulation is recommended by the Commerce Commission.

As part of these changes, Optimised Deprival Value (ODV) will be formalised in the information disclosure regime as an interim measure because: while ODV is currently used by gas pipeline companies there is no assurance of consistent application of valuation rules (this can impact on profit measures); and regulated ODVs provide a firm basis for making any commercial gain transparent. "This approach should not be interpreted as the Government favouring ODV as the asset valuation methodology for gas, or pre-empting the outcomes of the Commerce Commission’s deliberations", said Pete Hodgson.

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