Average gas bills to drop under final revenue reset

31 May 2017

Average gas bills to drop under final revenue reset

The Commerce Commission has released its final decisions on the default price-quality paths (DPP) for gas pipeline services. These paths set the revenues and minimum quality standards that the four gas distributors and one gas transmission business must comply with for the five-year regulatory period beginning 1 October 2017.

The Commission has decided that the maximum revenues regulated gas pipeline businesses (GPBs) can recover from users of gas pipeline services will decrease by around 13% or $33 million a year compared with current revenue allowances. The Commission estimates that the pass through of this price reset will reduce average household consumer bills for gas consumption by approximately 6% in 2017/18. The exact price impact will vary for consumers across different regions.

The Commission considers that, with these allowed revenues, GPBs will be able to maintain the quality and reliability of the services they provide.

Deputy Chair Sue Begg said that while the primary driver for the reduced revenue limits was a lower cost of capital, the Commission had also focused on setting price paths that were more tailored to each GPBs’ particular circumstances.

“By basing our assessment on the businesses’ own asset management plans we have been able to better ensure that the maximum revenues set meet their individual investment needs and operating costs. This means we are in a better position to ensure consumers are charged prices that are aligned with the reasonable cost of the services they receive,” Ms Begg said.

“Following our draft decisions in February, we received further evidence from the GPBs regarding their forecast costs. We have increased our expenditure allowances for Vector’s distribution business and First Gas’ distribution and transmission businesses compared with our draft decisions. The most significant change has been our acceptance of additional investment by First Gas to maintain the integrity and resilience of its transmission network.”

As noted in the draft decisions, the Commission has not included the expenditure that First Gas forecasts will be needed to future-proof the transmission pipeline at White Cliffs in Taranaki. It is anticipated this project will be addressed separately under a customised price-quality path.

In its final decisions the Commission confirmed its draft decision to introduce a new quality standard for gas transmission businesses focused on maintaining the reliability of the current network. The quality standard requires First Gas to maintain an uninterrupted gas transmission service at all times. This reflects that, while rare, interruptions in gas transmission can have a large impact when they occur.

The final decision and an infographic detailing the revenue changes for each GPB by region can be found on the Commission’s website.

ends

© Scoop Media