Commerce Commission Website - Controlled Gas Services


Controlled Gas Services
Sections of the Commerce Act 1986 referred to in the text below have been repealed under the Commerce Amendment Act 2008. Background - The Gas Control Inquiry On 30 April 2003, the Minister of Energy requested the Commerce Commission to report on whether goods and services supplied in markets directly related to gas transmission and distribution systems should be subject to control and hence whether an Order in Council under Section 53 of the Commerce Act should be made in relation to gas pipeline services. In its Inquiry on Gas Control, the Commission was governed by the Section 52- 56 of the Commerce Act. Section 52 of the Commerce Act requires the Commission to consider two key issues in relation to whether or not control under Part V may be imposed. Goods or services may be controlled under Section 52 if: competition is limited or is likely to be lessened in a relevant market; and control is necessary or desirable in the interests of persons who acquire or supply the goods or services in the affected market or markets. Having determined whether control may be introduced under Section 52, the Commission conducted further analysis to determine whether an Order in Council imposing control should be made (Section 56(1)). The Commission submitted its report to the Minister on the 29 November 2004. The Commission recommended: For the gas pipeline services businesses of NGC Transmission, NGC Distribution, Wanganui Gas, and Maui Development Limited the Commission advised the although the requirements of Section 52 were met for the introduction of control, that the Order in Council should not be made; and For the gas pipeline services businesses of Vector and Powerco, the Commission advised that the requirements of Section 52 were met for the introduction of control, and that the Order in Council should be made. Control under Part 5 of the Commerce Act On 27 July 2005 the Minister of Energy announced the decision to impose control over the gas distribution services of Powerco and Vector. The Minister made this decision based upon, among other advice, the recommendations of the Commission in its Gas Control Inquiry Final Report. Control was implemented by way of an Order in Council (the Control Order), and took effect on and including 25 August 2005. Section 55 of the Act requires the Commission to authorise the supply of the controlled goods and services. On 24 August 2005, pursuant to Section 71 of the Act, the Commission issued the Commerce Act (Natural Gas Services) Provisional Authorisation 2005 (Provisional Authorisation) specifying the control terms for the supply of the controlled services by Vector and Powerco to enable the controlled services to be lawfully supplied on and after 25 August 2005. The Provisional Authorisation took effect from 25 August 2005, reducing average prices by 9% for Powerco and 9.5% for Vector. The terms of the Provisional Authorisation will remain in effect until such time as a further provisional authorisation under section 71 or the Authorisation under section 70 of the Act is determined (or an acceptance of an undertaking). In July 2006 the Commission consulted on whether to amend the Provisional Authorisation. The Commission decided not to amend the Provisional Authorisation at that time. On 31 October 2008, the Commission made a determination in relation to the final authorisation (the Authorisation) for the controlled services pursuant to section 70 of the Act. Section 70(1) of the Act enables the Commission to make an authorisation in respect of all or any component of prices, revenues, or quality standards that apply in respect of the controlled services using whatever approach it considers appropriate.