Commission proposes stable pricing approach for gas pipelines
The Commerce Commission has released its draft decision on the revenue limits and quality standards for regulated pipeline infrastructure businesses for the five-year period starting 1 October 2026.
Commissioner Vhari McWha says the decision to keep gas pipeline infrastructure revenues largely constant over the next five years should be viewed in a long-term context.
“Domestic gas production is declining faster than anyone expected. Yet natural gas, including some biogas blends, remains an essential fuel for many homes and businesses. We expect gas use to continue for at least twenty years. Investment in gas networks will need to continue, to provide safe and reliable networks over this horizon,” said Ms McWha.
“The downturn in the gas sector was something we recognised in our 2022 price review, when we considered a range of future scenarios for the sector – including the risk of whole or partial closure of the gas network – alongside the impact on households and other users of natural gas.
“The final price-quality path we set then reflected that the remaining life of natural gas pipelines in New Zealand was likely to be shorter than previously expected. In revisiting our analysis, some risks have materialised more quickly than expected, while others have abated. On balance, our view is that the scenarios we adopted in 2022 remain reasonable.”
The draft decision proposes moderate increases in revenue limits to support safe and reliable networks and retains current quality standards for outages and emergency response times. It allows pipeline businesses to bring forward some depreciation costs to reflect the shorter economic life of their infrastructure assets, with modest increases in operating allowances, excluding growth-related capital expenditure.
Currently there are around 300,000 individual connections to the regulated natural gas network, solely in Te Ika a Maui, the North Island. Most of the connections are households but most of the gas consumption is by a smaller number of commercial and industrial users. Some high-volume industrial users take natural gas directly from the transmission network.
Ms McWha says the draft decision would mean a modest increase in the pipeline component of the household gas bills from October 2026. Pipeline charges make up about one third of the residential gas bill. The final price consumers pay will also depend on their retailer’s pricing and individual circumstances.
The Commission has estimated the consumer bill impacts.
Consumers on Vector’s Auckland network would see the largest adjustment, which has been spread over 2 years to ease the impact. The estimated average increase in Auckland household gas bills is about $4 per month in the first year, and again in the second year.
Vector’s maximum revenues have been held flat for the past three years, and there is less room to offset costs now. After this adjustment, Vector’s average monthly charges are expected to remain among the lowest when compared to other networks.
The average household bill in other areas of the North Island would increase by around $2 per month from October 2026,” said Ms McWha.
For the remainder of the period, average increases are expected to be largely limited to inflation.
The draft decision sets out a stable approach to maintain safe, reliable infrastructure while there is still demand from gas users. The Commission is now inviting feedback before finalising its decision.
Background
Under Part 4 of the Commerce Act, the Commission sets price-quality paths for regulated gas pipelines which limit the revenue that gas pipeline businesses can earn and sets the minimum quality standards the businesses must meet. For gas distribution businesses these revenue limits will increase or decrease if actual demand is higher or lower than expected demand.
Five gas pipeline businesses are subject to price-quality regulation. Firstgas, GasNet, Powerco and Vector are all gas distribution businesses that transport natural gas to commercial and industrial users as well as households. First Gas also has a gas transmission business that provides gas to large users of natural gas such as big industrial plants, electricity generators and the gas distribution businesses.
The Commission is inviting feedback via submissions until 22 January 2026, with cross-submissions to follow. The final decision will be published by the end of May 2026 and take effect from 1 October 2026.