Commission sets new revenue limits for gas pipeline businesses

Associate Commissioner Nathan Strong says the Commission’s role is to ensure consumers don’t pay more than necessary as gas networks adapt to changing use. “Our decision means we are keeping prices as stable and predictable as possible, while making sure the system stays safe and reliable.”
 
“For most households, this means moderate, gradual increases and more certainty about what they’ll pay over the next five years,” said Strong.
 
Gas demand is expected to decline, but it will continue to play a role in New Zealand’s energy system for years to come. 
 
However, gas pipeline costs are largely fixed – meaning they don’t fall even if fewer people use gas. Maintenance and monitoring of the network need to continue regardless of how much gas flows through it. 
 
“A key focus is to ensure the gas pipeline businesses can recover their necessary costs over the five-year period. This ensures gas is flowing safely and reliably now - and while consumers continue to demand gas in the future.” 
 
The Commission says changes are already underway across the sector, with gas pipeline businesses reducing investment and focusing more on regular checks and maintenance. For example, as recently as 2022, the businesses collectively spent around $90 million on new capital in that year. For the next five years that number has come down to just over $50 million initially and declining every year. 
 
“To reinforce that shift, we’ve allowed for 7% less in capital expenditure than the businesses had planned. We’ve also provided revenue allowances in line with recent operating spend, but 5% lower than what they put forward in their asset management plans,” says Strong.
 
“We expect businesses to make careful decisions about where they invest, focusing on the best overall long-term value for consumers. This means prioritising spending in a way that keeps the network safe and reliable while helping manage impacts on consumer bills over time.”
 
In terms of the total revenue gas pipeline businesses can recover, the Commission is allowing modest increases in revenue now, rather than deferring costs into the future, to support more stable pricing over time. The increases are largely driven by how network assets are depreciated. 
 
“Households and businesses need as much certainty as possible as the energy system changes. By limiting increases where we can and keeping the system safe and reliable, we’re helping ensure people who choose to continue using gas can do so with some confidence and predictability,” Associate Commissioner Strong says.
 
Most households are expected to see moderate increases of around 1 to 3 percent from 1 October 2026 (excluding inflation). In Auckland, where pipeline charges have historically been lower, households are expected to see slightly higher increases, phased in over time.
 
For an average residential customer (outside of Auckland), the gas bill increase from pipeline charges would be less than $5 extra per month in the first year. An average residential customer on Vector’s Auckland network, would see an increase of less than $5 extra per month, for each year in the first three years.
 
Small businesses will see similar percentage price increases to households, but higher overall costs due to greater usage.

Larger commercial and industrial users are more exposed to wider energy market conditions, including gas availability and wholesale prices. 
 
“Overall, the decision reflects the Commission’s long-term approach to setting prices and revenues in a way that can be sustained over time. We’ve continued the approach we took in the last price path, balancing the right incentives for maintaining the network while recognising a potentially shorter economic life for the assets,” adds Associate Commission Strong.

Background

Under the Commerce Act, the Commerce Commission regulates the businesses that own and operate New Zealand’s natural gas transmission and distribution pipeline infrastructure. These networks are all on the North Island. Companies involved include Firstgas Transmission, Firstgas Distribution, GasNet, Powerco, and Vector. 

We regulate gas transmission and distribution businesses through price-quality path regulation by setting the maximum revenue each business can collect from electricity consumers and the minimum quality standards they must maintain. Maximum revenue allowances are reset every 4-5 years.

We do not oversee the daily operations of the gas sector or set the exact prices regulated businesses charge their customers. They are responsible for their own decisions on the operation and maintenance of their networks within the boundaries we set them.

Pipeline charges make up about one-third of a typical residential user’s gas bill. The total amount consumers pay will continue to depend on wholesale gas prices and retailer pricing, which are not regulated by the Commission.
 
There are just under 300,000 residential users, 13,000 commercial consumers and about 400 industrial users on the North Island who use gas pipeline services.

New Zealand’s gas production has halved since 2016, with the decline occurring much faster than anticipated

While gas demand in New Zealand is expected to decline over time, the Commission considers gas will remain an important part of New Zealand’s energy mix for at least the next two decades. Given this expectation, gas pipelines must be maintained and operated to provide reliable services to consumers who continue to use gas.