Vector & Powerco network customers – look for a drop in gas prices

13 November 2013

TUMG Natural Gas PipelineBy now you should have received your October natural gas accounts.  If you are in the Vector or Powerco networks you should have seen a reduction in your overall cost of gas.  The ‘gas year’ runs from October to September and a raft of industry costs are reviewed annually ahead of October 1st.  Typically an inflation adjustment is passed through with metering, network and transmission charge changes applying.

The good news this year for most natural gas customers, especially those based in Auckland, is that the annual review should result in lower costs.  The Commerce Commission has enforced two sets of reductions – in transmission and distribution.  The change to transmission costs affects all customers. As such, the charging methodology and overall level of the charge has changed.

Previously customers were charged a variable rate per unit for usage and a fixed cost per day for capacity on the transmission network.  Capacity pressures on the transmission network have seen Vector drastically lower the variable cost (roughly equating to the daily running costs of the network) and increase the fixed daily capacity cost (the cost of long-term infrastructure support.)  This will serve to smooth Vector’s returns on its assets – but was coupled with an overall decrease in costs.  It has also made the hoarding of transmission capacity more expensive for gas retailers – which will hopefully alleviate some of the transmission constraints previously seen on the network.

In addition to these transmission reductions, the distribution costs charged by our two largest local network operators have been reduced.  Both Vector and Powerco have sought to rationalise their customer pricing bands and reduce pricing disparities for similar customers across their respective networks.  These changes should see some natural gas users enjoying real reductions in their costs whilst others will at the very least have a lower than usual price increase.

What does this mean for you?

Your recent natural gas invoice should cover supply from October 1st. As such, these savings should be apparent.  Ideally you will have received a communication from your retailer outlining these reductions ahead of time.  If this hasn’t happened, we recommend that you contact your retailer and request confirmation of when this price change is expected.  These are third party costs that suppliers on-charge to their customers and we should be mindful of avoiding the much bemoaned ‘petrol price syndrome’ where oil price reductions appear to filter through to the end user far slower than increases!