Higher fixed rate for gas confirmed

The commission has been reviewing the price that gas distribution companies can charge for connections. It is allowing gas networks to depreciate their assets over a shorter timeframe, which has the effect of increasing the daily fixed rates that gas companies charge their customers.

It is doing this because while the Government’s goal is for New Zealand to have 100% renewable energy by 2050, in the interim the commission wants to incentivise gas providers to continue to provide services to gas customers.

There are around 300,000 active gas connections, all in the North Island. The majority are residential consumers.

The Commerce Commission’s Associate Commissioner, Vhari McWha, said for a typical annual household gas bill of about $1246, this would be an increase of around $48 per year, or around $190 over the next four years.

However, that figure could be even higher if wholesale gas prices rise.

The Commission wants gas pipeline businesses to continue delivering a safe and reliable supply to consumers over the short-term until the future of gas use in New Zealand becomes clear.

Commerce Commission Associate Commissioner Vhari McWha said they want to avoid the potential for a sharp increase in existing customers' bills as demand for natural gas is expected to reduce over time.

The Commission is set to determine price and quality factors that apply to New Zealand’s four gas pipeline businesses by the end of May 2022. The decision will take effect from 1 October 2022 and will remain until 30 September 2026.

What does this mean for you?

You will still be able to get gas for, at least, the next four years – though it will be more expensive.

After that, the future of gas looks uncertain. However, the commission will be looking into whether pipelines can be repurposed for low- or no-carbon gas alternatives, such as hydrogen, to replace natural gas.

“We have considered the impact on consumers in determining how much revenue should be brought forward and balanced this against the need for businesses to invest in the networks to continue to provide the services at a level that consumers demand,” McWha said.

“We recognise that this will have an impact on some of New Zealand’s most vulnerable users of natural piped gas and have limited the size of the increase with that in mind.”

The commission hopes to have a clearer view of the long-term future of natural gas in four years. For now, the future of gas use in New Zealand remains unclear.