Other Requests from the Minister
Appropriate Valuation Methodology for This Inquiry
192. The Commission investigated the use of both historic cost and replacement cost valuation approaches for this Inquiry. The historic cost information was found to be generally unavailable. ODV/ODRC valuations were readily available and relatively robust compared to the historic cost information. Therefore, the Commission considers that the appropriate valuation methodology for this Inquiry to be ODV/ODRC.
Net Benefits to the Public of Control
193. The Minister requested the Commission to advise him on the net public benefits of control. The net public benefits assessment measures only efficiency effects. The efficiency effects under the net public benefits assessment are largely the efficiency effects within the NAB test.VII
194. The benefits, costs and net public benefits assessed at the mid-point of WACC for NGCT, NGCD, Vector, Powerco and Wanganui Gas are set out in Table 16.
Table 16: Net Public Benefits| Company | Mid WACC (Annuity $000) |
| NGCT | |
| Total efficiency benefits | 644 |
| Total efficiency costs | 1,740 |
| Net Public Benefits | -1,096 |
| NGCD | |
| Total efficiency benefits | 306 |
| Total efficiency costs | 1,219 |
| Net Public Benefits | -913 |
| Powerco | |
| Total efficiency benefits | 401 |
| Total efficiency costs | 1,134 |
| Net Public Benefits | -732 |
| Vector | |
| Total efficiency benefits | 685 |
| Total efficiency costs | 1,388 |
| Net Public Benefits | -702 |
| Wanganui Gas | |
| Total efficiency benefits | 47 |
| Total efficiency costs | 421 |
| Net Public Benefits | -374 |
Technical Provisions Relating to Section 57A of the Commerce Act
Description of Services
195. The Order made under s 53 of the Commerce Act may identify the services to which it relates:
- by a description of the services; or
- by a description of the kind or class to which the services belong.
196. The Order may apply to services:
- supplied in or for delivery within specified regions, areas, or localities in New Zealand;
- supplied in different quantities, qualities, grades or classes;
- supplied by or to or for the use of different persons or classes of persons.
197. The Commission would identify the services in the Order by the suppliers of the gas services. Accordingly the Order would refer to the services supplied by some or all of NGC Holdings Limited (Transmission), NGC Holdings Limited (Distribution), Powerco Limited, Vector Limited, Wanganui Gas Limited and Maui Development Limited in markets directly related to either a natural gas transmission system or a natural gas distribution system or both.
198. Where "transmission system" is defined as:
Transmission system means that part of a system that conveys gas from the point where the gas leaves a gas processing facility to the boundary of the gasworks or gate station outlet flange supplying gas-
(a) for distribution; or
(b) to a gas customer, where the gas does not enter a distribution system.
199. Where "distribution system" is defined as
Distribution system means all fittings, whether above or below ground, under the control of a gas distributor and used to distribute gas from-
(a) The boundary of the gasworks or gate station outlet flange supplying gas for distribution; or
(b) The outlet of the container in which gas for distribution is stored-
to the outlet of the gas measurement system of the place at which the gas is supplied to a consumer or gas refueller (or, where no such gas measurement system is provided, to the custody transfer point of the place at which the gas is supplied to a consumer or gas refueller); and, for the purposes of any regulations made under section 54 of this Act relating to odorisation or the measurement of calorific value, includes a gas transmission system.
200. In addition, the Commission considers that gas meters should be separately identified in any Order.
Date of Expiry
201. The Order made under s 53 of the Commerce Act must specify the date on which it expires (s 57A(4)).
202. The Commission acknowledges that it can be problematic to set a period of control without determining the form of control. It considers, however, that the appropriate period for expiry of an Order declaring control would be 11 years.
203. If a shorter period was adopted then another inquiry would have to be undertaken if control were to be extended. The Commission has the ability itself to vary authorisations and the form of control under Part V and also has the ability under s 56 of the Commerce Act to recommend amendment or revocation of the Order that declares control, should a shorter period of control become desirable.
Other Matters for the Minister to Consider
204. The Commission has not considered the implications of Vector's proposed acquisition of NGC. The Minister may need to consider the implications of that acquisition should the acquisition proceed.
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