Review of the New Zealand Gas Sector

[ Last Updated 18 November 2005 ]

Short Description A comprehensive review of the New Zealand gas sector prepared for the MED by ACIL Consulting.

Author ACIL Consulting

Document Status

Archived

A Report to the Ministry of Economic Development

ISBN 0-478-2475-7

ACN 058 284 521

This report has been prepared by ACIL Consulting, who are independent consultants, and represents the views of ACIL Consulting, not the Government. The Government has not yet considered the recommendations made by ACIL and will not do so until submissions have been received and evaluated.

Document Table of Contents

Contact Details for ACIL Consulting
Reliance and Disclaimer
Executive Summary
1. Introduction
2. Background
3. Overview: Features of a Competitive Gas Industry
4. Overall Efficiency of the Gas Sector
5. Review of Asset Valuation and Multi-Utilities
6. Review of the Regulatory Regime
7. Take or Pay Contracts
Attachment A1. Glossary
Attachment A2. Terms of Reference
Attachment A3. Specific Features of the Gas Industry
Attachment A4. Notes on Interfuel Competition
Attachment A5. The Maui Contract
Attachment A6. Current Legislation and Regulation Applying to the Gas Industry
Attachment A7. Current Voluntary Arrangements

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List of Charts

Chart 1: Gas Use by Sector
Chart 2: Natural Gas Industry Structure
Chart 3: Participants in the Gas Supply Chain and Related Energy Flows
Chart 4: Forecast of Gas Use
Chart 5: Residential Energy Prices ($ real)
Chart 6: Energy Prices in the Industrial Market ($ real)

List of Boxes

Box 1: Baumol's Definition of Economic Efficiency
Box 2: Marginal Cost Pricing
Box 3: The Competition Policy Trade-off when Scale Economies Exist
Box 4: Reserves Estimation
Box 5: Daily Market Data Published by VENCorp
Box 6: Differential Pricing

List of Figures

Figure 1: Ownership
Figure 2: Gas Transmission Pipeline System
Figure 3: Approximate Quantities
Figure 4: Illustrative Transmission Prices in the NGC Gas Transmission System
Figure 5: Vertical Integration in the Gas Supply Chain
Figure 6: Average Gas Prices for Residential Market Component with Average Wholesale Price
Figure 7: Average Gas Prices for Industrial Market Compared with Average Wholesale Price
Figure 8: Take or Pay Obligations under the Maui Contract PJ
Figure 9: Maui Contract Arrangements
Figure 10: Illustrative Consumer Decision Process
Figure 11: Maui Contract Annual Quantity and Maximum Daily Quantity PJ
Figure 12: Maui Arrangements

List of Tables

Table 1: Gas Distribution Information Disclosure
Table 2: By Pass and Vertical Integration
Table 3: Average New Zealand Energy Prices as at September 2000 ($/GJ)
Table 4: Comparison of Gas Price Necessary to Match an Equivalent Electricity Price
Table 5: Comparison of Energy Costs to Supply 10,000 kWh or 36 GJ Per Annum $
Table 6: Comparison of Well Head to End User Prices
Table 7: Impact of a Carbon Tax
Table 8: Approach to Access and Price Regulation
Table 9: New Zealand Fuel Demand for Year Ending September 2000 (PJ)
Table 10: Average New Zealand Energy Prices as at September 2000
Table 11: Energy Efficient Equivalent Prices for Various Efficiencies ($/GJ)
Table 12: Indicative Regional Gas and Electricity Prices ($/GJ)
Table 13: Comparisons for Electricity and Gas Water Heating