Price of gas connections to rise by $190 over next four years

Tuesday, 31 May 2022

Natural gas customers, including the hospitality trade, faces considerable uncertainty over the timing and cost of an expected switch to ‘greener’ options such as biogas and hydrogen.

Price of piped gas connections set to go up by 16% or $190 over four years
Total gas bills will rise by more than that assuming price of gas itself also goes up

The average price that gas lines companies will be able to charge for piped gas connections will rise by 3.8% over each of the next four years, adding up to a 16% price rise by 2026, the Commerce Commission has decided in a final ruling.

The decision means the average gas customer would see the bill for their connection rise by $48 a year from October, or $190 by the end of the four-year period in 2026, associate commissioner Vhari McWha said.

Their overall gas bill would rise by more than that over the period assuming the price of gas itself also goes up.

The decision will affect about 300,000 gas customers in the North Island where gas is piped to homes, most of whom are residential customers, but will also impact cafes and restaurants, many of which rely on gas for cooking.

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The commission has been reviewing the price that gas distribution companies are allowed to charge for connections and has factored in the likelihood that demand for gas will decline faster than had been expected in the past because of climate change initiatives.

That means First Gas, GasNet, Powerco and Vector are likely to have a shorter time to recoup their investments in gas pipes, justifying a higher price for connections.

In a draft report in February, the commission had suggested allowing a price rise of 19.3% over the four year period.

But the commission said it had reduced the size of the proposed price increase following submissions.

“We recognise that price increases directly impact gas users, and for this reason the changes are being phased-in over time,” McWha said.

“The Government’s recently-released Emissions Reduction Plan suggests that the transition towards net-zero emissions involves an increasingly significant role for renewable electricity, a managed phase-out of fossil fuels like natural gas, and a potential future role for biogas and green hydrogen,” the commission said.

McWha said the ruling meant the price of gas connections would riser faster the expected rate of inflation over the next four years.