Commission warns gas industry of possible court action
Published18 Feb 1997
The Commerce Commission sent a clear warning to the natural gas industry today, that if the 1980 wholesale contracts are not successfully renegotiated within a reasonable time, then the Commission will have to consider court action against gas companies.
The Chief Investigator of the Commission's Network Industries Unit, David Taylor, made the comment in a speech given to the Gas 1997: Energy Solutions Towards 2000 conference in Auckland today.
Mr Taylor said the Commission's view is that the 1980 contracts are anti-competitive and breach the Commerce Act.
The specific concerns the Commission has about the contracts are:
· the requirement that the utility buy all its gas from the Natural Gas Corporation (NGC);
· the restriction on NGC competing with utilities;
· the requirement that new delivery points be mutually agreed (this effectively prevents a utility entering anothers area); and
· the 15 year rolling term.
The gas industry was fully deregulated in 1993 when the Government removed price controls from natural gas.
"The Commission did of course expect post-deregulation adjustments to take some time and, given the commercial nature of the negotiations, it is natural that the parties have different incentives in approaching the negotiations," Mr Taylor said.
"However, the Commission is increasingly frustrated that new contracts are not in place. Therefore, it is appropriate to remind the parties of one incentive that they share in common, namely that they are all potentially subject to remedies under the Act...
"I have been asked what, in theory, is the ultimate sanction available to the Commission? Quite simply, if the Commission is satisfied that a breach of the Act occurred and that it meets our enforcement criteria, the Commission could take enforcement action in the High Court seeking to have the contracts struck down and penalties that reflect the respective blame for the continuing operation of an anti-competitive arrangement.
"The issue remains in your hands, for the moment anyway," Mr Taylor told the conference.
