A regulated solution is looming for access to Vector’s Auckland gas transmission network, with the potential loss of legacy contract rights for major gas shippers and commercial users, including Contact Energy and MightyRiverPower. The issue will get a public airing at a Gas Industry Workshop in Auckland, with the GIC’s principal adviser Ian Wilson saying “if we need to over-ride contractual rights, we would probably have to regulate.” The GIC “would have preferred” parties to the Vector Transmission Code which governs pipeline access and commercial arrangements would have “taken the initiative and fixed things up.” Wilson confirmed to NZ Energy and Environment Business Week the risk of regulation is rising by them failing to do so.

The Vector North pipeline into Auckland has become a bottleneck competing gas shippers and their would-be Auckland customers say is artificially raising the price of natural gas in Auckland. While there is spare capacity in the pipe most days, capacity rights are included as part of long-standing “legacy” contracts to existing gas retailers. One major gas user in Auckland, Wilson Hellaby, describes gas prices as “wildly distorted” by the current bottleneck. A proposal explored by GIC last year to have gas transmission capacity rights follow customers rather than retailers went nowhere, and Associate Energy Minister Pansy Wong is now seeking answers from GIC on the problem.

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The most vocal critic of the current situation, Greymouth Gas, is also accusing Vector of failing to act on a Greymouth proposal to build additional gas capacity into Auckland. Stung by comments from Vector CEO Simon Mackenzie in last week’s issue of NZ Energy and Environment Business Week nothing is stopping alternative investment in Auckland pipeline capacity, Greymouth says Vector “rejected” just such a proposal last September, “without proper technical discussion of the benefits.” Greymouth says it proposed, at its own cost, to build a “looping pipeline and additional compression in the Auckland region” which would increase the Vector pipeline’s capacity – a claim Vector rejects, saying Greymouth’s own advisers produced a report “which supports Vector’s conclusions.”

It now accuses Vector of going on an “investment strike” ahead of new Commerce Commission rules on future gas network pricing “to assure it of excessive returns,” which Vector also rejects as “misleading.” Meanwhile, a GIC workshop in Auckland on Wednesday, August 18 is shaping as a feisty session, with Greymouth issuing a list of proposed agenda items and a blunt warning it does not want what it calls Vector’s “excuses.” Among the biggest users of the pipeline are GIC members Contact and MRP, which operate the Otahuhu-B and Southdown gas-fired power plants respectively.

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