Gas use to be controlled by bill before House

Press, 20 April 1982, Page 16

Gas use to be controlled by bill before House

Parliamentary reporter

The abolition of the New Zealand Gas Council and the introduction of a new system of control over gas reticulation in New Zealand will result from a proposed law introduced in parliament.

The Gas Bill, which was given a first reading and referred to the commerce and Energy Select Committee, will regulate the manufacture, supply, and use of all gas in New Zealand, including natural gas, manufactured gas, liquefied petroleum gas, and biogas. If passed, the bill will repeal and replace the Gas Supply Act, ISOB, and the Gas Industry Act, 1958. Private acts under which the company gas undertakings now function will not be repealed, but the provisions of the bill will take precedence over any of the powers of the private acts, most of which were written more than a century ago. Although the bill defines gas a§ any gaseous fuel delivered through pipes or in containers, -biogas comes within the scope of the proposed law if it is sold. If biogas is used solely for private purposes, such as on farms, it will not be covered by the legislation.

Any gas which comes within the responsibility of other acts, such as the Transport Act, 1962, or the Dan-

gerous Goods Act, 1964, is specifically excluded. Once the bill is passed, the Ministry or Energy will be responsible for all gas supplied to consumers by pipe, and for all gas appliances whether supplied by gas through a pipe or from a cyclinder.

Since gas in a cyclinder is at high pressure, the cylinder and its contents will continue to be the responsibility of the Marine Division of the Ministry of Transport, and of the Dangerous Goods Division of the Labour Department respectively. The bill first provides for a chief inspecting engineer (a new post) to make routine inspections of the supply of gas, and to investigate any accident caused by or involving gas as defined. He will be required to advise the Secretary of Energy on standards to be met by fittings, gas appliances, gas installations, meters, and the gas itself. - Under existing regulations, there are limited powers for gas referees appointed by the Minister of Energy to be responsible 5 ' for gas being properly tested and metered before supply to consumers. The referees also have limited powers over the safe supply of gas. The proposed chief inspecting engineer will absorb the functions of the gas referees, and his duties will be similar to those of petroleum

inspectors, mining inspectors, and the Chief Inspector of Dangerous Goods. The bill confers on the chief inspecting engineer and his deputies powers of entry onto land for the purposes of inspection, and places on all persons an obligation to assist gas officers in their duties.

The second part of the bill provides that no-one shall supply gas. other than biogas, through pipes to any consumers unless he is the holder of a franchise or otherwise authorised by the Minister of Energy.

Existing gas companies in Auckland, Christchurch, Wellington, Gisborne, Hastings, Hawera, and Napier will automatically become franchise holders on the passing of the bill.

Under the existing law, gas undertakings have been ..formed by, several methods, such as private acts — the Christchurch Gas Act of 1870 being an example — and through local government legislation.

The Local Government Act, 1974, and the Gas Industry Act, 1958, both of which were amended in 1979, provided for any person wishing to supply gas to apply to the Minister to become a gas distribution organisation. The procedure will still apply, but the law will be expanded to ensure that any person being granted a franchise

will also have to accept certain responsibilities. Chief among these is a requirement that the franchise holder must “diligently and continuously” carry out a capital works programme to provide the widest practicable availability of gas throughout the franchise area at the earliest practicable time. Failure to comply with this requirement will put the franchise at risk and the Minister may call for applications to take over the franchise.

Franchise holders may be any body or person, including united or regional councils, territorial authorities, or companies, including the Natural Gas Corporation, Ltd.

To ensure that the regional interest of consumers is catered, for, applications for franchises must be referred by the Minister to the appropriate regional or united council for its recommendation.

Apart from the group of existing gas suppliers which will automatically become franchise holders, any other gas distributors, .including the Natural Gas Corporation, will have to make application to the Minister for confirmation of the franchise. Where the Minister has reason to grant a franchise in place of the corporation or any other gas distributor who holds a franchise, the price to be paid by the incoming franchise holder to the outgoing owner for any assets, such as a reticulation system, shall be determined by agreement between the parties or by arbitration. In ascertaining the price to be paid, regard has to be taken of the costs incurred in establishing the franchise, the likely future profits from it, existing contractual pricing arrangements, and a reasonable rate of return for the incoming franchise holder.

The franchises will not be tradeable, and may not be sold or otherwise disposed of without the prior written consent of the Minister. Under this section, where the franchise holder is a company, any sale or disposition of shares which changes the effective control of the company is deemed to be .a disposal of franchise. A franchise will automatically be revoked when a franchise holder ceases to supply gas. The third part of the bill

specifies the obligation of franchise holders to supply gas. A provision already in the Gas Supply Act, has been carried forward as an economic formula within the terms of the bill for determining when the gas owner may refuse to supply gas. The underlying principle is that the franchise holder is obligated to supply gas on request, except that he may refuse on specified economic grounds. Uneconomic supply as defined in the bill means any supply from which the estimated annual return to the franchise holder is less than 20 per cent of the estimated capital cost of the extension necessary to give the supply. For the purposes of this definition, annual return is defined as the annual receipts from the sale of the gas through the extension, less the price of gas to the franchise holder.

Where 20 or more persons desire gas to be supplied, they may, instead of applying individually to the franchise holder, apply collectively to the Minister of Energy. If the Minister is satisfied that the supply of gas would not be uneconomic, he shall grant the application and direct the franchise holder accordingly.

A supply of gas, even if uneconomic, may be arranged through the mutual agreement of the franchise holder and the consumer, provided that the consumer is required to pay no more than the capital cost of the extension together with interest at a true rate of 10 per cent a year. The abolition of ■ the Gas Council and the transfer of its assets and liabilities to the Crown is included in the final part of the bill. . Speaking to the bill's introduction, the Minister of Energy (Mr Birch) said that the council no longer filled the function for which it was originally intended, which was to promote and expand the manufactured gas industry, and to preserve it against competition from electricity.

The council.had served the country well, but no longer represented the gas industry as a whole, including as it did only representatives of the gas-manufacturing undertakings and taking no account of the development of the supply of natural gas.