Earlier rise in gas price probable

Press, 19 April 1986, Page 13

Earlier rise in gas price probable

PA Wellington Natural gas users are likely to face a price increase earlier than expected after the Goverment’s surprise decision to continue price controls on gas. The natural gas division of Petrocorp, which distributes all North Island gas to local authorities, has hinted strongly that it would seek price increases within the next few months. Any rise in wholesale gas prices would almost certainly be passed on by retailers to consumers. Gas industry sources say they believe the Government’s continuation with price control represents another step away from its deregulation thrust.

The general manager of the natural gas division, Mr Peter Davenport, said Petrocorp would be reviewing pricing options over the next few weeks. Petrocorp last month indicated its belief that price control would be lifted by announcing it would forego the right it had to apply for a whole--sale price increase from April 1. It expected price control to be lifted with introduction of the new Com-

merce Act from that date. Last month’s statement said that in the interests of keeping a stable environment for the industry it would not seek a rise till October 1. Contracts allowed for a rise of 50 cents a gigajoule at that date.

Mr Davenport said that in a deregulated industry controlled by established contracts where costs could be anticipated, price movements could be negotiated once a year. “Under price control, however, Petrocorp had to be careful that it recovered all justified historic costs at the time it was eligible to do so. This could result in applications being made for price increases twice a year.” Gas industry sources said they were disappointed that the Government had not deregulated

the industry as it would have given them the flexibility to adjust prices both up and down in time with the marketplace. A deregulated market might mean that gas prices were lowered for compressed natural gas stations to compete with recent petrol prices. < Petrocorp’s latest moves would mean that the gas industry would be back to the status quo with gas companies and gas authorities applying for increases their costs went up. The Minister of Energy, Mr Tizard, said recently that existing price controls had not caused significant distortion of energy markets. Gas wholesaling and retailing occurred in a monopoly situation with little evidence of potential competion from other energy forms, he said.