Energy Minister Pete Hodgson is calling for self-governance by the gas sector players, backed by the threat of regulation and a Commerce Commission inquiry into monopoly pricing methodologies, which is expected to take between 18-24 months to complete.

The gas sector, in turn, is expecting an electricity-style shakeup, which late last decade saw power companies having to choose between electricity generation and selling, or transmission activities.

NGC Holdings (formerly Natural Gas Corporation) _ as owner of the North Island high-pressure gas reticulation network and a significant seller in its own right _ may be most affected by the review. This country's second largest gas reticulator, New Plymouth-headquartered Powerco, should be affected to a lesser extent as it does not sell gas.

Hodgson said the government initiated the gas review because it was concerned that market processes were inadequate. "It is now clear that those concerns were well founded and that the industry shared them," he said, though he did not detail those concerns.

He said the government's policy package was designed to enhance efficiency and reliability in gas production and transportation, and improve fairness for gas customers.

"The gas sector plays a critical role in New Zealand's energy sector and the economy generally and the depletion of the Maui gas field over the next few years means that gas supply will come from many smaller fields.

"New Zealand needs improved market arrangements to manage the post-Maui supply situation."

Hodgson's preference for an industry-initiated solution was reflected in his invitation for the industry to set up a governing body to manage the market and associated rules, including developing an open access regime for all transmission pipelines and developing model contracts for gas consumers.

IN the past there have been allegations of excessive gas transportation charges, but Hodgson said the issues were complicated and that there was room for debate.

Oil companies developing new gas fields, such as the 1tcf Pohokura resources of North Taranaki, will welcome the news that all pipelines are to be opened up, including this country's largest, the strategic Maui pipeline, so non-Maui gas will be able to be piped from Taranaki north to an energy-hungry upper North Island.

Hodgson said the Government expected the gas industry to move quickly to implement these measures, with those arrangements to be in place by December 2004. "We will monitor them to make sure they are able to meet that deadline and will introduce legislation if necessary to do this, "he warned.

The new governing entity will need to develop arrangements relating to production, wholesale markets, transmission and distribution networks, and retail markets. This authority should represent all stakeholders, including consumers, with an independent chairman and a majority of independent members, appointed after consultation with the Energy Minister.

The required initiatives include:

· improving arrangements for the wholesale trading of gas;

· developing an open access regime for all transmission pipelines;

· developing standard terms and conditions for accessing distribution pipelines;

· developing model contracts for consumers;

· developing standardised arrangements for customer switching; and

· establishing an independent system for handling consumer complaints.