First Gas

What was the client issue?

First Gas, a gas distribution network in New Zealand, asked Oxera to give evidence on regulatory finance issues to the New Zealand Commerce Commission (NZCC). In particular, we were asked to provide expert evidence in relation to the Commission's assessment of systematic risk for gas pipeline businesses in New Zealand, relative to electricity networks. As part of this assignment, Oxera also advised the parent company, First State Investments.

How did we help the client solve it?

Craig Lonie and Sahar Shamsi gave expert evidence to a panel of Commissioners in New Zealand. The evidence was submitted as a report to the NZCC (available here) and was followed by expert testimony as part of a regulatory 'hot-tub' process.

The hot-tub process involves concurrent provision of expert testimony in a court or regulatory proceeding, by appointed experts, on behalf of different stakeholders. In the regulatory hot tub, Oxera's view of asset risk for the gas distribution networks in New Zealand was debated with other stakeholders, including electricity networks and user groups.

Why was the outcome compelling for the client?

The NZCC agreed with several of the points raised by Craig and Sahar. In its subsequent decision, the Commission revised its asset beta for First Gas, allowing an increase of nearly 20% in the asset beta for gas pipeline businesses in New Zealand. The client was delighted with the outcome.

What did the client say?

Client testimonial: 'We engaged Craig, Sahar and the team at Oxera to provide expert advice on a very important cost of capital issue facing our business. We were impressed with how quickly Oxera grasped the essence of the issue and set about analysing the conceptual and empirical arguments involved. We also appreciated the intuitive, engaging way that Oxera present their economic evidence. The Oxera team was highly responsive and committed to exploring all angles of the issue. Oxera didn't simply tell us what we wanted to hear – and are genuinely committed to providing high-quality A1:I19 Ben Gerritsen, GM Commercial and Regulation, First Gas (2016)