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"GasRiserMaintenance"
- IssuesRaised
inOffers byTowngas toResidentialTenants toTransferOwnership ofGasRisers.
( by
Mrs. Pamela Chan, Chief Executive of Consumer Council)
(Executive
Summary)
Towngas informed the Council that its intention in
seeking ownership of gas risers in return for maintenance at no
cost to the owners, was to clarify what is presently an
unsatisfactory situation regarding non payment of repair and
maintenance work carried out by Towngas to gas risers. Towngas
stated that some building owners are taking advantage of the fact
that Towngas will as a matter of priority, maintain and repair gas
risers as a matter of public safety before the matter of who pays
is resolved. It has found that not all building owners will pay for
that work, and will claim that it is not only the responsibility of
Towngas to do the work, but that the cost should also be borne by
Towngas. This attitude by some building owners is taken
notwithstanding the fact that it is clear in the Deed of Mutual
Covenant that gas risers are to be treated no differently from
water, sewerage and electricity pipes; responsibility for which is
undertaken by the building owner.
In addition, Towngas claimed that much of the repair
and maintenance work that is done in the interests of public safety
arises because some building owners do not exercise care in
managing their property, resulting in damage being caused to the
risers. It should be noted in regard to this issue that Clause 4.3
in the Schedule to the Offer/Acceptance on transfer of ownership,
specifically absolves Towngas from being responsible for work
arising from (amongst other reasons):
- damages arising from fire, vandalism, sanitary
spillage and application by any party of chemicals; or
- misuse or negligence of the occupants or other
parties.
In an effort to resolve the issue of responsibility
for the repair and maintenance work Towngas devised a scheme
whereby those building owners who did not wish to bear the cost of
repair and maintenance, could transfer ownership of the gas risers
to Towngas.
The Council was approached for comments regarding
offers that Towngas had been making to building owners concerning
the maintenance of gas risers. Towngas had been offering to
undertake maintenance of the risers at no cost to building owners,
for as long as Towngas are suppliers of gas, on condition that
building owners transfer ownership of the property in the risers to
Towngas.
The Council met with Towngas to ascertain what their
intentions were in seeking transfer of ownership of the property. A
major concern of the Council was directed at the implications for
building owners who relinquish ownership, should they wish to take
advantage of changes to the system of gas distribution in the
future that will widen the competitive choices for consumers. For
example, the introduction of a 'common carrier system of gas
supply' with competition at both the production/supply and the
retail level. If ownership of a building's gas risers remains with
one supplier, this could raise the costs, or limit the choices
available for consumers to take advantage of the new competitive
choices that may become available.
The Council appreciates that the safety issues in this
matter should not be compromised by commercial imperatives, and
that they are a matter of grave concern to Towngas and the public.
Nevertheless, the Council is also concerned that the offers to
transfer ownership to Towngas were silent on the costs to building
owners in future circumstances, where owners might seek to have
property in the gas risers returned to them. The Council was also
concerned that the present costs of repair and maintenance to gas
risers, where some owners did not pay for that work, was being
subsidized by others. For example, by those building owners who
retained ownership of risers and paid for repair and maintenance
when and if the need arose. The cost of repair and maintenance was
also being paid by consumers generally, because the expenditure for
repair and maintenance of those who do not pay would also be
recovered through other means available to Towngas to recover
expenditure. In other words, the tariffs and fees that are paid by
consumers to Towngas. This subsidization would also arise in
respect of building owners that agreed to transfer ownership or
risers to Towngas in return for no cost repair and maintenance.
Accordingly, the Council approached Towngas for
information in regard to two matters. First, the costs that would
be incurred by building owners who have transferred property in the
risers to Towngas if in future they seek to resume ownership of
risers. Second, the degree of cross subsidization inherent in the
fact that not all building owners would be directly paying for
repair and maintenance work - either by retaining ownership and
refusing to pay, or by transferring ownership and getting repair
and maintenance at no cost.
Towngas subsequently informed the Council that it is
temporarily suspending its offer to provide repair and maintenance
at no cost on condition that building owners transfer property in
risers to Towngas.
As to the options that appear to exist, and the 'pros'
and 'cons' the Council sees them to be as follows.
A choice between transferring
ownership or retaining ownership
This option would be to continue with the situation
where building owners would have the choice of retaining ownership
of risers and paying for repair and maintenance as that need
arises, or transfer ownership to Towngas and have work undertaken
at no cost.
As the matter currently stands the issue of costs to
owners in reversing ownership in the future remains unresolved.
There is also the wider implication for future competition in the
accrual of ownership of risers by Towngas if a common carrier
system is introduced in the future, and competitors need access to
the risers. In addition, the issue of cross subsidization remains
unresolved. Under this arrangement, building owners who retain
ownership will be required to pay for repair and maintenance as and
when required. Consumers in those buildings will be paying the same
gas supply tariffs and inspection fees as consumers in buildings
where ownership of gas risers has been transferred to Towngas.
Towngas to assume ownership of all
risers
This option would follow the example of piped LPG
suppliers who assume responsibility for repair and maintenance work
on risers, but only for the period while the supplier continues to
supply gas to the building. This would remove the distinction
between building owners who directly pay for repair and maintenance
work, and those who do not. However, it would also mean that the
costs of repair and maintenance are evenly spread between all
consumers through the Towngas tariffs and fees.
This could mean that consumers in buildings whose
owners take good care of their risers and would have little need
for repair and maintenance work would be subsidizing the building
owners who do not take similar care of their property. The effect
of Clause 4.3 of the Schedule to the Offer/Acceptance letter, that
absolves Towngas for some repairs, may limit the extent to which
negligence in the care of risers by some building owners will be
subsidized by other consumers. However, it can be assumed that if
Towngas attempts to absolve itself from taking responsibility for
undertaking the work, the building owners may well take the
attitude that prevails now, and refuse to pay.
The net effect of these factors could result in
Towngas justifying the imposition of an across the board riser
maintenance fee to cover the additional repair and maintenance and
inspection costs.
User Pays
The third option is to revert back to the situation
before the ownership transfer offers were made. In other words,
leave the matter of repair and maintenance to either building
owners' discretion or for Towngas to demand that work be undertaken
on dangerous risers. If there is a failure to pay Towngas for work
it has undertaken to rectify a dangerous situation, the legal
processes of debt recovery should be used.
(Executive Summary)
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