Multinet Gas, a natural gas distributor in Australia's Victoria state, said a regulator's ruling on the charges it can levy on its network allows ``substantially better'' returns than proposed in a draft.

The tariffs will take effect on July 1, rather than Jan. 1, 2008 as earlier anticipated, because of the delay in handing down the ruling, Peter Barry, chief executive of DUET Group (DUE), which owns 79.9 percent of Multinet, said today on a conference call with analysts and reporters.

Revenues that companies are allowed to receive from monopoly energy transmission assets are set by a regulator every several years, based on the assessed value of the assets, the allowed rate of return, and planned investment and operating costs. The U.S. subprime lending crisis has boosted the cost of borrowing in the past months.

``The shift away from the scale of price cuts proposed in the draft decision of August 2007 reflects the sharp increase in the cost of capital in recent months,'' Greg Wilson, chairman of Victoria's Essential Services Commission, said in a separate statement on the regulator's Web site.

The regulator also released final rulings on charges that may be levied on the networks of the other two monopoly gas distributors in Victoria, Envestra Ltd. (ENV) and SP AusNet. (SPN)

DUET shares fell 10 cents, or 3.1 percent, to A$3.10 in Sydney trading, while Envestra dropped 2.1 percent to 70 cents and SP AusNet lost 2.5 percent to A$1.19. The moves compared with a 2.4 percent decline in the exchange's benchmark utilities index.

Considering Appeals

``We've seen a substantial increase in returns in relation to the final decision,'' Barry said on the call. The draft ruling was ``harsh,'' he said, adding that the company will review the decision to decide whether to appeal.

The ruling provides for initial real cuts in gas network charges of between 1.9 percent and 6.2 percent at Multinet and SP AusNet, the regulator said. Envestra is allowed to initially increase charges by 0.6 percent, it said. The ruling allows for the three companies to invest a total of A$933 million over the 2008-2012 period.

Adelaide-based Envestra, which generates about half its revenue through the Victorian distribution business, said it will consider appealing the ruling.

``In the current volatile capital markets, it will be challenging for any company such as Envestra to finance such large capital expenditure requirements at the allowed rate of return,'' Envestra said in a statement to the exchange.

SP AusNet, majority owned by Singapore Power Ltd., also said in a separate statement it will review the ruling, which is a ``significant improvement'' on the draft decision. Gas distribution in Victoria accounts for about 15 percent of Melbourne-based SP AusNet's revenues.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net