KEY POINTS:
The Auckland Energy Consumer Trust, holder of a 75.1 per cent stake in Vector, has obviously been set on pulling the strings at the Auckland energy network company. So much so that it and chairman Michael Stiassny took it upon themselves to negotiate with the Commerce Commission when Vector was accused of abusing its monopoly position. This intrusion seems to have meant that minority shareholder interests and Vector's independent directors were treated in a fairly cursory way. Starkly revealed was a largely unworkable ownership structure.
As a result, three independent directors, businessmen Tony Gibbs, John Goulter and Greg Muir, have resigned. They strode away from Vector, declaring their concern about governance and expressing no confidence in Mr Stiassny. The three men did not go into detail, but it is clear they believed the chairman had acted outside strategies agreed by Vector's management and the board.
At the heart of the strife is the differing priorities that are part and parcel of Vector's set-up. The trust is elected by and administers shares on behalf of power users in Auckland, Papakura and Manukau. The tipping of its hat in that direction underpinned the dispute with the Commerce Commission, which claimed Vector was giving cheaper power to its beneficiaries and overcharging others customers, especially business customers. Vector initially reacted sharply to the threat of price controls, saying it would review plans for further investment in its networks. Subsequently, approaches by the trust and Mr Stiassny to the commission led to a draft settlement.
The trust is intent, as far as possible, on protecting the position of its beneficiaries. But that means the most astute, most profitable business option is not always taken. Nor can the trust's ideas have tallied on all occasions with wider visions that the departed independent directors had for Vector. It is difficult, if not impossible, for the trust's board members to act always in the company's best interests, or to comply with a 2004 High Court ruling that trustees must consider the interests of Vector paramount. Election campaign pledges were judged to be of lower priority, a telling commentary on the company's odd character.
The independent directors had other reasons to feel dismayed. Mr Goulter, whose place on the board was surely a result of his experience dealing with regulatory issues while managing Auckland International Airport, was replaced as chairman of the board's risk and assurance committee by trust representative Karen Sherry. As that committee oversees relations with the Commerce Commission, this was a startling message of intent. It was also staggeringly inept, considering, as Mr Muir put it, the "skill-set gaps" on the board.
Trust chairman Warren Kyd has tried to make light of the departures. The market decreed otherwise. Its first reaction sent Vector's stock down 9 per cent, wiping $222 million off the value of the company. Whatever the recovery, it will not stop continuing questions about the future of a company burdened by an unmanageable structure. These will continue until that structure is rectified, either through Vector returning to public ownership, as happened with Ports of Auckland, or total privatisation.
Privatisation is the best option. Gone would be the problems inherent in an elected public trust operating in the commercial arena. The public interest in utility networks is best served by competition between private suppliers, with Commerce Commission regulation where necessary. Certainly, that would be better than Vector's dysfunctional halfway house and half-pie governance.
