Readers' views: Power cuts and the cost of electricity

Power company Vector is embroiled in a row with the Commerce Commission which it says risks a future of power cuts. Meanwhile the fallout continues from June's major blackout in Auckland and consumers complain of rising prices.

What do you think about the state of the electricity supply - and what do you think should be done about it? Are Vector and the Commerce Commission just playing "high-priced poker" or is there a real threat to power users? Does power simply cost too much?

This discussion is now closed. Thanks to all those who sent their views.

I urge this prominent Newmarket business to sort its differences out with the Commerce Commission and quickly. Auckland business needs security of supply and we need to know much-needed line and capacity upgrades are imminent.

- Cameron Brewer, Newmarket Business Association

The whole system is unwarranted, I have just one line to my house and multiple suppliers wish to sign me up, its an expensive paper shuffling industry. We should go back to one entity to be more efficient

and cheaper, or does the govt collect more gst with the present system!

- Joseph Williamson

Vector need to make a decent return on their investor's money. It's all very well for people to live in the fairy tale past where NZ supplied a cradle to grave environment, wake up, move on that's gone. There are some that have posted who think it's 'their' right to have low cost electricity supply, they should stop and ask themselves how that is sustained on a ludicrous 7% return, Decisions that harm investor confidence will in the short & long term harm NZ, and will surely scare international investors away from New Zealand as a positive place to put their money.

- Des Mills

Even an idiot (admittedly one with a good memory) would have to agree that when this country had the one national grid owner/operator (NZED, aka the Government) - we had timely forward planning, adequate investment, superb maintenance, honourable people at the helm and reasonably-priced power delivered through Power Boards managed by the public end users of the power. Then some bright and avaricious spark (no pun intended) thought it a great idea to "fix" what was never broken and split up this excellent organisation by stealing what the public had already paid for, to create multiple business units, each with their own staff and management (not elected by the public end users of the power), then allow as many as wished to sell these business units to overseas owners. Inevitably this caused spiralling power costs to the former public owners of the power supply system by the new companies who are greedy for higher profits. Enter the public watchdog and Champion of fair play - The Commerce Commission - with a fair and reasonable finding that Vector (and all the others) are greedily overcharging and raking in excess and unfair profits. The reaction is not an honourable "fessing-up" by the ones with fingers firmly stuck in the till but a "if you restrict us to fair play we won't guarantee you any power" response. Roll on the day when the Government (doesn't matter which) admits this experiment is a total failure, takes back our power grid, restores the NZED/power board structure with associated honourable manner of doing business, sacks the greedy lot currently fleecing all and sundry and gets power prices back to an affordable level.

- Owen

Wasn't it an awful lot simpler and fairer when it was the NZED, and lines were looked after while apprentices trained, etc. And the dreaded $ was not the driving force, rather, supply was?

- Prue Fry

How can Vector threaten us with power outages when we already have them. We even had a transformer explode in our street. I come from Zimbabwe and we never had that happen! Vector is a monopoly that has to go. Utilities should be controlled by the government and not private companies who want to cut costs and maximise profit.

- Graham

Vector had better watch it. We, the consumers could of course vote to have the lines nationalised. We the taxpayers could refuse to allow our money to be applied to their bills because they are not delivering. Vector is responsible to the public for the security of supply. This is not so much high stakes poker as Russian roulette. Auckland has been greatly compromised by the under investment of this company that allows things to fall apart despite reaping hundreds of millions in profit from us poor suckers.

- Nicholas Alexander

I agree with Vector's decision to hold investment money in light of the move from the Commerce Commission. I think that the Commerce Commission have overstep their boundaries of control to impose such prices changes/threaten to control Vector. Decisions like this hurt investor confidence and is the surest way to scare international investors away from the New Zealand market.

- KC Wong

All infrastructure companies should be government owned and operated, otherwise we will end up with the current situation we have with Vector (and Telecom etc) Isn't that one of the functions of government, to run and maintain our infrastructure in New Zealand. Never, ever should any infrastructure company be allowed to fall into private hands, where profits come before a fall!

- Ian Morine

The comparison is obvious. Before deregulation we had reliable electricity supply and additional demand was planned for and the necessary infrastructure in place before it was required. Electricity was retailed through democratically elected boards who were accountable to the consumer. We most likely had the most reliable and low cost electricity anywhere in the world. People who say the market should be allowed to do its work in this area ignore the fact that in a country this size it is possible to plan the provision of electricity service very well. Power prices are now a major drain on most sectors in the economy. And why on earth were they allowed to buy the gas suppliers, one of their most effective competitiors. It is probrably not possible to bring back full public owership following the panicked sell off before the last election. State owned capacity should be bought back to a break even model and no more energy trust assets should be privatised. If this affects other largely overseas owned companies, tough, no one ever asked if we wanted to sell it in the first place.

- Alan Hartley

It is ridiculous that a company such as Vector can presume to hold the country to ransom because it has been chastised for profiteering. Utilities should never be in private hands. Our household has, on paper, a substantial income, but we have struggled with our power bills this winter. God help the many that are old, infirm, and with very limited financial resources. Keeping warm should never have to be an issue where the elderly and children are concerned.

- T Nyman

Never mind the share price and overseas investors, they don't live here and have to suffer power outages, or loss of business. Nationalise them, before the next major outage.

- Eric

This threat by Vector is nothing but an appalling display of desperate fabrication to try to hide behind their unjustified high prices. This is crystal clear proof that the MARKET is not delivering price protection for the New Zealand electrical energy users despite the fact that the New Zealand Government stated some time ago; the public of New Zealand would start benefiting from the "flow on effect" of low prices of the revamped Electricity Industry! It is long overdue that the Government put a stop to these greedy predatory practices in the Electricity Industry!

- Peter Koloszar

Vector has accomplished great business and engineering deeds amid fierce competitions, skills shortages and rising cost of electricity spot prices from power generators. Thus their profits are just the great awards they got from this society. Their pricing management has always been logical, rational and very sincere compared to world market price of electricity. Attempts to control and interfere with their pricing managements constituted a political challenge. Does small love will bring happiness? Commerce commission must keep its hand off at this critical stage of national power upgrades.

- Binh Nguyen

I find it incredible that Vector, which is owned by a trust, has been targeted for excessive profit when Telecom, owned by shareholders, has not. Is this because the trust model is not freemarket enough for big business or the Commerce Commission?

- Chris Randal

It seems that Vector thinks that investments at comfortable guaranteed profit levels cannot be made. They, in a monopoly position, want more guaranteed profit. Investment and reliability, and thus our livelihoods, are held hostage for larger profit demands from Vector. I think the share price first needs to drop significantly and then nationalize the assets to prevent this monopolistic, rent-seeking behavior. Or accept a comfortable guaranteed return on investment which is more then anyone of us will ever get from any bank.

- Stef

Almost all new network is paid for by developers and individual land owners looking to connect into the network. Vector, as do all lines network owners, obtain significant amounts of network assets for free and are then able to write off depreciation of assets it didn't pay for. Vector's return on assets is misleading. Each year it grows its asset base without paying for a majority of it and then it can complain that the profit it has made as a proportion of its asset base is small. This allows it to remain under the Commerce Commission radar and allow it to continue increasing prices in line with the CPI as stipulated by the Commerce Commission. The Commerce Commission allows electricity lines and retail companies to get away with too much. Their current intervention is one brick in a huge wall. However, if you remove the right bricks...

My tip is this is a good time to pick up some Vector shares.

- Clued consumer

People who think Vector is "blackmailing" the NZ public fundamentally misunderstand the way financial markets work. Vector is owned by shareholders. If those shareholders are not allowed to receive more on their investment than they could expect from depositing it in a bank, then why on earth would they bother investing in the shares? This is not just an issue for Vector. The people of New Zealand need to understand what message this is sending to overseas investors... why would anyone want to invest in a country so much at the whim of regulatory madness such as this?

- Kate

Isn't it amazing how, after years of milking the consumers to maximise their returns, now that the power companies are being called to heel they are threatening to take their toys away and stop playing. The Commerce Commission would not have made its decision lightly. If Vector had adequately reinvested in the past, instead of maximising it's returns at the expense of its consumers and the security of its network, we would not be where we are today. I trust the announced hold on and review of expenditure includes the Directors Fees and top management remunerations as those people have all failed the people that they have pretended to serve. They are facing the consequences of their past actions.

- Dave Laing

How can you privatise utilities and not expect this to happen? In the beginning Vector told us all we would save money they then turned and told shareholders they would make great profits. How do they achieve both these things? Auckland has seen the answer they shortcut maintenance and don't invest properly back into infrastructure. The emphasis needs to be on continuity of supply to all New Zealanders and keeping pricing reasonable not playing on the sharemarket and focussing on profit. Look how much money is lost nationally everytime they mess up and the power goes out. Yet alone the loss to our internationally credibility.

- Michael

As far as I am concerned, the government should renationalise critical infrastructure such as power transmission and generation companies so the New Zealand public is not held hostage to the providers' whims to make sufficient profit. In general, I believe that private enterprise works better, but power supply is essential.

- Matt Perot

I've been having many issues with power companies, all over correct billing. There is constant confusion on my property to which house is connected to what meter, 3 years later I'm still having problems getting the right bill and a full record of what has gone on. Now I find we're being overcharged as well and if the government tries to correct it, they are threatened with funding cuts to critical infrastructure!! I know businesses have to make money, but given the little choice we have in power suppliers, and that power is an essential service which provides the human right of keeping warm, some government intervention is necessary to keep power going at a reasonable price. Perhaps instead of strict price controls Mr Cullen could free up some of his our surplus to entice power companies to supply cheap, reliable electricity?

- Dan

Its paramount to corporate blackmail, they seem to be a bunch of disconnected individuals whom have a similar outlook on New Zealand as Telecom. They have had it there way for far too long and now the world is changing, they refuse to adapt as they think they are above it all. Healthy competition breeds happy consumers, when these monopolised giants realise this they will no doubt see the errors in there ways.

- James Lloyd

NZ has been under-investing across a range of infrastructure, spanning roads, water supply, rail, electricity generation and electricity and gas transmissiobn. After years of neglect, all are now gearing for a catch-up mode. Were NZers homes and businesses asked to indicate a premium they would be prepared to pay for supply security (that is, a strong infrastructure network with some redundant capacity), we would find achieving the minimum delivered price is NOT the driving consideration. Recall the reaction to the Auckland CBD crisis in 1998, or post the Otahuhu substation outage in June. The Commerce Commission is misjudging this need. Their approach is academic, the rate-of-return hurdles are being set unrealistically low. Vector could get almost that return from bank deposits! - and assume no risk. The targeted 7.3% return is FAR FAR lower than they were in the time of government control pre 1987. 7.3% is too low to encourage investment in infrastructure. While the Commerce Commision serves a valuable role of protecting us all from monopolistic behaviour, it is not serving our needs if it continues to frustrate much needed investment in infrastructure. The Minister of Commerce should reset its mandate to reflect this fundamental objective.

- Chris Stone

A reader is advocating nuclear power. Have people no idea what would happen to this country in the event of a nuclear accident. The contamination immediately round the scene would cut off access to a very large chunk of New Zealand, meaning, because of the narrowness of NZ, we would have to take to sea to bypass that area. I see in your paper that some boaties are believed to have run aground due to street lighting and a light on the boat ramp being out for a week. Lets have Vector spend some money on fixing their faults faster. North Shore City has had many more faults this last year than usual and they are taking longer to fix. Put some of that profit back into maintenance, employ more staff which will put some of the profits back into the economy.

- Vivienne Keohane

Now is the moment for the entire electricity system to be re-nationalised, NZ must not be held to ransom by the current foriegn owners.

- Robert Hall

Why dont we have a nuclear power station closer to where its needed with the lower cost of building all the transmission lines. More power where its needed!.

- Stephen Kenna

Electricity is a bit like petrol, no matter what is charged we all still use it and have to buy it. These essential items should not be thought of as investment items to make a great return on, while many struggle to keep warm in winter etc. As nobody appears to have any control over prices of 'essential' items, at least it makes us think is there another way? maybe we should look at how other developing countries are coping and take stock.

- Glenn

This once again demonstrates the short term folly in privatising public utilities. Being blackmailed by the distributor is final tribute to those free market economists who espoused the selling of any government controlled utility.

- Rob Park

Vector sounds like a kid threatening to take it's ball home after not getting it's own way. It's about time large corporations learned they couldn't always have things their own way. Anti-competition legislation is there for a reason.

-David B