KEY POINTS:
For an apparently dull industry, the electricity business does seem to attract more than its fair share of drama.
In the past decade, Aucklanders alone have endured at least two major blackouts (one of which lasted five extraordinary weeks); a public outcry over the death of a woman whose power was deliberately cut off; noisy protests from farmers furious at plans to erect massive pylons on their land; and alarmingly frequent campaigns for voluntary savings over the chilly winter months to prevent us running out of electricity altogether.
For a small country that prides itself on being innovative and practical, we sure seem to have problems keeping the lights on.
And as if that weren't enough to keep the industry awake at night, there have also been the corporate shenanigans at one of our largest energy companies, which have resulted in an astounding number of high-profile directors and executives either quitting or being sacked in an intensely political struggle for control of an organisation that has grown from about $1 billion of assets to nearly $6 billion in just six years.
The question has to be asked: why would anyone want to take responsibility for an industry that seems to have so much at stake, in terms of lives and reputations?
Simon Mackenzie doesn't exactly wriggle when I put this question to him, but he does hesitate for slightly longer than you might expect.
The new chief executive of Vector has been in the job for just five months, but at the age of 47, he is already an industry veteran and acknowledges, almost reluctantly, that he has become known as something of a fix-it man.
"I think by nature I'm the kind of person who doesn't like complacency, and I do thrive on a challenge," he grins.
At first, Mackenzie seems a little too genial for such a tough business, despite the fact that he seems to be more than comfortable with the kind of vocabulary common to Kiwis who have completed their MBA at a top American university.
That's a polite way of saying he could probably drone on for hours about "infrastructure solutions" or "the regulatory space". But you can't help but like a bloke who blushes easily, loves to talk, and whose face lights up when he mentions his family.
Colleagues praise Mackenzie as a quiet achiever who has an obvious passion for the industry.
One admirer, who did not want to be identified, describes him as "the new Keith Turner". Turner, the former head of Meridian Energy, retired earlier this year and is widely respected, even though he could be outspoken.
"Simon's the one with the most experience now in the electricity industry," says the admirer. "He's been right across the board. He doesn't run around with a comb in his hand, but he gets the job done."
It is indeed obvious that Mackenzie loves what he does. He can't wait to show off his desk ornament - a mounted cross-section of the Mercury power cable that failed in 1998, plunging the heart of Auckland into darkness for five humiliating weeks.
This is certainly not the sort of job where you can ever afford to relax, he admits.
"When I see the light flicker, I think: 'Is that us, or is that Transpower?"'
Severe storm warnings bring on a particular dread, and whenever he happens to be flying over Auckland at night, he is always relieved to see plenty of twinkling lights below.
But these days, of course, Vector is answerable not just to Aucklanders.
Created in the wake of the '98 blackout, as a way of separating the maintenance of Auckland's power lines from retail electricity sales, Vector has gone on a spending spree in recent years, becoming one of New Zealand's largest companies in terms of assets.
Until it agreed to sell its Wellington lines business to Hong Kong billionaire Li Ka-Shing, it was responsible for one-third of the country's electricity connections. It also supplies natural gas and LPG to most of the country, has a significant stake in a windfarm company, has an extensive fibre-optic telecommunications network, carries out industry training, has a half-share of a tree-trimming business, and has formed various other strategic alliances.
While the Wellington sale came amid rising concern about its debt levels, Mackenzie is not ruling out further acquisitions.
"The Wellington sale could potentially give us further scope in that space," he confirms.
Wellington, for example, is one of the few areas where it does not distribute its own gas. And given the current market conditions, it is ever hopeful that some other networks could go on the block. More likely, though, are further opportunities in Auckland.
Given the moratorium on building more thermal power stations, and the rapid transformation of telecommunications, innovative solutions are definitely going to be needed in Auckland, he enthuses.
"There's a huge amount of infrastructure build required in Auckland, and gas transmission pipeline investments required. And the rail network is going to be electrified, so there's a lot of other opportunities in that space."
So how did a nice guy like Mackenzie end up in a business like this?
Born in Dannevirke, he developed an interest in building things from a young age. After leaving school, he considered joining the Air Force, but applied instead to join what was then known as the New Zealand Electricity Department as an engineering officer.
He remains extremely grateful for the variety of training he received, involving both study and practical experience.
"A lot of issues could be said about the old NZED, but when I look back, just the structure of their programme and the training, and what we got exposed to, was absolutely fantastic."
Not that it was all tremendously interesting. He recalls being ordered to sit at a lathe for five or six weeks, putting a thread on reinforcing rods.
'The guys do it to see whether you bitch and moan, or just get on with it. It's a test to see how you behave and relate to other guys."
Needless to say, Mackenzie passed the test, and eventually found himself at the head office in Wellington, helping out with technical purchasing.
His boss, Tom Lamb, had been brought in from overseas to supervise the Marsden Point project, and was also involved in building the Huntly power station.
He was Mackenzie's first real mentor, and when Mackenzie was deliberating whether to do more study or take a job at Huntly, Lamb persuaded him to go for the practical experience.
It proved good advice. He was initially given the job of pulling together the project plan, then became a commissioning engineer on the turbine systems, managing a lot of the external contractors. What was expected to be a nine-month job ended up lasting four years.
By then, however, it was the mid-80s, and most of the big energy projects had finished. He decided it was a good time to do his OE.
Like most Kiwis, he headed to London, but Earl's Court had little appeal. His passion for windsurfing took him to the south coast, where he ended up working for a property developer who had cottoned on to the concept of swanky, large-scale retirement villages.
"What I learned from him was a real entrepreneurial angle, as well as a real focus on selling the customer side."
When the developer hooked up with a firm of architects in Barcelona to develop similar villages in the Pyrenees, Mackenzie was happy to decamp to Spain for a couple of years.
From there, he travelled through India, Nepal, and Italy - as you do - ending up in Western Australia, where with another couple of guys he noticed a gap in the booming property market.
"I designed a simple program that calculated how to construct complex roofs on high-end properties."
After another sojourn in Spain, he finally returned to New Zealand, having worked through five years of wanderlust.
Once he had completed a business degree at Waikato University, Mackenzie joined DesignPower as its commercial manager. His job was essentially to help turn what was then known as ECNZ's internally focused engineering arm into a modern consultancy.
At that point, he was headhunted by Mercury Energy, formerly known as the Auckland Electric Power Board. His job was to sell major products and services to large customers, and oversee new developments. The wholesale electricity market was also evolving, so he got pulled into a team looking at transmission pricing and management, and wholesale trading.
When what he refers to as "the CBD event" occurred, he and several others in the industry were given the job of working out what had gone wrong. The result, agreed to by the Government for a variety of reasons, was for electricity companies to separate their wholesale, retail and distribution activities. Mercury's wholesale arm was given to Mighty River Power, and its lines business became known as Vector.
Mackenzie was asked to become network development manager - a role that according to him essentially involved working out how to turn the business around so that it was focused on customers, and investing appropriately.
He was heavily involved when Vector decided to buy another lines business (UnitedNetworks), helped develop the company's telecoms strategy, and was also involved in the purchase of the Natural Gas Corporation.
At that stage, Vector had three divisions: electricity, gas, and technology. As head of the technology division, and having had some previous involvement in regulatory issues, he was the logical choice to help sort out a major stoush with the Commerce Commission in 2006.
The commission essentially accused Vector of overcharging some of its customers (including large commercial customers), while undercharging others (including residential customers), and threatened to take control of its pricing.
Vector's controversial chairman, Michael Stiassny, was apoplectic. He announced a freeze on $630 million of capital expenditure while Vector had the threat dangling over its balance sheet, and warned of other dire consequences of the commission's actions. The share price plummeted.
According to some, Stiassny continues to blame then-CEO Mark Franklin for the mess. But in any case, Mackenzie was able to sort it out.
Vector offered to adjust prices for its 21 customer groups over a two- to three-year period. As is usually the case, the devil was in the detail, but in May this year the commission announced it had agreed to Vector's offer.
Mackenzie is clearly relieved to have the issue behind him, and without wanting to inflame the situation further, notes that the Government has since agreed to clip the commission's wings, through the Commerce Amendment Bill.
With help from Wellington lobbyists Chen Palmer, Vector appears to have persuaded politicians the industry is being choked by regulation.
'To be fair, they also recognised that it wasn't working. There were too many instances of it."
Of course, he concedes, there needs to be a balance between consumer and business interests. But the way he sees it, a regulatory regime must also deliver certainty and confidence.
Doing his best not to sound patronising, he suggests that part of the problem is that, unlike Europe, New Zealand does not have a long history of regulation in this area and is still getting a feel for its implications.
The issue did create enormous uncertainty for Vector, he insists.
"There was the potential for a huge amount of cashflow to be wiped off."
Stiassny's official line for Franklin's resignation last July was that the company needed to tighten up as a result of regulation.
"Mark's saying, 'I don't want to be the man who tightens those screws, or whatever, to that degree'," he told the Business Herald at the time.
So does that mean that Mackenzie is happy to be the one wielding the screwdriver?
He acknowledges that his main task since taking over as acting CEO in August has been to drive integration of NGC and UnitedNetworks "to a new level".
As part of his grand plan, he has reorganised the company into four customer-focused divisions: service delivery, regulation and pricing, asset investment, and commercial.
One issue that could get particularly interesting over the next couple of years is the roll-out of high-speed broadband. Vector already has extensive ducting and overhead power lines throughout Auckland that could provide much of the backbone needed to deliver fibre optic cables to most of the city. But so far, the major telecommunications companies have been surprisingly reluctant to talk turkey.
In the absence of any clear direction from the Beehive, it is possible both Telecom and Vodafone and goodness knows who else will build competing networks in an attempt to cherry-pick what is obviously the most profitable part of the country. While that might sound just dandy, it is the ducting that is by far the most expensive part of building a high-speed broadband network - and ultimately it will be customers, and taxpayers, who pay.
Mackenzie has already made his views on the subject fairly well known. In short, he would like to see some heads banged together. What he has been less forthcoming about, though, is his personal take on what is starting to seem like the constant ringing of alarm bells over the fragility of our energy supply.
When pushed on the subject, he gives me a look that I interpret to mean that he wished he could remember the code for his PA to interrupt with urgent business.
"At the moment, clearly it's an issue with regard to energy supply. It's not a distribution capacity issue. We've got the capacity in our networks to provide the energy," he replies.
Well, yes, quite. But what is the answer? He waffles about "cool heads" and "economic objectives". But the best explanation he can come up with is an analogy with telecommunications.
"Probably the biggest issue from my perspective is: are we having a holistic enough view of how we get the optimal use of fuel, and the appropriate relationships between generation investment and transmission investment, and how does that dovetail into the climate change initiatives and [emissions trading scheme] stuff? ...
"My sense is there's a little bit too much focus on, 'These are some issues we need to deal with on generation, and these are issues we need to deal with on transmission', and there needs to be a better connection across the top."
Right-oh. So how do we do that, then?
"I don't think you can say that the market's failed, but there's always opportunities for improvement, like some of the improvements that have been looked at in other countries overseas. There's other mechanisms that can be used to refine markets, rather than putting everything back together and saying, 'It's all a big failure'."
Such as? "Such as energy trading tools that create the right incentives. I know they're looking for much more liquidity in the hedge market. That's an initiative the industry has driven."
And maybe we really do need a thermal plant in Auckland, he suggests.
"We've long said that needs to be in Auckland because of the system characteristics."
Also, he notes, some markets impose capacity obligations on generators, or put in place other sorts of structures that achieve the same objective.
Which has conveniently brought him to a subject he is rather more keen to talk about - renewable energy.
With Auckland's power use soaring - winter peaks are now a thing of the past in Auckland thanks to the huge summer surge in air-conditioning (otherwise known as heat pumps to you non-believers) - and talk of trains, and even cars, running on electricity at some stage, Mackenzie is all but rubbing his hands together.
"The growth is essentially adding a city the size of Wanganui every year to Auckland. You can't do that unless there's a little bit more pipe capacity."
The politically correct answer is, of course, renewable energy.
Vector has been "inundated", he insists, with queries about micro-wind turbines - an example of which just happens to be installed on the building next door to its headquarters in Newmarket. And Mackenzie has noticed, for example, that something like three out of four homes recently renovated in his Devonport neighbourhood have had solar panels installed on their roofs.
Photovoltaic technology which can turn solar panels into sticky film is also developing rapidly and the price is coming down quickly, he notes.
In fact, Vector has established a centre where interested parties can see for themselves the kind of technology that is already available - such as fibre-optic cable, batteries powered by the wind, and batteries for plug-in cars. There's even a device that can control the flame on a gas hob depending on whether a saucepan is in the vicinity.
Smart meters that allow Vector to have two-way communication with its customers are finally being installed, and he predicts gas is going to grow in popularity, simply because it is more efficient to burn it directly than burn it to make electricity.
Again, Mackenzie sees an analogy with telecommunications. Like telecoms networks, energy networks essentially have a 40-year life, or even less, he explains. Right now, energy bosses are trying to figure out exactly what will replace our traditional copper power lines in the near future.
"Is the mobile phone going to displace the fixed network? It's exactly the same context," he explains. "That's why we've reorganised around new functions, and that also drives a new culture around understanding customer needs."
As for the sustainability of Vector itself, the unkind might suggest that the latest version of the company's board gave Mackenzie the job because they knew he would follow the party line. At stake, after all, is an enormous monopoly that is still 75 per cent owned by the public. Each year, around 300,000 Aucklanders receive a handy dividend cheque from Vector, simply because they happened to live within the old AEPB boundaries back in the early '90s.
While the trust that owns the stake is due to relinquish control to Auckland's city councils in 2073, some would like to see that happen a whole lot sooner. Others would prefer to see Vector's annual profit of more than $150 million handed over to the Auckland Regional Council or, in an opposite tack entirely, have the company fully floated on the stock exchange.
Mackenzie is reluctant to get political, but the question that has to be asked, he maintains, is why would you try to fix something that isn't broken?
"From our view we're performing well as an organisation. Like everyone, we've got opportunities to improve. We're delivering the infrastructure to Auckland. We've invested in all the networks both here and on the North Shore. We're bringing new solutions to market; we're building fibre - so if you step back, there is not a big problem with distribution infrastructure investment in Auckland."
On the other hand, there are clearly issues with other infrastructure, he notes. Yet no one seems to be suggesting that Transpower or Transit should be under the ownership of the ARC, or any other council, he grumps.
"So there's a contextual setting here which is probably not being focused on enough."
But what about Stiassny? Some market watchers have expressed doubt as to whether he has been doing more harm than good.
"He doesn't come to play tiddlywinks or anything, but he absolutely focuses on the challenges for the organisation; about the performance of the business. We have to accept that we'll always have a degree of commentary around us as a business because of our ownership structure, and we just have to focus on delivering good outcomes to keep putting some of that history behind us."
It was only a gentle prod, but I have clearly touched a nerve.
"The reality is, it's important to make it clear that from my perspective this organisation has moved on significantly from a couple of years ago," he snaps. "It is a bit of a frustration that those kind of things keep coming up. Everyone else has kind of moved on, particularly from a business perspective.'
He looks slightly flushed. I doubt that it happens often.
