Some power bills to rise as Vector settles with Commerce Commission

Vector is close to settling a dispute with the Commerce Commission over price subsidies. Picture / Brett phibbs

Energy company Vector has told the Commerce Commission it will rebalance power prices from April 1 in a move that is likely to result in higher power prices for Aucklanders and others.

In August, the commission declared its intention to take control of Vector's prices and accused it of abusing its monopoly position.

The commission had threatened to regulate the country's biggest lines company because it said it was subsidising some customers.

The commmission said today the voluntary move was part of an administrative settlement offer presented to the commission last month and was an alternative to regulatory control.

The commission's threat to regulate caused Vector to suspend $630 million of planned investment, claiming it was no longer certain it would make an adequate return.

Vector was accused of overcharging many industrial and commercial customers and undercharging other customers, particularly Auckland residential consumers who are the beneficiaries of the Auckland Energy Consumer Trust, Vector's principal shareholder.

If rebalancing does occur, it is likely to mean that Auckland residential consumers will pay more but North Shore customers could pay less. Businesses, too, could have lower bills.

Commission chairwoman Paula Rebstock said its preliminary view was that Vector's offer was, in principle, consistent with the objectives of the regulatory regime.

She said Vector's decision to rebalance tariffs meant prices paid by customers would now reflect the cost of supplying them.

The Commission would take submissions on the proposed settlement.

Vector said it welcomed the commission's apparent acceptance of its proposal.

It was not able to immediately say by how much consumer prices would rise as a result of the proposed settlement.

"We believe this is in the best interests of both our customers and our shareholders," said chairman Michael Stiassny.

"Vector is encouraged that we are now moving to a much more positive relationship with the commission."

Vector would complete the rebalancing in two equal stages by March 31 2009.

Differentials in rates of return across Vector's different customer classes and regions would be brought within a 1.5 per cent range.

Vector agreed to provide the commission with an external audit of each of its rebalancing steps.

Mr Stiassny signalled Vector's investment programme would probably be reinstated.

"The board's decision to defer large, long-life new investments remains in place but will be reviewed when we know the outcome of the administrative settlement."

He said Vector had been encouraged by a number of recent initiatives from the Government to support investment, including a review of parts of the Commerce Act that Commerce Commission decisions would be subject to appeals.

- NZPA