Vector has second thoughts on attack

By CHRIS DANIELS

The country's biggest power lines company, Vector, has attacked the Commerce Commission's regulation plans for its business, saying they do not meet its own legal obligations.

The trust-owned company's chairman, Michael Stiassny, strongly criticised plans for regulating the monopoly power lines businesses in a letter to the commission..

But Vector is now distancing itself from his comments, saying that while they were correct three weeks ago they no longer represent its position.

A company spokeswoman asked the Business Herald not to publish the letter's contents, saying Vector's position had changed.

Stiassny would say only that dialogue with the commission was continuing.

The commission is in the final stages of introducing rules to stop lines companies abusing their monopoly positions.

Stiassny told the commission its "thresholds" approach to regulation were contrary to the goals of the Commerce Act.

At the heart of Vector's criticism is opposition to a"price path threshold" that would require lines companies to consistently reduce prices by consumer price index inflation minus a factor of X.

This X factor could be 1 per cent, 3 per cent or 5 per cent depending on how efficient a company was judged to be.

The risk of regulation having a significant effect on Vector has risen considerably since it took over UnitedNetworks late last year.

In the latest compendium of power lines companies issued by PricewaterhouseCoopers, UnitedNetworks is listed as having the second highest return on investment among New Zealand's 29 networks.

Stiassny said Vector's analysis showed that efficient, high quality companies that had low prices were most likely to breach the Commission's thresholds.

Controlling, or even investigating such companies would not promote efficiency, he said.

"Rather, the Commission's proposals would provide disincentives for efficiency including appropriate investment."

Poorly performing companies were less likely to breach the commission's thresholds.

He also criticised the length of time the commission has put aside for consultation, saying companies such as Vector have not been given enough time to to make "meaningful written submissions" on the issues, or to prepare for its conference in March.

Peter Alsop, the commission's manager of network performance, responded to the Vector letter.

He said the use of three different X-factors should address many of Vector's concerns.

This would group businesses, and so better recognise different performance levels and the ability of companies to cut prices.

The thresholds would also "identify companies that should be targeted for further investigation, and, if necessary, for control".

* The commission is accepting submissions on the plans until the end of this month.

It will then hold a conference between March 10 and 14 before setting the thresholds which, it hopes, will come into force from April 1.