Vector says investment warning just 'prudent business'

Vector's major shareholder has denied that warnings about Auckland's electricity supply security are a bargaining ploy.

The line company has put on hold, or is reviewing, $630 million worth of infrastructure investment after the Commerce Commission said it was making too much profit.

Both sides were sticking to their guns yesterday in a stand-off that has been described as a "high-priced poker game".

Warren Kyd, chairman of the Auckland Energy Consumer Trust which owns 75 per cent of Vector shares, said the warning was not a gimmick.

"We're doing what any prudent business has to do. The Commerce Commission don't have to run a business, we do. It's commercial reality. As the Government has said, it's going to stifle investment."

He said the company's 8.3 per cent profit on weighted average cost of capital was in line with the commission's requirements.

"The commission now thinks that is one per cent too high."

Mr Kyd said any business in such circumstances would assume the worst and review its plans.

"If we don't make allowances for that, we're likely to lose our credit rating, creditors won't like it, those people who've invested will make little or no dividend, and the company really is left with no alternative."

The commission defended its stance.

Chairwoman Paula Webstock said the commission's existing regulatory regime required appropriate investment to ensure security and quality of supply.

It had issued its reasons for its intention to declare control of Vector, and was now in the consultation phase where all parties, including the company, could put their views forward.

The commission has extended the deadline for submissions to October 2 after receiving a request from Vector for an extension.

As an alternative to control being imposed, a company can propose an administrative settlement. This usually involves an agreement on pricing levels and quality measures.