Vector's price plan rejected

New Zealand's competition regulator said yesterday that it would not accept network company Vector's proposals to comply with planned price controls.

Last month the Commerce Commission ordered Vector and another distributor, Powerco, to cut their gas prices because they were making excessive profits.

Vector was told to cut its prices by an average of 9.5 per cent, worth around $6.9 million, and work out a way to pass the savings on to consumers.

"The approach Vector has adopted does not apply a price decrease across all customer classes," said Commerce Commission chairwoman Paula Rebstock.

Instead, Vector was proposing to raise residential consumer prices by 5 per cent, cut small business charges by 5 per cent, and cut prices for medium and large commercial and industrial users by various amounts.

"The Commission wishes to ensure that all customers receive the benefit of [price] control," Rebstock said.

The regulator was ready to intervene and, if necessary, would amend its original control order next week.

That would allow Vector to keep current prices until November 1, after which it would have to cut prices 10.4 per cent.

In July, the Government accepted a commission recommendation that price controls be imposed on the two companies because they had substantial market power and were earning excessive returns above their cost of capital.

Shares in Vector, which debuted on the share market on August 15 after an initial public offering of a 25 per cent stake in the group, ended down 2 cents yesterday at $3.16.

Vector is 75 per cent controlled by an Auckland-based consumer trust.

- REUTERS