Editorial: No need to fear Vector share issue

Out of the blue, a director of Auckland electricity line company Vector has issued a public alert that privatisation plans are afoot - again.

John Collinge's outburst followed a decision to dismiss him from the board because he is also a member of the Auckland Energy Consumer Trust, which exercises public ownership of Vector.

Mr Collinge says the company is considering a $500 million share float that would buy out the interests of local bodies and dilute the trust's holding to perhaps a third of the company.

It is obviously early days. He says the trust chairman, Warren Kyd, is sounding out the members with "informal proposals" at this stage.

Mr Collinge, a former National Party president, pronounces himself "bemused" by a proposition that would take control of the company out of the hands of the Auckland Energy Consumer Trust.

He says he wants to bring the public "up to date with what is going on". He should do that - properly.

It is too easy to raise a hue and cry against privatisation without explaining the purpose for which private capital might be sought and giving the public an intelligent choice.

Vector must be contemplating some major new enterprise that would justify going to the sharemarket. It cannot be short of funds for its ordinary operations.

Lines networks are natural monopolies and the financial returns are limited only by regulatory restrictions on prices or profits.

Last month, Vector was one of three gas pipeline operators found by the Commerce Commission to be reaping excess profits on its gas lines.

The three gas suppliers - Vector, NGC and Powerco - have been discussing mergers lately but the commission's finding will not help those plans.

In any case, the talk of a Vector float is probably inspired by an opportunity for the company to enter an entirely different network business - telecommunications.

It is only a few weeks since TelstraClear finally had the door to Telecom's line monopoly firmly closed by the decision of Communications Minister Paul Swain not to pursue the "unbundling" of Telecom's household connections.

The Australian company must now decide whether to revert to plans to install its own network in this country or remain an operator of niche services. If it decides to dig here, Vector would seem a useful partner.

Vector already has fibre-optic cables in the ground in Auckland, some it laid itself, the rest it acquired with the purchase of United Networks.

And Vector, of course, owns the overhead power cables that could easily be joined by a TelstraClear line to houses and other premises in the largest city.

A network would require perhaps $1.2 billion of additional investment by the partners, and the suspicion must be that a $500 million float would be Vector's contribution.

If so, the public of Auckland would be presented with a decision much more far-reaching than privatisation of a power line company.

It is a decision that could be pivotal for the prospect of a new telecommunications network throughout the country and all the possibilities that offers - broadband internet, additional television, video on demand and so on.

It is a decision the Government might not leave to the vagaries of local politics.

It would be too easy for the likes of Mr Collinge to seek re-election to the trust on a platform of opposition to any dilution of public ownership and put at risk the prospect of competition in broadband telecommunications for the country at large.

Of course, the voters might be willing to put public money into a TelstraClear partnership, and that could be the Government's preference, too. But it would be a needless cost.

The public interest in utility networks is best served by competition between private suppliers where possible, and Commerce Commission regulation where necessary. Public ownership is usually a red herring, serving only the political interest of its alarmists.