KEY POINTS:
Increasingly, the word dysfunctional has become synonymous with the Auckland Energy Consumer Trust, the holder of a 75.1 per cent stake in Auckland energy network company Vector. This should, in fact, have always been the case, given the irrationality of its very existence. Such a governance arrangement was always bound to hinder Vector's fortunes. True to form, the publicly elected trust's inherent shortcomings have played no small part in a series of misfortunes, culminating late last year in the resignation of three high-profile independent directors from the Vector board.
These mishaps have been seized on by the Auckland City Council, which is making a fresh bid for Vector's shares. It, with the Manukau and Papakura councils, is lobbying the Government to unwind the trust.
This would see consumers get shares or cash worth $3000 to $4000, with the councils receiving the rest of the shareholding, worth between $450 million and $750 million, depending on the payout to consumers. Each of the councils could either keep their shares or sell them to invest in other infrastructure.
The Government has said previously that it did not see the issue as a priority. Given the trust's ongoing blundering, it can hardly maintain that stance. The simple fact is that Vector's governance structure is unworkable. Trustees are elected by and administer shares on behalf of power users; they are not shareholder representatives. The burden of electoral baggage dictates they should not interfere in Vector's operational affairs, or attempt to influence plans for growth and improved profitability. Business acumen should determine these in the interests of all shareholders, not trustees intent on advancing consumers' interests by securing lower power prices and suchlike.
Yet interference has been very much in the trust's mind. A trustee has usurped an independent director in directing dealings with the Commerce Commission. Contrary to the recommendation of a ministerial inquiry, two trust members have also been appointed to the Vector board, raising obvious conflict of interest concerns. How can the trustee directors act in accordance with trust wishes when the law associated with a listed company and legal rulings both bind them to act in the best interests of Vector's profitability?
The only possible reason for the Government to pause might be the case of Bryan Leyland, who stood for the trust last year on a policy of winding it up and distributing cash or Vector shares to consumers and councils. He polled fourth to bottom of 20 candidates. But such elections attract low turnouts and are not an accurate gauge of sentiment. A better guide would be the strong public appetite for shares when 24.9 per cent of Vector was floated in 2005. Mum-and-dad investors can be enticed from the housing market when offered the steady income and strong long-term returns of fully or partly privatised utility companies.
Both the stock exchange and economic growth have suffered from the unhealthy and non-productive emphasis on housing. Disbanding the consumer trust would be part of the remedy inherent in a shareholding democracy. There would also be a bonus for local councils, who would be free, as with Auckland International Airport shares, to sell if they required funding for other infrastructural development. Most importantly, Vector would be able to operate as a commercial enterprise.
The time has come to end this farce. If the Auckland City Council is being opportunistic, it is only because it has been given the opportunity. Further opportunities are inevitable if the Government does not act.
