The Vector payout: how, where and when

Suddenly, being hooked up to the electricity supply via Vector's powerlines seems worthwhile. BERNARD ORSMAN details the coming windfall.

You live in Auckland and are connected to the Vector network of powerlines. In the week starting March 26, you will receive a cheque for $520 in the mail.

Not quite as good as the $1060 coming to 20,000 Te Awamutu and Cambridge residents this month in a long-awaited payout from the Waipa Power Trust.

But even $520 is a nice pre-Easter bonus. Perhaps it will pay for a new electrical appliance or a deposit on a winter holiday in the South Pacific.

But before you spend the $520, stop and think. The money belongs to you and it always has - it is your share of the profits made by Vector.

In fact, the $152 million being distributed is three years of profits that have been frozen in a bank account while Vector and politicians fought a series of battles in and out of court.

Justice Barry Paterson, QC, brought matters to a head just before Christmas when he gave a ruling clearing the payout. The Auckland City Council briefly flirted with appealing, but councillors voted last week to call off the lawyers.

Am I entitled to a Vector dividend?


If you were a Vector customer at the eligibility date of Monday, February 12, you will receive the full dividend of $520. About 230,000 households and 33,000 businesses in Auckland (including Waiheke Island) and Manukau Cities and most of Papakura District will receive $520. Even if you signed up with Vector on the cut-off date of Monday this week, you will receive $520.

Are former Vector customers entitled to a dividend?


There are about 82,000 former customers who qualify for a partial dividend, including those who closed their accounts in the weeks before the magic cut-off date.

They were customers when dividends from 1998, 1999 and 2000 banked up during legal action by Auckland, Manukau and Papakura councils. They have either moved out of the Vector area, changed line company or died since the legal action started.

A payout will be based on how long they were Vector customers during the period when the dividends were stalled.

Former customers must prove they were customers at August 30, 1999, or May 31, 2000 (the dates of eligibility for the 1998 and 1999 dividends), by providing a copy of their power account for those dates or producing details that can be checked against Vector's records. They will have to show ID, such as a driver's licence or passport.

Former customers should not ring Vector or Mercury if they think they are entitled to a payout. People should ring the Auckland Energy Consumer Trust on 0800 4PAYOUT (0800 472 9688) or visit the trust website.

The trust is running an advertising campaign outlining these details and giving former customers six months to apply.

When will I receive a payout?


All 263,000 existing Vector customers will receive a cheque in the mail in the week starting March 26. NZ Post hopes to have all cheques delivered by Saturday, March 31.

Who gets the cash in the house or flat?


The payout goes to the person who is the account holder and whose name is on the power bill. In multi-tenant flats, the dividend will be sent to whichever name or names are on the power bill. Flatmates will have to decide how to split the payout.

What about people with more than one power account, or businesses with several branches?


People will receive a payout for each account they have. The same goes for businesses - a payout for each separate account.

Where is this money coming from?


Profits that Vector, a community-owned company, declared in 1998, 1999 and 2000 and which were frozen during the legal wrangles. The money has been sitting in a bank accumulating interest. The total sum is $182.5 million but after tax there is $152 million to hand out.

In Te Awamutu and Cambridge, the $20 million in tax-free payments is going to people who were Waipa Networks consumers on November 1 last year. It is money that came from the sale of its energy arm to TrustPower for $8 million and the shares it held in the Tauranga-based electricity company for $12 million.

Will the taxman want a slice of my payout?


Tax, including tax imputation credits, has been deducted from the $182 million of accumulated dividends to leave a tax-free dividend of $152 million for distribution. The Inland Revenue Department toyed with asking for customer information so it could intercept the cheques of 50,000 people who owe tax but decided not to do this.

Why isn't the money being used to keep power bills down or put lines underground?


The Energy Companies Act requires Vector to act as a commercially successful company. Its job is to make profits which, in turn, are returned to shareholders - you, the customer - in the form of a dividend. The profits are given to the publicly elected Auckland Energy Consumer Trust, whose job it is to distribute them to customers.

The trust cannot do anything else with the money, such as spend it on underground lines. However, the trust can set broad policy objectives and it is likely to ask the board to do more underground work.

Why are households getting the same payout as businesses?


A Mangere pensioner will get the same payout as a multinational bank in Queen St because the new trust has exercised a discretion to distribute the $152 million equally among households and businesses, despite legal advice from John Katz, QC, favouring the previous trust policy of paying businesses more.

Trustee John Collinge argued that all consumers in the community had an equal interest in the powerlines in the same way as all residents have an equal interest in the assets of a city.

"It is an undivided share but still, I believe, an equal one. If so, they are entitled to the distribution in equal shares."

What is Vector?


Cast your mind back to the old Auckland Electric Power Board in the days before Government reforms that turned power boards throughout the country into commercial enterprises.

In 1993, Mercury Energy was created out of the remnants of the Auckland Electric-Power Board. A further set of reforms required power companies to separate the lines side of the business from the retailing of electricity. In April 1999, Mighty River Power, a state-owned enterprise, bought Mercury's retail customers and the name Mercury.

The remaining network of lines and cables bringing electricity to houses and businesses in Auckland and Manukau Cities and most of Papakura District was renamed Vector.

Where does the Auckland Energy Consumer Trust come into this?


When Mercury was established in 1993, all 300 million shares were issued to the Auckland Energy Consumer Trust to be held in trust for the company's then 250,000 consumers. The trust has five members who are voted in at local body elections. The main job of the trust is to distribute profits from Vector to consumers.

At the last elections in October last year, the National Party-aided Citizens and Ratepayers group lost control of the trust to a new anti-privatisation ticket Powerlynk.

What have the court battles been all about?


Auckland, Manukau and Papakura councils have taken Vector to court six times since 1998 and lost every time. The first four times were over the corporate governance structure of Mercury (now Vector) which saw six C-class shares issued to partners of law firm Russell McVeagh so they could appoint five of the nine directors to the Mercury board. The structure has since been dismantled, resulting in the trustees appointing all the directors.

In the fifth and sixth court actions, the councils tried to stop a dividend payout to consumers, arguing that the money came from capital, not income, and should be put back into Vector, which the councils will eventually own.

After Justice Paterson cleared the payout before Christmas, Manukau and Papakura said enough was enough.

The investments committee of Auckland City Council, however, voted 4-3 last month to appeal against the decision. It wanted the $31 million identified by Justice Paterson as capital to be kept in Vector and not distributed to power users.

After public outrage the full council overturned this decision last week.

How much have the court battles cost?


Auckland City has spent $1.4 million on lawyers, Manukau about $750,000 and Papakura $95,000 - nearly $2.3 million of ratepayers' money in joint action. On top of this, Vector, the trust and Raynor Asher, QC, who represented the consumers in the last two court actions, have been awarded court costs against the councils.

These costs amount to $1.65 million for the first four court actions and up to $1.8 million (the final figure is still being worked on) for the last two. The final bill to ratepayers will be around $5.7 million.

Auckland City's share of costs awarded against the councils is likely to be about $2.1 million, Manukau's $1.24 million and Papakura's $140,000.

When all the lawyers have been paid, Auckland City councillors will have blown $3.5 million of ratepayers' money on the fruitless court action, Manukau $2 million and Papakura $235,000.


Links


Auckland Energy Consumer Trust