Vector proposes settlement and agrees to rebalance prices
Published13 Oct 2006
Vector has proposed to rebalance its power prices from 1 April next year and comply with the Commerce Commission's price path threshold for the remainder of the current five-year regulatory period.
The voluntary move forms part of an administrative settlement offer presented to the Commission last month. An administrative settlement is an alternative to regulatory control being imposed.
The Commission announced its intention to declare control of Vector in August 2006 after finding the company was overcharging many industrial and commercial customers. Vector was also undercharging other customers, particularly Auckland residential consumers who are the beneficiaries of the Auckland Energy Consumer Trust, Vector's principal shareholder.
"The Commission's preliminary view is that Vector's offer is, in principle, consistent with the objectives of the regulatory regime," said Commerce Commission Chair, Paula Rebstock.
"Vector's decision to comply with the price path threshold and to rebalance its tariffs underscores the effectiveness of the current regulatory regime in delivering long-term benefits for consumers," Ms Rebstock said.
"Workable solutions for both consumers and businesses can be achieved without the Commission necessarily having to impose control."
Vector's offer involves rebalancing its charges to different customer groups over the next two years, so the prices paid by consumers will reflect the costs of supplying them. The distribution component of consumers' power bills will go down in many cases, but in some instances it will increase. Vector's distribution charges comprise around 20% - 40% of the average power bill.
The Commission will release details of Vector's administrative settlement offer in November, so that interested parties can provide their views.
The timeframe for submissions on the Commission's existing Intention to Declare Control will be extended to allow consultation on the proposed settlement offer. This will enable interested parties to also provide their views on the offer in light of the Commission's earlier Intention.
If, after taking into account the views of interested parties, the Commission does not accept Vector's offer, then the Commission will still need to decide whether or not to declare control.
If the Commission's preliminary view on Vector's offer is confirmed and it is subsequently accepted, then the Commission will be able to close its post-breach inquiry into Vector's threshold breaches in 2004.
Background Vector
Electricity distribution services.
The regime.
Control.
Intention to declare control of Vector.
Administrative settlement.