Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


ComCom takes issue with Vector on regulated rates of return

ComCom takes issue with Vector on regulated rates of return

By Pattrick Smellie

Nov. 30 (BusinessDesk) - The Commerce Commission says Auckland electricity network monopoly Vector is wrong to claim it is being subjected to regulated costs of capital higher than its Australian counterparts.

Vector has repeatedly made the argument in its protracted argument with the competition regulator, saying Vector faces greater business risks than Australian networks and should be reflected in a higher weighted average cost of capital when regulated prices are being set.

Instead, Vector says it faces an 8.77 percent WACC while Australian peers face WACC's of between 9.4 percent and 9.95 percent.

However, the commission's deputy chair, Sue Begg, says in slides prepared for an analysts' briefing in Wellington today that this is not a "like for like" comparison because Vector is not taking into account investor taxes, "notably dividend imputation."

As a result, Australian network WACC's are in a range of 8.66 percent and 9.17 percent, falling to a range of between 7.08 percent and 7.49 percent on a post-tax basis, well below the 8.77 percent applying to Vector.

The comments were part of the commission's confirmation of final default price-quality path pricing for 16 electricity distributors, which have been delayed by challenges to the commission's methodology by Vector, which must cut its charges by 10 percent as a result of the commission's ruling.

The decisions make only minor changes to the draft decisions already announced in August, and confirm the commission's view that Vector would be "over-recovering" $121.6 million a year without the price changes.

Vector is also amongst a large group of monopoly operators including ports and airlines seeking a merits review in the High Court of the way the commission has set its final pricing. If successful, that could see today's confirmed price paths being reopened.

Vector earlier this month lost a final appeal to the Supreme Court over the process the commission adopted to set the price paths.

The NZX-listed company's chief executive Simon Mackenzie said today's decision was "as expected".

"Today's decision requires a reduction in our electricity distribution prices by an average of 10 percent in 2013, with a further price adjustment in 2014."

Mackenzie said the regime created "perverse incentives" which made Vector a "victim of its own success" for lowering its costs and improving operational efficiencies.

"Our focus remains on the merits appeal process, which is well under way, with a decision expected in the first half of next year," he said.

The only changes of significance in today's announcements are a decision, at the request of four community-owned lines companies to limit allowable increases in their tariffs to no more than 10 percent in one year, for fear that higher increases would be difficult for customers to afford.

The affected lines companies are Alpine Energy, Centralines, The Lines Company, and Top Energy.

Network charges make up around one-third of the cost of electricity, so price rises and falls will not translate into electricity price cuts or increases for consumers of the same size.

Vector shares rose 1.1 percent in early trading on the NZX, to $2.67.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Wine: 20% Of Marlborough Storage Tanks Damaged By Quake

An estimated 20 percent of wine storage tanks in the Marlborough region, the country’s largest wine producing area, have been damaged by the impact of the recent Kaikoura earthquake. More>>

ALSO:

ACC: Levy Recommendations For 2017 – 2019 Period

• For car owners, a 13% reduction in the average Motor Vehicle levy • For businesses, a 10% reduction in the average Work levy, and changes to workplace safety incentive products • For employees, due to an increase in claims volumes and costs, a 3% increase in the Earners’ levy. More>>

Women's Affairs: Government Accepts Recommendations On Pay Equity

The Government will update the Equal Pay Act and amend the Employment Relations Act to implement recommendations of the Joint Working Group on Pay Equity. More>>

ALSO:

Immigration: Increase In Seasonal Workers For RSE

The current cap will be increased by 1,000 from 9,500 to 10,500 RSE workers for the 2016-17 season. Mr Woodhouse says the horticulture and viticulture industry is New Zealand’s fourth largest export industry, producing almost $5 billion in exports. More>>

ALSO:

Hurunui: Crown Irrigation Invests Up To $3.4m In North Canterbury

Crown Irrigation Investments will invest up to $3.4m in the Hurunui Water Project, an irrigation scheme that will be capable of irrigating up to 21,000 hectares on the south side of the Hurunui River in North Canterbury. More>>

ALSO:

Not So Great:Butterfly Eradication Success

The invasive pest great white butterfly has been eradicated from New Zealand in a world-first achievement, Primary Industries Minister Nathan Guy and Conservation Minister Maggie Barry say. More>>

Gordon Campbell: On The Government’s Tax Cuts Fixation

Long before the earthquake hit, the dodginess of the government tax cuts programnme was evident in the language of its packaging. It is being touted as a “tax cuts and family care” package... More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news