Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search


VECTOR line profits raise concern of consumers

The profit results announced yesterday by VECTOR highlight the concerns of consumers about the activities of electricity monopolies according to the Executive Director of the Major Electricity Users Group (MEUG), Mr Ralph Matthes.

The Chairman of VECTOR, Mr Wayne Brown, commented on the improved result by VECTOR where after tax profit increased from $49.2.million to $94.2 million.

Mr Matthes said VECTOR’s customers were entitled to know:

 Why they should accept Mr Brown’s statement that “left alone, we won’t be touching prices”, whereas every other business tries to be more efficient and reduce its costs instead of simply taking the attitude that unless it is forced to it won’t reduce costs and prices.

 How was the $45 million increase in profit achieved?

 What were the “unspecified one-off gains from the sale of its interests in Southdown and McLachlan geothermal plant”?

 Whether the reported 7% Return on Investment (ROI) is a fair measure of VECTOR’s performance or whether it reflects an inflated asset value and or a raft of inefficiencies and or fudged cost allocations.

 Why did VECTOR expect in the future to earn a 10% ROI, when Transpower which arguably has the same or even more risk, has a target ROI of between 6% and 7% ROI .

The only positive aspect of Mr Brown’s announcement was his acknowledgement that the $110 million tunnel from Penrose to the CBD should never have been built. We will therefore be looking to VECTOR to ensure that the cost of that poor investment decision is not included in any future Optimised Deprival Valuation (ODV) of the company – otherwise it could extract a ROI from consumers. Rather the cost should be borne by the companies shareholders.

“What yesterday’s announcement highlights is the very weak regulatory regime that companies like VECTOR currently face” stated Mr Matthes. “It is ironical that monopolies such as VECTOR can parade profit results and make claims about future profit and price levels without being answerable to the users of their networks, that is consumers and retailers.”

He said every competitive business in New Zealand has the discipline of potentially losing market share to its competitors and this keeps costs and prices honest. Line companies do not face any real disciplines and they tend only to pay lip service to the concept of information disclosure stated Mr Matthes.

The community should be aware that the performance of line owners (and their auditors) in meeting their information disclosure requirements was described as “almost without exception, highly unsatisfactory” by the Ministry of Economic Development as recently as December 1999.

Mr Matthes said that a study undertaken by MEUG also revealed serious discrepancies and inconsistencies with the way that some line companies were reporting their activities. In most cases consumers ended up paying more for their line services than they should be and any talk by the Chairman of VECTOR that its rate of return should be higher is unjustified.

All consumers were looking to the Government to ensure that the line companies were subjected to price control and that these monopolies could not simply charge what they chose. Consumers were optimistic that these forms of control would emerge from the Ministerial Inquiry into Electricity that would be reporting to Government in June.

© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines

Supreme Court: Worksafe Decision On Whittall Pike River Prosecution Unlawful

The question in issue on the appeal was whether WorkSafe New Zealand acted to give effect to an unlawful agreement of this nature when it offered no evidence on charges against Peter William Whittall for breaches of the Health and Safety in Employment Act 1992...

The Supreme Court... has found that the decision to offer no evidence was made under an unlawful agreement to stifle prosecution. It has granted a declaration to that effect. More>>


Cullen To Chair: Tax Working Group Terms Of Reference Announced

Finance Minister Grant Robertson and Revenue Minister Stuart Nash today announced the Terms of Reference for the Tax Working Group and that the Group will be chaired by Sir Michael Cullen. More>>


Gordon Campbell: On The New Pike River Agency (And The Air Strike Wing)

Much of the sympathy the public still feels for the families of the Pike River miners has been sustained by the sense that the previous government – let alone the mining company and the processes of receivership and litigation – has never dealt honestly, or fairly, with them. More>>


Not Going Swimmingly: Contractor Cut, New Dates For Christchurch Sports Centre

“As an incoming Minister, I have been conducting a thorough review of progress on the Anchor projects and to learn of a $75 million budget blowout on this project was very disappointing..." More>>


Tertiary: Allowances, Loan Living Costs To Get Boost

“From 1 January, student allowance base rates and the maximum amount students can borrow for living costs will rise by a net $50 a week,” says Education Minister Chris Hipkins... further adjusted from 1 April 2018 in line with any increase in the CPI. More>>


Foreign Affairs: Patrick Gower Interviews Jacinda Ardern

Prime Minister Jacinda Ardern says discussions have already begun on how to bring climate change refugees into New Zealand under a Pacific seasonal employment plan... More>>


Gordon Campbell: On The Centre Right’s Love Of ‘Nanny State’

You’d almost think it was 2005 again. That was a time when the rugged individualists of the centre-right were being beset by government regulations on the nature of light-bulbs, the size of shower heads, the junk food available at school tuck shops and other such essentials... More>>




Featured InfoPages

Opening the Election