Vector should pay adequate compensation

Vector should pay adequate compensation

“There is a sense of irony when Vector yesterday announced handsome profits at a time when most businesses are struggling in the new economic environment, and then today because of a failure on Vector’s power network many businesses in Newmarket have suffered material financial losses,” said Ralph Matthes, Executive Director of the Major Electricity Users’ Group (MEUG). He was commenting on the half year financial profit result of $90.8 million announced[1] by Vector yesterday and the unexpected 2 hour power failure today that affected many businesses such as cafes and restaurants relying on lunchtime trade.

“Consumers don’t mind paying Vector and other electricity line businesses for services and a reasonable return to the line company for assets employed. But if service is unreliable then the line monopoly cannot expect to keep earning good profits. Vector should pay adequate compensation to those customers that lost power.

“The best solution is to create commercial incentives on Vector and other line companies to deliver on prescribed levels of service and if they fail to deliver they become liable for damages. This is the normal commercial arrangement for suppliers of goods and services in competitive markets. The line monopolies are not going to voluntarily go down this route; hence we need quality regulation by the Commerce Commission and Electricity Commission to facilitate the transition to a more balanced commercial framework so that if power goes off, the line companies pay the cost.

“In the wider context of improving the quality of regulation of monopoly businesses we are heartened by comments reported in the media that the Chair of Vector said that a small country like New Zealand needed a regulator like the Commission” concluded Mr Matthes.

[1]Vector media release, Vector reports steady half year performance, 18 February 2009, web reference http://www.vector.co.nz/news/vector-reports-steady-half-year-performance-180209 . The $90.8m is NPAT for the 6 months ending 31 December 2008. The result for the same 6 months in the prior year was $77.4m.

ENDS

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