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Vector astonished at Commission regulation move

Tuesday 12th April 2011 1 Comment

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Energy company Vector's share price fell 4.28% yesterday as it expressed astonishment at a move by the Commerce Commission to change the way it calculates a price when it regulates electricity distribution businesses.

The commission today released a paper outlining a change to how it calculates starting prices between 2010 and 2015 for electricity distribution businesses that are subject Commerce Act rules.

Suppliers may increase prices over the regulatory period by an allowed rate of change from a starting price.

When the commission first set a default price path for 2010 to 2015 in 2009 it rolled over existing prices, but last month it asked electricity businesses for information so it could calculate a new starting point.

It did not issue an information request to Orion New Zealand, because it was affected by the earthquake in Christchurch.

Vector's share price fell 11c to $2.46 yesterday and brokers said investors did not like regulatory uncertainty.

Vector said it was astounded at a fundamental and sudden change in approach with no consultation. Participants had been given an extremely short time to respond to a crucial issue.

"This overturns the basis under which most lines companies and market participants have been using to estimate the impact of the new regulatory regime for a considerable period of time," Vector said.

"All this paper has done is to increase regulatory uncertainty in the capital markets and the wider infrastructure investment space yet again."

In February, Vector appealed against commission decisions regarding input methodologies for the electricity distribution, gas distribution and gas transmission sectors.

It said then that the appeal would focus on key aspects of error of law and merits review.

The company argued that the commission had failed to take this into account in its final determinations and had misapplied the intention of the 2008 Commerce Act amendments.



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Comments from our readers

On 12 April 2011 at 3:59 pm Brownie said:
If the Govt. gets around to part1aly privatise parts of Govt owned Utilities.INVESTORS should look at what has happened at Telecom and now Vector with unfair regulatory measures both have become disastrous investments.
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