Infrastructure company Vector has lambasted the Commerce Commission's final draft of input methodologies for electricity distribution services.The commission released its proposals for consultation on Friday morning.Vector chief executive Simon Mackenzie.
Infrastructure company Vector has lambasted the Commerce Commission’s final draft of input methodologies for electricity distribution services.
The commission released its proposals for consultation on Friday morning.
Vector chief executive Simon Mackenzie. speaking at the company's AGM in Auckland, told shareholders that the commission’s proposed allowed return on investment is, by Vector’s calculations, at least one percent below that allowed in Australia.
Given the funding difficulties created by New Zealand’s relatively small capital market, New Zealand’s rate should be higher, he argued.
“Realistically, how can New Zealand infrastructure companies attract local and offshore capital when clearly we are disadvantaged by this situation?”
“We are of the strong view that [the draft input methodologies proposal] does not meet the legislative intent and purpose requirements of the Commerce Act.”
Mr Mackenzie said Vector was prepared to use recent changes to the Commerce Act - rights of appeal and merits review, won after hard lobbying by Vector and others – to challenge the commission’s decisions.
Vector now has 20 days to lodge a merits review – in other words, challenge the outcome – in relation to the proposals released today.
The final dates for consultation on the draft input methodologies for electricity and gas distribution fall in mid-November.
At present, Vectors earns approximately 60% of our revenue from regulated sources, Mr Mackenzie reminded shareholders.
Electricity and gas transportation network businesses account for approximately $750 million of the company’s total revenue of $1.2 billion, with competitive gas wholesale and technology segments providing the remaining $450m.
Hoping for fibre, hunting for gas
Vector has clearly set its sights on the tender to provide fibre services to Auckland as part of the government’s ultrafast broadband initiative.
“We’re ready to start expanding our fibre network by the end of the
year, in line with the Government’s election promise," Mr Mackenzie said.
He stressed Vector’s commitment to servicing Auckland’s network needs – with capital expenditure and maintenance in the region expected to approach $2.5b over the next decade.
On the gas front, capacity constraints on the northern pipeline into Auckland continue to pose a source of potential conflict for Vector and pipeline users.
“To invest in new capacity requires confidence of further significant demand, regulatory certainty and obviously it must stack up commercially for us,” Mr Mackenzie told shareholders today.
Vector’s own gas supplies are tightening as legacy gas contracts wind down – though Todd and Shell’s recent upwards revaluation of the Kapuni field gas reserves has provided some comfort.
The company is continuing to rebalance its gas wholesale portfolio towards ‘blue chip’ customers while seeking out new medium term gas supply contracts.
Vector (NZX: VCT) shares last traded at $2.37.
