Commerce Commission offers Vector one month's grace

Vector is hoping it will be able to sort out an administrative settlement regarding pricing levels. Picture / Glenn Jeffrey

The Commerce Commission yesterday sought to soothe fears that its clampdown on electricity lines companies would dissuade investment as it extended by a month the deadline for public consultation over its controversial plan.

Following a warning that power lines companies could follow the precedent Auckland's Vector set to review capital spending, the commission said ensuring appropriate investment was a key part of the regulatory regime.

"The regime not only allows for appropriate investment, it in fact requires that appropriate investment is made to ensure security and quality of supply," said commission chairwoman Paula Rebstock.

This week, Vector declared war on the commission by putting on hold $630 million of capital spending and saying it would explore all legal avenues to block the commission's attempt to control its prices.

The Electricity Network's Association, which represents the 24 power lines companies, said other members could also follow suit.

The commission has accused Vector of abusing its monopoly position and claimed hundreds of thousands of Auckland homes were paying lower line charges at the expense of consumers in Wellington, the North Shore and other areas.

It said Vector would have to raise its line charges over the next three years to comply with its rules.

The commission estimated that Vector, with about 650,000 customers in Auckland and Wellington, would earn $13 million to $75 million in excess revenue a year over the next two years - potentially more than its $45 million net profit in the year to June.

It was seeking submissions on its plan to control Vector's prices by September 4, but will now accept submissions until October 2.

Rebstock said Vector could propose a settlement to the commission as an alternative to control. Such a settlement would likely involve agreement on pricing levels and quality measures.

"The result [of a settlement] is that prices and quality are maintained at levels the commission considers appropriate for the long-term interests of consumers, without the need to impose control, which can be intrusive and costly."

She said as formal consultation was the appropriate method for discussing the issues, the commission was unlikely to make further comment.

Vector chief executive Mark Franklin said his company was encouraged by the deadline extension and was working on its submissions.

"We are also committed to working in parallel with the commission towards an administrative settlement," Franklin said.

Since the commission disclosed its plan, Vector, just over 75 per cent owned by the Auckland Energy Consumer Trust, has lost $370 million from its market value.

Its shares closed last night at $2.29, 9c below last year's float price of $2.38.