Customers left out says Vector

By CHRIS DANIELS energy writer

Monopoly electricity lines companies may start caring more about pleasing a Government regulator and less about customers if a Commerce Commission plan is adopted, says lines company Vector.

The Commerce Commission published a discussion paper in March outlining a system it thinks will leave the monopoly companies free to run efficiently while discouraging excess profit-taking.

The paper shows the commission favours a system of thresholds relating to price, profits and service, with companies which operate within stated guidelines left alone, but those who breach them targeted for regulation.

Vector, New Zealand's second-largest lines company, has completed its submission on the commission's plans, which it says should look at customer outcomes, not business inputs.

"Customers are concerned with outcomes and, if you replicate a competitive market by focusing on good outcomes for customers, the economic efficiencies follow," says chief executive Patrick Strange in the submission.

Vector argues that any thresholds regime should focus on outcomes relevant to customers - price and service, not inputs such as the weighted average cost of capital and the consumer price index.

"We oppose strongly the proposal for input benchmarking, as it will inevitably distort behaviour. Companies will be forced to align their businesses to optimise their score under benchmarking, instead of focusing on outcomes."

Looking at the inputs would lead to a "compliance culture" rather than improving innovation.

"It will ultimately lead to the commission telling the lines businesses how to operate their businesses and will expose the commission to becoming a de facto decision maker, which will be of concern to lines businesses and should also be a concern of the commission."

Lines companies will always have better information about their business than any regulator, says Vector.

A commission suggestion to use a regulated system of customer surveys to ascertain customer satisfaction draws criticism from Vector.

The submission says official surveys will add cost and complexity, while not covering all the requirements of a business. Companies will be focused on scoring highly in surveys, not actually improving.

"Inevitably we and other companies would time company announcements, advertising and dividend distributions to optimise our score."

Powerco, the third-largest lines company in New Zealand after UnitedNetworks and Vector, has been arguing for one regulatory framework to apply across the entire electricity sector.

Powerco has suggested the commission act "in an exclusively judicial role" in the lines industry.