The Sunday Star Times yesterday reported that the Wellington-headquartered commission had hit back at recent criticism by Vector shareholder Brook Asset Management that regulation would prevent Vector earning adequate returns.
Commission chair Paula Rebstock said Brook's warning was not a rational response to price control and that the concerns raised could reflect a lack of experience with regulation by the players involved.
The tactics could also indicate existing regulatory interventions were having their intended impact of constraining the market power of monopoly providers, she added.
Brook chairman Simon Botherway wrote to Auckland-headquartered Vector last month saying the commission's ruling - that companies such as Vector should not make more that their weighted average cost of capital on regulated investments - was detrimental to its investment plans as returns would be "absolutely and entirely inadequate".
But Rebstock said the commission’s rules were common internationally and allowed monopoly businesses to recover only efficient costs and to earn a fair rate of return on efficient investment.
Earlier this year then Energy Minister Trevor Mallard accepted the commission’s recommendations and imposed price control on Vector and fellow gas network company Powerco.
Last month Vector said it might need to invest up to NZ$200 million in high-pressure gas transmission facilities over the next decade to cope with Auckland’s predicted energy growth and proposed power station developments.
