Vector is pleased to have reached a settlement with the Commerce Commission for an unintended breach of its regulated price path. The correction will take place in Auckland’s lines prices across the whole region over the next two years.
 
The breach arose in April 2013 when Vector restructured its prices to enable residential consumers to benefit from either a low user fixed charge or standard user tariffs. Under low fixed user rules, electricity retailers are obliged to advise customers of their optimal plans.  Lines companies are legally prevented from unilaterally transferring customers between standard and low use tariffs and rely on electricity retailers to request them to do so.
 
Vector assumed that competition in the electricity retail market would ensure retailers acted in accordance with these rules; would select the most beneficial tariffs for their customer; and then proactively request Vector to make the switch. This did not occur.
 
Vector Chief Executive Simon Mackenzie noted that in its statement the Commerce Commission has accepted that Vector did not intend to breach its regulated price path at the time at which it restructured prices.

“We acknowledge that in hindsight we got our assumption wrong. However, it does raise concerns about the genuine effectiveness of competition in the electricity retail market.  It’s disappointing that neither competition nor enforcement appears to be working to benefit customers. 
 
“We can only reiterate Commission Deputy Chair, Sue Begg’s comment that all energy consumers should check that they are on the best tariff for their circumstances. Savings of up to $200 per year per household can be made and Vector does not want consumers paying more for their energy than is fair,” he said.
 
Vector acknowledges that as a result of the new tariff structure not being implemented as intended, the company did not comply with its regulated price path for 2014 and 2015, resulting in earning extra revenue as openly disclosed in its audited regulatory accounts.
 
“Fortunately, a substantial amount of the inadvertent gain has already been unwound when Vector transitioned to a new price path in 2015. Our focus is now on ensuring that the repayments we are making reach consumers via their retailers,” Mr Mackenzie said. 
 
Vector is pleased to have been able to work constructively with the Commerce Commission to reach a fair and reasonable settlement.

The Commerce Commission has agreed the best way forward is to correct it through Auckland’s lines prices over the next two years.