Photo: Vector / Brett Phibb
Vector has backed down on its plan to sell and lease back assets after the Commerce Commission found it would cost consumers millions of dollars over the coming decades.
The Commerce Commission issued a formal warning to Vector today about its the sale and lease agreements, which resulted in a $300 million asset revaluation but without an improvement in its service or infrastructure investment.
Vector's approach to valuing those transactions was inconsistent with regulatory rules under the Commerce Act, the commission said.
"This should send a strong message to all regulated suppliers that we will act to protect consumers from price increases that can't be justified," Commission deputy chair Sue Begg said.
Vector entered into the arrangement in March 2020, which involved selling its CBD tunnel and a portfolio of substation land and building assets to its subsidiary companies and then leasing those assets back.
Vector had now reversed the transactions which would have allowed it to earn significantly greater revenues from its electricity consumers over the estimated 30 to 40 year duration of the leases.
"It is a good outcome for consumers that Vector has reversed its regulatory treatment of its transactions, which has removed the potential impact of higher costs on their electricity bills," Begg said, adding Vector had co-operated with the investment.