Vector loses long running legal battle

03:17, Nov 15 2012

The Supreme Court today unanimously dismissed Vector's battle to overturn the Commerce Commission's ability to set the prices monopolies can charge to transport gas and electricity to customers.

The ruling brings to an end the long running battle between the Auckland energy distributor and watchdog, which saw the two face off in the High Court and Court of Appeal, then wind up before the Supreme Court.

Vector had won in the High Court, lost in the Court of Appeal, and then appealed to the Supreme Court.

Under the new pricing rules being proposed, the Commerce Commission calculated that Vector needed to reduce its prices by between 16 per cent and 25 per cent, which equates to $4.60 a month for the 140,000 customers.

Vector challenged the watchdog to reset prices on two grounds.

Firstly, under the Commerce Act of 1986, the Commerce Commission is required to publish input methodologies - or how it calculates prices - when it assesses a monopoly's profitability. It must also set standard starting prices for a five-year period.

When prices were set at the end of 2009, the input methodology was not put in place, and the regulator rolled over the existing price structure in March the following year for five years. The input methodologies were published in December 2010.

Vector contended that the Commerce Commission couldn't reset profitability limits without first having the methodology in place without leaving the new price regime in an unacceptably uncertain state.

The court dismissed the argument, saying the Commerce Act didn't specifically require this.

It also rejected Vector's second argument that under the act the Commerce Commission couldn't retrospectively change starting prices in any five-year period, saying it placed "unnecessary gloss on the statutory text".

The court said if Vector's strict reading of the act were to hold, it would hamper the practical rollout of the statute.

Vector was ordered to pay costs of $40,000. The firm's share price fell 0.4 per cent to $2.71 in response to the ruling.

The commission welcomed the decision, saying it would be able to finish its regulatory work.

"The judicial reviews the commission has faced in relation to input methodologies have significantly delayed the implementation of the Part 4 regime," said commission chairman Mark Berry.

"This has had the effect of allowing some businesses to continue to charge their customers too much. And some businesses which we believe should be able to charge more in order to invest in their networks have not been able to increase prices," Dr Berry said.