Power company sparks challenge over Vector's $14m Auckland customer repayment
Power company Vector is refusing to make a lump $14 million repayment to Auckland households it overcharged.
Vector admitted to overcharging its customers in a Commerce Commission decision released on July 7, after a change to the way it set prices.
The pricing change meant about a third of households in Auckland were overcharged for power between 2014 and 2015 - amounting to an additional $13.9m for Vector.
Auckland based Mercury Energy told Vector it should repay the money in a lump sum to affected households.
But instead of paying it all back at once - which Mercury estimated to be in the vicinity of $25 per home - Vector said it will set a cap on lines charges, reducing the amount of revenue it recovers over two years starting in April 2018.
"Customers shouldn't have to wait, and they will lose sight of the money they are owed," said Julia Jack, Mercury's chief marketing officer.
"It is actually the customers' money and it would help them with the current winter chill," Jack said.
Affected customers were in Auckland's CBD, Avondale, Mangere, Papakura and eastern suburbs.
Mercury wants Vector to accelerate the repayment and offered a solution help to make that happen.
"Mercury wants to work with Vector to have the $13.9m released to all retailers so the amount could be applied to energy costs via a rebate," said Jack.
"From Mercury's perspective we'll ensure that our customers get every cent passed through from the Vector refund."
To give confidence around distribution of the payment, Jack said Mercury would have the rebate externally audited and would make that report public.
"To be doubly sure, we'll top up the amount by 5 per cent to Mercury customers if Vector hands over the cheque in the next 30 days," said Jack.
Vector has rejected the offer. Instead Vector Chief Executive Simon Mackenzie said it would follow the legal terms of the settlement with the Commerce Commission - which states the money will be repaid by holding residential prices flat for the next two years, resulting in consumers paying less.
"We have been totally upfront throughout, acknowledged our mistake and the Commerce Commission accepted that we did not intend to breach our regulated price path at the time we restructured prices," Mackenzie said.
He claimed some of the responsibility for the overcharging of customers was because electricity retailers did not help switch consumers to lower tariffs when Vector changed its prices.
"Vector was legally prevented from unilaterally switching consumers between low use and standard use tariffs. We were forced to rely on retailers to identify and request Vector to switch those consumers who would benefit from a low use fixed charge tariff. In many cases, the retailers simply didn't do it," Mackenzie said
He said Vector settled on the reduced lines charge repayment plan with the Commerce Commission because it was the most reliable way to ensure the over recovery is returned to customers. There is no regulatory power to force retailers to pass on refunds to customers.
"Vector wants to ensure the money gets to consumers, particularly in light of how the breach came to pass. This way we can be sure that all consumers will get what is owed," he said.