Commerce Commission v Vector Ltd

[2019] NZHC 540

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2018-404-2214

[2019] NZHC 540

UNDER

Parts 4 and 6 of the Commerce Act 1986

BETWEEN

COMMERCE COMMISSION

Plaintiff

AND

VECTOR LIMITED

Defendant

Date:	6 March 2019
Counsel:	J Every-Palmer QC, L A O’Gorman and R Cahn for Plaintiff J A Farmer QC, SDJ Peart & M Singh for Defendants
Judgment:	22 March 2019

JUDGMENT OF DUFFY J

This judgment was delivered by me on 22 March 2019 at 11 am pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Buddle Findlay, Auckland

J D Every-Palmer QC, Barrister, Wellington Chapman Tripp, Wellington

J A Farmer QC, Barrister, Auckland

COMMERCE COMMISSION v VECTOR LIMITED [2019] NZHC 540 [22 March 2019]

[1]    In this proceeding, the Commerce Commission (the Commission) claims that Vector Limited (Vector), which carries on business as an electricity and gas distribution company in Auckland, has failed to achieve the Quality Standards prescribed under the Commerce Act 1986 (the Act) for the 2015 and 2016 Assessment Periods. Vector admits the contraventions. The parties have agreed on a penalty. The suitability of that penalty is the subject of this hearing.

[2]I consider the agreed penalty appropriate.

Legal framework

[3]    Part 4 of the Commerce Act 1986 governs regulation of industries where there is little or no competition and no likelihood of a substantial increase in competition.1 The purpose of that part is to create outcomes akin to those in competitive markets. These purposes are to be achieved by ensuring that suppliers of regulated goods or services: 2

(a)have incentives to innovate and to invest, including in replacement, upgraded, and new assets; and

(b)have incentives to improve efficiency and provide services at a quality that reflects consumer demands; and

(c)share with consumers the benefits of efficiency gains in the supply of the regulated goods or services, including through lower prices; and

(d)are limited in their ability to extract excessive profits.

[4]    One of the ways consumers are protected against the lack of competition is through the imposition of price-quality regulations. Electricity line services are subject to price-quality regulation set out in determinations of the Commission under s 52P of the Commerce Act. There are three determinations relevant to this hearing, which are referred to collectively as the “Default Price-Quality Path Determinations”

1      Section 52.

2      Section 52A.

(DPPs). Those paths specify either or both of the maximum prices and revenues that may be charged and recovered, and the Quality Standards that must be met.3 The Quality Standards are important, as by limiting the maximum prices charged and revenues recovered, distributors may attempt to gain short term benefits through reducing expenditure and “running down the network”.

[5]The relevant DPPs are:

(a)the Electricity Distribution Services Default Price-Quality Path Determination 2010 dated 30 November 2009 (DPP 2010) which applied from 1 April 2010 to 31 March 2013;

(b)the Electricity Distribution Services Default Price-Quality Path Determination 2012 dated 30 November 2002 (DPP 2012) which…