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Vector Technology Services In the past year, Vector carried out a review of our assets and business activities to support the delivery of our future-focused Symphony strategy. In addition to the movement of some assets between wholly-owned entities within the Group, the restructure saw several digital assets moved to a new entity, which we have named Vector Technology Services (VTS). Our Symphony strategy has a fundamental technology overlay across all business units, including our electricity business, and there are opportunities to commercialise these solutions. Beyond creating another revenue stream for the Group, taking these proprietary solutions to market will support other infrastructure companies on a similar digital transformation. The review found that such activities can be more effectively and transparently achieved through a new subsidiary company with its own incentives and leadership. At first, VTS will focus on our industry-leading cyber security capability which was developed by Vector’s own cyber experts with input from expert global partners. We will also take to market our Distributed Energy Resource Management Systems (DERMS), the system co-developed with our partner, mPrest. In future, we will look to add
In the past year, Vector has progressed work on a digital platform to enhance the way we monitor the condition, performance and future potential of the many thousands of assets that make up our electricity network, such as poles, wires and transformers. Working collaboratively with our field service providers (FSPs), we are now collecting and storing more detailed, accurate and consistent data to track the general health and condition of our network assets. This capability is paving the way for more precise and real-time information flow to customers via the Outage Centre and other customer information channels. Funding efficient investment As a country – and now more than ever – we must be strategic and focus on creating a high-value economy that is built on innovation, moving from volume to value. This way of thinking is the embodiment of our Symphony strategy and is a central theme in our ongoing discussions with our regulators, as we continue to advocate for changes to reflect the environment we are in. In November 2019, our Default Price- Path 3 (DPP3) regulatory settings were confirmed through to 2025 – providing targets for electricity network quality and allowable revenues for the five-year period, which commenced 1 April 2020. A significant issue we are facing is the
impact of the inflation assumptions selected by the Commerce Commission. Those assumptions used in setting our new price path have for a decade systematically over-forecast inflation and in turn reduced our revenues below levels consistent with a fair return. This is an impact that will be further exacerbated through to 2025 given radically different inflation expectations since DPP3 was determined in late 2019. Nor do we believe this is a sustainable outcome or one that is consistent with the legislation intended to ensure regulated businesses can invest for the long-term interests of consumers and earn an appropriate return. This is not an issue that is exclusive to Vector, as other regulated entities in New Zealand face the same challenges and a review is underway in Australia with their regulator. We will actively engage with the Commerce Commission to seek a constructive solution. Vector considers this to be a critical matter that must be worked through collaboratively to ensure Auckland growth and government infrastructure investments are supported through aligned regulatory settings, while ensuring fair returns to our shareholders. Despite this obvious cashflow challenge, Vector remains committed to upgrading, extending and maintaining Auckland’s electricity network to the best of our ability for the benefit of energy consumers.
“As a country – and now more than ever – we must be strategic and focus on creating a high-value economy that is built on innovation, moving from volume to value.”
THE INTERPLAY OF TODAY AND TOMORROW
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