30 MAY 2008 NEW ZEALAND GAZETTE, No. 90 2461

(a) publish its intention to make a declaration and invite interested persons to
give their views on the matter; and

(b) give a reasonable opportunity to interested persons to give those views;
and

(c) have regard to those views.

Assessment and identification of Vector’s threshold breaches

Vector owns and operates the electricity distribution networks in the Auckland,
Northern and Wellington regions. Auckland networks cover Auckland City,
Manukau City and parts of Papakura District. Northern networks cover North Shore
City, Waitakere City and Rodney District. Wellington networks cover Wellington
City, Porirua, Lower Hutt and Upper Hutt. The Northern and Wellington networks
were acquired from UnitedNetworks Limited (UNL) during October 2002, when
Vector acquired 100% of the shares of UNL, including three geographic networks –
Eastern, Northern and Wellington, although it subsequently sold the Eastern network
in November 2002 to Powerco and Unison. On 28 April 2008, Vector announced the
sale of its Wellington network, subject to a number of conditions including the
approval of Vector’s shareholders.

Vector is listed on the New Zealand Stock Exchange. Its majority shareholder, with a
shareholding of 75.1%, is the Auckland Energy Consumers Trust (AECT). The
balance of 24.9% is held by a number of individual shareholders through publicly
listed shares.

The Commission has assessed Vector against the initial price path and quality
thresholds set on 6 June 2003 and has identified Vector as having breached both
thresholds at the second assessment date (31 March 2004).

Intention to declare control of Vector

On 9 August 2006, the Commission published as a Supplement to the New Zealand
Gazette (9 August 2006, No. 94, page 2759) its intention to make a declaration of
control under Part 4A in respect of electricity distribution services supplied by Vector.
On the same day, the Commission published a paper titled Commerce Commission,
Regulation of Electricity Lines Businesses, Targeted Control Regime, Intention to
Declare Control, Vector Limited which contains the Commission’s reasons for its
intention to declare control of Vector. The Commission invited interested persons to
give their views on the matter by 4 September 2006 but suspended the consultation
process on 13 October 2006 when it received an administrative settlement proposal
("Proposal") from Vector which was considered in principle to be consistent with the
Purpose Statement. On 23 January 2007, Vector provided the Commission with an
amended proposal reflecting a number of minor changes to the cost of supply (COS)
model it uses to derive the tariff levels for each customer group.

Draft decision not to declare control of Vector

On 14 December 2007, the Commission published a paper titled Commerce
Commission, Regulation of Electricity Lines Businesses, Targeted Control Regime,
Draft Decision: Reasons for Not Declaring Control, Vector Limited which contains
the Commission’s preliminary view to accept the Proposal made by Vector on
13 October 2006 and updated on 23 January 2007 and not to make a declaration of
control under Part 4A in respect of electricity distribution services supplied by Vector.
The Commission also published a copy of Vector’s Proposal.