Vector and Sound Bites
Vector and Sound Bites.
Again and again I read or hear that Vector say: “we pass through the costs… developers can do their own civils and TMP… they just want a subsidy”… and people who don’t know the detail nod.
Convenient. Like nipping into a Four Square. Get what you want and it’s sorted. It isn’t. It is complicated.
An installation from Vector includes much more than “pass through” costs.
Development Contribution. This one IS a contribution to growth. It is standardised and allocated based on the capacity going to the new home. A known.
Project management fee. A big sweetie. Not a pass through, and a significant slice. The number moves around, but $17,000 on a modest development is common. That is the equivalent of a full time site manager for five to six weeks. Yeah, right… efficient? NO.
Electrical installation and materials. Not a pass through. Assigned by Vector, at Vector’s number.
Traffic management, reinstatement and civils. Yes, we can now do these ourselves. Thanks to meetings through late 2024 and early 2025, there is now a line on the quote that lets us choose to opt out. When an independent contractor does the work, those costs drop drastically. The project management fee does not.
A developer trying to deliver affordable housing in Auckland is aiming at roughly $700,000 a unit. The way you make money on that is efficiency and speed. The red tape and the slowness make it a no-go zone for small developments. If you ask for a quote change they say, there may be extensive delays. You pay for multiple days waiting and waiting and following up… several even email me!
So where exactly are the sound bite merchants seeing costs that look representative? I see inefficiency. Did the “merchant” ask someone who knows? Who does the sound bite recipient believe?
And here is the question that should keep someone at the Commerce Commission awake at night…
If developers can smash civils, traffic management and reinstatement to a fraction of Vector’s quote, what is being loaded onto the regulated asset base that already-connected households are paying for? Who is checking that detail?
Do you know that that is the base on which everyone’s daily line charges can be increased… so they want to get that figure as high as they can (naturally).
I cross-checked over yesterday’s McDonald’s. The RAB is growing ahead of connections, not behind them. Vector has the largest connection base. I would expect there to be economies of scale and the RAB should not grow ahead unless something pretty special is going on (I may be wrong but I will say it anyway as it is a fact and a curious observation).
