Otago lines company accused of causing power cuts due to under investment

Monday, 17 September 2018

A linesman works on a power pole in Cromwell, part of a network owned by Aurora Energy. The company is being prosecuted by the Commerce Commission, which alleges that under investment led to increased power outages.

Electricity customers in parts of Otago experienced power outages because the lines company failed to properly maintain its assets, the competition watchdog alleges, as it prosecutes a company owned by the Dunedin City Council.

Aurora Energy, which operates a major electricity network in Otago, is being prosecuted by the Commerce Commission for failing to meet standards due to under-investment.

According to its website, Aurora Energy owns the seventh largest electricity network in New Zealand, supplying customers in Dunedin, Central Otago and the Queenstown Lakes district.

The Commerce Commission alleges that an increase in power outages on the network occurred because Aurora, which is owned by Dunedin City Council, did not properly maintain parts of the network.

Aurora, along with other lines companies, has been warned before for breaching standards, but this is the first time charges have been brought by the commission.

The company operates the network which delivers electricity to 88,000 customers in Dunedin, Central Otago and Queenstown Lakes.

The proceedings relates to Aurora failing to meet regulated standards in 2016 and 2017. The charges, brought under the Commerce Act, could see Aurora fined up to $5 million.

'Aurora is subject to price-quality path regulation that sets limits on the total revenue it can earn as well as the level of outages or interruptions (known as quality or reliability standards) that can occur on its network each year,' the commission said in a statement.

Aurora told the Commission that it breached the standards in 2016 and 2017, as part of its obligations as a regulated monopoly, sparking the investigation which led to the charges. It has also breached its standards in 2018, which will be further investigated.

'The Commission alleges Aurora under-invested in asset maintenance and renewal, which led to significant proportions of its assets – such as poles, cables and transformers – being in a deteriorated condition and at or near the end of their service lives. The Commission considers that this led to an increased level of power outages and therefore significantly contributed to Aurora's breaches of the quality standards.'

Separate to the action taken by the commission, Aurora has agreed to engage independent experts, WSP, to undertake a 'full assessment of the state of its network,' the commission said.

'The Commission considers that the quality and robustness of both documents will be critically important to all Aurora stakeholders. They should provide a reliable baseline view on Aurora's current network condition and set out its plans to get its network reliability back to appropriate levels.'

In a statement, Aurora described the issues being addressed as 'historic'. Chief executive Richard Fletcher said management 'focusing on the future' and making sure the network was safe and reliable.

'Aurora Energy has been through an extensive transformation in the last 12 months and the new organisation has significantly increased investment on the network. The company is making good progress, but we have a large number of network assets and there is a lot of work to do. We have committed to a multi-year programme of investment.'

Richard Healey, who has been making public warnings about the state of the network, said the commission's action had restores some of his faith in government agencies.

'It's a bitter sweet moment for me. Although the commission has done the hard yards, a fact which I gratefully acknowledge, and will now work to make an example of Aurora that will pull other networks into line, it simply reminds me that Worksafe have done nothing to correct this appalling situation.'

Healey though questioned whether the independent investigation into Aurora would give a clear picture given that it was being undertaken based on data provided by the company.

'For the past two years I have been at pains to point out that the major problem here is that Aurora simply do not understand the condition of their network. It is my strongly held belief that this situation has arisen because the board wanted to be able to maintain a situation of deniability when an outcome exactly like this one arose.'