Power outage: Transpower defends no compo for businesses

The pylon fell over last month when Omexom contractors removed too many nuts from bolts...
The pylon fell over last month when Omexom contractors removed too many nuts from bolts connecting the tower to a base plate during routine maintenance. Photo: Supplied / Kawakawa Electrical Ltd
Transpower is defending not compensating Northland businesses hit by last month's major power cut when a pylon fell over.

The Northland Chamber of Commerce is accusing the grid operator of doing a U-turn on compensation. But Transpower says it talked to local businesses in good faith and explored what compensation options might be possible.

The pylon fell on June 20 when Omexom contractors removed too many nuts from bolts connecting the tower to a base plate during routine maintenance.

David Knight, Transpower executive general manager strategy regulation and governance, said the state-owned company's liability for losses was not straightforward, and it was not practical for it to guarantee there will never be power cuts. Businesses who think they have suffered losses as a result of the outage should lodge a claim with their insurance company.

Northland Chamber of Commerce chief executive Darryn Fisher said Transpower was doing "a complete 180-degree flip" from its earlier position, making things more expensive and time-consuming for local businesses.

"We were definitely having a good faith conversation about, you know, the pain that they had caused from the negligent actions of that tower falling over," he told RNZ's Morning Report programme today.

"I think they realised the damage that they had done to Northland businesses and Northland as a brand."

He said while businesses would have insurance, there was "a lot of fine print" in some contracts that meant some would not be covered in this particular instance.

Northland Chamber of Commerce chief executive Darryn Fisher. Photo: Supplied
Northland Chamber of Commerce chief executive Darryn Fisher. Photo: Supplied
Asked if a power company would ever be able to guarantee continuity of supply, Fisher said the inquiry into what went wrong would show that, in this case, it was the result of negligence - not an 'act of God'.

"We're really looking forward to the outcome of that."

He will be talking to "a number of ministers in the region this week", but said it could take "multiple years and multiple millions of dollars to resolve", with legislation favouring "the big guy" not small- to medium-sized businesses.

Fisher said a class-action lawsuit was one option.

MWIS Lawyers is gauging interest in such a potential case. Partner Juliet Golightly said individual claims against Transpower could cost more than any compensation was worth.

"The issue is this: it's very, very clear that both Transpower and the contractor are liable because the act of removing all the bolts from the pylon footings… obviously was negligent and it was foreseeable that the pylon might fall over and that if it did, that would take the power out for the whole of Northland," she told RNZ's Midday Report programme today.

"But the difficulty here is the power imbalance. So any one individual business can't really take Transpower on, and they know that a class action is one way that businesses can get around that power imbalance, although it's not without its problems as well."

Golightly said class action lawsuits were not common here because "we don't have legislation supporting class actions in New Zealand in the way they do in other jurisdictions like Australia".

She said there had not been a lot of response to a survey on a potential class action suit on the firm's website, but people had asked about it informally.

"In terms of the time it would take to do a class action, all court proceedings take a long time. There are very long systemic delays in the High Court, which is where this would be, and a class action is not immune from those.

"There's another step which would be required, which is to get the High Court to approve the class action."

While it might take a long time, getting involved would not be difficult for businesses, she said.

"It's gonna be quite a long time before you get any response. On the plus side, all you're doing is giving your name and contact details and saying, you know, 'This is an estimate of my losses, and yes, please, if you launch your action, I'd like to be involved.'

"And then sometime later, if we got approval from the High Court, then usually I would think settlement would be likely on the horizon - and you just get a check in the mail, so to speak."

Transpower's Knight said in a statement today that retailers would be compensated "where these have appropriate evidence" via electricity retailers.

"The situation for businesses is more complex as they are generally not covered by the Consumer Guarantees Act."

He said Transpower's discussions with the Northland Chamber of Commerce made it clear the "only practical avenue for businesses who think that they have suffered loss as a result of the outage is to lodge a claim through their insurance company".

The insurance company could then engage with Transpower on their behalf, he said.

It was not practical for Transpower to guarantee supply, he said, because if it was forced to pay out every time the power was cut, "it would significantly increase costs for offering these services, and these higher costs would ultimately be passed on to consumers".

Transpower's own investigation into what happened on the day the pylon fell would be complete by the end of July, Knight said.