Commission taking Aurora Energy to court

Dr Richard Fletcher. Photo: supplied
Dr Richard Fletcher. Photo: supplied
Aurora Energy could face a maximum fine of $5 million after the Commerce Commission announced it was taking the company to court for failing to maintain its network.

The announcement, in a statement by the commission this morning, related to breaches of regulated quality standards by the Dunedin City Council-owned energy company in 2016 and last year.

The commission has completed an investigation into the breaches, which found "they resulted from Aurora failing to comply with good industry practice''.

"Specifically, 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.''

The company has also reported it breached its 2018 quality standards, which will be subject to a further investigation, the commission said.

In the meantime, the commission would be asking the High Court to impose financial penalties on Aurora under the Commerce Act for its breaches in 2016 and 2017, it said.

The maximum penalty available to the court was $5 million.

Aurora, which supplied electricity to more than 88,000 homes, farms and businesses in Dunedin, Central Otago and Queenstown Lakes, was a wholly-owned subsidiary of Dunedin City Holdings Ltd, owned by the Dunedin City Council.

It has been repeatedly criticised in the past by whistleblower Richard Healey for failing to maintain its network.

Public concern over the safety of Aurora's ageing network prompted the company to invest in a $30.25 million programme to replace close to 3000 power poles, beginning two years ago.

An interim asset management plan published by Aurora, released earlier this year, showed the company expected to spend $930 million, including on renewals, over the next decade.

That was a dramatic increase on 2015, when the company was estimating a $360 million spend over the coming decade, and close to Mr Healey's claim the bill would top $1 billion.

Aurora was also subject to price-quality path regulations which set limits on the total revenue it could earn, and the level of outages or interruptions on its network each year.

The company was also using independent experts to undertake a full assessment of the state of its network.

The results, together with a detailed asset management plan showing how it would refurbish or replace assets, was expected to be provided to the commission by the end of October.

"The commission considers that the quality and robustness of both documents will be critically important to all Aurora stakeholders.''

Aurora chief executive Richard Fletcher, in a statement this morning, acknowledged the decision by the commission, saying it had been "anticipated''.

"Today's decision by the Commerce Commission moves the process forwards to resolve what are now historic matters, in a way that Aurora Energy hopes achieves the best outcomes for consumers.''

The "new team'' at Aurora were "focusing on the future and on making the necessary investment and improvements to maintain and upgrade Aurora Energy's electricity network''.

"Our primary focus is on ensuring the network remains 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.''

chris.morris@odt.co.nz

Comments

Great. Fining Aurora millions and making them spend a fortune defending a law suit is really going to be a good use of money that could otherwise be spent replacing poles (or at least propping up the stadium).

It's great Aurora are being held to account, but I'm not convinced taking $5,000,000 out of customers' or rate-payers' pockets is the answer. Perhaps 88,000 customer rebates would be a little more palatable.