Network concerns vindicated

The concerns expressed about the state of the Delta-Aurora electricity network by former employee Richard Healey were vindicated with the release this week of a review of the Dunedin City Council-owned companies.

The review, carried out by Deloitte, contained recommendations that will be acted upon and include the separation of the Delta and Aurora boards with no commonality of directors and with separate chief executives.

Delta and Aurora chairman Ian Parton appears to be the only casualty so far, as long-term director Stuart McLauchlan resigned from the board in October after three terms. Dunedin accountant Steve Thompson has been appointed as chairman of the combined boards, in the interim.

Chief executive Grady Cameron, surprisingly, continues in his role, despite the damning review of the companies' operations. Mr Thompson defended Mr Cameron, saying he had done a good job in difficult circumstances.

At the very least, Mr Cameron must be made to reapply for his job and face the market on his record. The best result is for him to resign and admit his failings in leading the companies.

An apology to ratepayers from the companies, and Dunedin City Holdings Ltd (DCHL) is also required. The review confirmed there has been an under investment in asset inspections/condition monitoring, planned maintenance and asset replacement over the last 25 to 30 years.

This can be seen by several factors, the primary one being the high volume of assets having been self-assessed as requiring replacement.

The review says the board has communicated its concerns to DCHL over several years, in respect of the aged network, the need to invest in a renewal programme and the implications this is likely to have on short-term shareholder returns.

However, Deloitte does not believe this was done in a robust enough manner with a clear focus on the level of investment needed to replace those assets having been assessed as requiring replacement.

Blame has been apportioned by the review and action will be taken. However, the full oversight of those boards lies ultimately with the elected city councillors - past and present.

The lack of oversight by elected officials is to be deplored. They have trusted the paid executives and dragged dividends from Delta and Aurora to give the appearance of good business practice in keeping rates down. In fact, the money should have been spent keeping ratepayers safe.

Even now, Mr Thompson and Mayor Dave Cull will not acknowledge the electricity network is unsafe, perhaps for legal reasons only. It is to be hoped it does not take an accident or death to change their minds.

From here there is a clear path needing to be followed. There may be a need for rates to rise, a penalty ratepayers do not deserve. Over the years, the council has had a voracious appetite for both debt and cash dividends.

The council's finance and council-owned companies committee needs to provide firmer oversight and not hand off responsibilities completely to DCHL, in the first instance. Ratepayers elected councillors to act in their best interests. Their money has not been used wisely and there must be consequences.

Recommendations made in the review need to be implemented as quickly as possible and work must continue apace on fixing the damaged poles.

One of the main problems to be faced is the appointment of directors to the two new boards. The South does not have a shortage of directors but it does have too many Dunedin lawyers and accountants on its boards.

Assurances must be given of independence being maintained but the public must also see the results of this independence and the necessary tension between the two companies which has so far been missing. Without these demonstrations of openness, suspicion will remain of a lack of commitment to change.

Comments

It is common knowledge internationally in the field of asset maintenance management that it is only by looking back and reviewing asset maintenance history can you then improve maintenance in the future hence generating more asset reliability and reduce costs long-term. Past Councillors cannot be sued for their actions that have now resulted in an excess of unsafe assets because of their desire to boost stadium debt repayment, but Dave Cull needs to remember that such past actions are a matter of public record. There are far too many lawyers and accountants on the boards of Council owned companies and no asset engineering managers who do at least understand the future impact of reducing current asset maintenance expenditure. Lawyers and accountants have no such understanding.

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