History shows power to the people lost

One of four poles on the writer’s farm that were red-tagged last week after former Delta worker Richard Healey raised maintenance concerns. They are part of a line on which another rotten pole blew over three weeks ago, causing a nine-hour outage. Photo b
One of four poles on the writer’s farm that were red-tagged last week after former Delta worker Richard Healey raised maintenance concerns. They are part of a line on which another rotten pole blew over three weeks ago, causing a nine-hour outage. Photo by Nick Loughnan.
Delta’s woes will be shared with Central Otago, writes Nick Loughnan.

What Central Otago once owned with its electricity assets, and was forced to give up, is still fresh in the minds of many of its residents as the operations of Dunedin City Council-owned Delta come under the spotlight yet again after a very courageous and selfless call on public safety by one of its senior employees. A little history will explain how.

New Zealand pre-1998 had a very different electricity network ownership model. All regions had their own municipal power authorities, with locally elected directors who gave willingly of their time to benefit their consumers' interests through provision and maintenance of electrical generation and distribution assets.

Central Otago's original power board had a long history of innovative and pioneering supply of electricity.

The Otago Central Electric Power Board from the 1920s went on to build five hydro-electric power stations in association with gold-mining, dredging and irrigation companies, providing the only source of electrical energy to the region until connection to the national grid in 1957.  A further six hydro dams were built before 1998.

The construction of these many generation assets, and the extensive distribution network of power lines was funded by a considerably smaller and sparsely scattered population than today, and all was overseen by a small group of highly skilled and modestly paid administrators, alongside their largely voluntary board directors.

It is fair to say there was widespread and justifiable resentment in Central Otago over the Bradford electricity reforms of 1998.

The proudly profitable and community focused power board was gutted, retaining only its generation assets, while the Dunedin City Council bought the Central Otago lines assets as part of Aurora/Delta.

New lines charges soon appeared on power accounts at ever-increasing rates until government intervention saw the Commerce Commission step in to take a much-needed and overdue regulatory role.

However, the new regulations came too late for many seasonal consumers.

The irony of this is still clear to see on dozens of orchards alongside the Clutha River, where orchardists within a stone's throw of the Clyde and Roxburgh Dams burn diesel to power their frost-fighting and irrigation pumps.

For them, imported fossil fuels are cheaper than the substantial costs of being connected to Aurora's lines network.

Since the reforms of 1998, the energy component of the average Central Otago household's monthly power bill has increased by about 50%, while lines network charges have increased by more than 1000%.

In that time, some new and necessary distribution assets have been built to keep pace with the demands of Central's growing population, but that is all.

The existing network has been poorly maintained to the point of neglect, and its reliability has deteriorated sharply, with the Commerce Commission putting Aurora on notice for its poor asset management.

Rotten, wind-blown power poles, along with lack of maintenance, are too often causing lengthy power outages. Of the 29 lines companies in New Zealand, Aurora's reliability factor is among the worst.

Contrast the condition of the Aurora lines network with the state of the company which manages it. Delta now pays its CEO more than the Prime Minister gets.

Not only has his salary doubled since he started in 2009, but the number of staff earning more than $100,000 per annum has grown from 25 to 88.

Their combined annual salaries have grown from $3.3 million to more than $12 million, while the dividend stream to the DCC shrinks. Perhaps this isn't quite the sort of growth the DCC was looking for in its once star-performing company.

Dunedin will now be wondering whether it can afford to keep Aurora/Delta. The cash cow has been making too much of a mess for its owner, it hasn't been fed properly and someone seems to be getting away with most of the cream. It must now be very tempting to sell it, wash hands quickly and retire some sizeable city debt.

A good option for ratepayers? The experience of Wellington City Council with its lines network would suggest otherwise.

In the current climate of diminishing global investment returns, New Zealand's lines companies are standout investment opportunities when properly run, and there is keen international interest.

As monopolies, they provide a guaranteed and lucrative income stream.

Since the Wellington City Council sold its network in 1996 to Canada's TransAlta for $210million, that network has been bought and sold another three times, and the current owner is CKI Holdings, a Hong Kong based and Cayman Island registered multinational conglomerate.

And, of course, the profits flow offshore through a tax haven, while that network's reliability is as bad as Aurora's, and its lines charges have been among the highest in the country.

It is most regrettable the control and ownership of Otago's strategic and essential electricity assets appear to be heading the same way. We are all the poorer for it.

-Nick Loughnan is a Central Otago farmer with a long-term interest in the electricity industry.

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