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“Systemic deficiencies:” Wellington Electricity given warning by Commerce Commission

News from Commerce Commission
The Commerce Commission has issued Wellington Electricity Lines Limited with a compliance advice letter after an investigation into outages on its power lines network in 2017 and 2018 found they were mostly caused by matters out of the company’s control.

A compliance advice letter is the lowest level enforcement response that the Commission issues for this type of breach of network quality standards.

Deputy Chair Sue Begg said the Commission’s investigation found that Wellington Electricity’s breaches did not indicate widespread concerns with management of the network or asset management practices in general.

“The main reasons that Wellington Electricity breached its network outage limits in 2017 were that its network was damaged by the Kaikoura earthquakes, and because of unusually high winds throughout the year,” she said. “Underground cable failures, possibly related to the earthquakes, as well as an unusually high number of cars hitting power poles were then a significant factor behind outages in 2018.”

However, Ms Begg said that the compliance advice letter recognised that the severity and duration of the outages was exacerbated by the lines company’s failure to follow good industry practice in some areas.

“The compliance advice letter outlines some systemic deficiencies where Wellington Electricity could have improved its performance to meet good industry practice,” she said.

“Wellington Electricity has engaged constructively throughout this investigation and shown a willingness to bring its policies and practices up to industry standard so that these breaches don’t happen again, so a compliance letter with recommendations for improvements is an appropriate response.”

Ms Begg said that Wellington Electricity has complied with its price-quality path since 2018 but that the Commission’s compliance advice letter notes that further breaches could result in a stronger enforcement response. “In that event, the 2018 contravention will be taken into consideration,” she said.

Stronger enforcement responses range from enforceable undertakings to a warning letter to the Commission seeking a court-ordered financial penalty of up to $5 million per act or omission, or seeking criminal penalties.

Price-quality regulation

As a regulated monopoly under the Commerce Act, Wellington Electricity is subject to price-quality regulation. The price-quality path sets a limit on the total revenue it can earn, which affects how much consumers pay for lines charges in their electricity bills, as well as quality standards that limit the frequency and duration of network outages on an annual basis.

As part of its reporting obligations, Wellington Electricity disclosed to the Commission that it had exceeded the price-quality path quality standards in the 2017 and 2018 assessment periods. A lines company must fail its annual reliability assessment in two out of three years to contravene quality standards under a price-quality path.

The Commission’s decision was made after an investigation that included a review of information provided by Wellington Electricity and obtaining an independent expert opinion from Nuttall Consulting.

The compliance advice letter can be found on the Commission’s case register along with the expert opinion from Nuttall Consulting and Wellington Electricity’s response to the expert opinion.

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