Vector charged $3.5m for excessive power cuts

Auckland electricity lines company Vector Limited has been ordered by the Auckland High Court to pay a $3.575 million penalty for breaching its network quality standard through an excessive level of power outages.

Vector serves more than half a million homes and businesses in the greater Auckland region and as a regulated business must comply with Commerce Commission regulations regarding the maximum revenue it can collect and the minimum standards of quality it must deliver. Quality is measured in the duration and frequency of power outages.

Commission deputy chair Sue Begg says Vector failed to adhere to good industry practice in some aspects of its network management, which resulted in it breaching the commission’s regulations on quality standards in the 2015 and 2016 financial years.

“Auckland consumers have a right to expect a good quality of service from their lines company and Vector failed to deliver it,” Begg says.

“Given the impact electricity outages have on consumers and businesses it is crucial that lines companies have the systems in place to identify and manage the risks present in their networks,” she says.

“The court has found that Vector’s governance of compliance with the quality standard did not meet good industry practice. Vector underestimated the risks it faced and did not meet best practice in managing vegetation or the life-cycle of certain aging assets. We expect better management decisions going forward, as do its customers, Begg says”

“We are aware of media reports asserting these proceedings stemmed from changes to Vector’s ‘live lines’ safety policies, which is incorrect. Vector was in breach of its quality standard regardless of that policy change and we took these proceedings because of the concerns we had with Vector’s overall decision-making and management practices.”

In her judgment released March 22, Justice Duffy notes: “These were serious contraventions. The size of the contravening party is an important factor in determining the seriousness of the contraventions. This is because any penalty must take account of both the size and resources of the party, and the effect on its customers. Vector is the largest electricity distribution business in New Zealand, having at least 540,000 or more customers at the relevant time. Those customers are likely to have suffered losses like those detailed . A significant penalty must be imposed to act as an effective deterrent to Vector and other distributors.”

The penalty imposed by the court was discounted by 35% for mitigating factors, including Vector agreeing not to contest the proceedings.

Vector has now exceeded the annual limit set by the commission for duration of outages for five years in a row, the commission says. In addition to the breaches covered by this penalty, Vector also breached its quality standard in 2017 and 2018. The commission is investigating those further breaches and expects to make a decision about enforcement action later this year.

EVtalk has approached Vector for comment.

A copy of the judgment will be available shortly on the commission’s website.