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Electricity distributors warned about service quality

Commerce Commission warns electricity distributors about service quality

27 June 2014

The Commerce Commission has warned Eastland Network Limited (Eastland), Aurora Energy Limited (Aurora) and Electricity Invercargill Limited (Electricity Invercargill) after they each failed to comply with the quality standards for electricity distributors in 2012.

The Commission sets quality standards to ensure there is no decline in the reliability of service delivered to consumers by electricity distributors. The quality standards place limits on the number and length of interruptions to the supply of electricity that a distributor is allowed in a given year.

The Commission investigated the electricity distributors’ failures to meet the quality standards and found that there was no serious fault on the part of the distributors.

“We consider that the warnings should be enough to deter those companies – and other electricity distribution companies – from failing to comply with the quality standards again,” said Commerce Commission Deputy Chair Sue Begg.

“Following their non-compliance, we have already seen the businesses take positive steps towards ensuring the level of service they deliver to customers in future meets the required standards,” said Ms Begg. “And we are pleased that the companies complied with the quality standards in 2013 and 2014.”

During the onsite investigation of Eastland and Aurora’s networks by the Commission’s engineering advisors, some concerns that might affect the future reliability of those networks were identified. Those concerns were reported to Eastland and Aurora, who have indicated they will consider them alongside the findings of their own internal reviews aimed at ensuring future compliance.

Electricity Invercargill provided evidence that its non-compliance was attributable to three outages caused by isolated operational incidents, so an engineering review of Electricity Invercargill’s network was unnecessary.

“Eastland, Aurora and Electricity Invercargill are now on notice that they are more likely to face penalties should they fail to comply with the quality standards in the future. We expect them to take appropriate steps to mitigate the risk of failing to comply with quality standards again,” said Ms Begg.

“The Commission has taken some time to come to the decision to issue the companies with a warning as assessing the particular circumstances of an electricity distributor’s failure to comply with the quality standards is a complex area. We’d like to acknowledge the cooperation of Eastland, Aurora and Electricity Invercargill with our investigations,” said Ms Begg.

The warning letters, as well as a paper summarising the Commission’s enforcement response to non-compliance with the quality standards for the 2012 assessment period, can be viewed atwww.comcom.govt.nz/default-price-quality-path-enforcement-responses.

Background
Electricity distributors transport electricity from the national grid to homes and businesses.

Eastland’s electricity distribution network area covers the East Cape and Northern Hawke’s Bay regions.

Aurora’s electricity distribution network area covers Dunedin and the Central Otago region.

Electricity Invercargill’s electricity distribution network area covers Invercargill City and the Bluff township area.

Part 4 of the Commerce Act 1986 provides that all suppliers of electricity distribution services are subject to default or customised price-quality regulation unless they are exempt. Exemptions apply for consumer-owned electricity distribution businesses. Eastland, Aurora and Electricity Invercargill are not exempt and are each currently subject to a price-quality path determination that sets a price and quality requirements that must be complied with.

Eastland, Aurora and Electricity Invercargill are each required to provide the Commission with a self-assessment against the quality standards following each annual assessment period. Eastland, Aurora and Electricity Invercargill reported non-compliance with the quality standards in the 2012 assessment period, which ran from 1 April 2011 to 31 March 2012.

The Commission considers that the electricity distributors’ failure to comply with the quality standards amounts to a contravention of a price-quality requirement applying to regulated goods or services as described in section 87(1)(a) of the Commerce Act 1986.

ENDS

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