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Managing the assets that distribute electricity

Auditor-General's report, Managing the assets that distribute electricity

The Auditor-General’s report Managing the assets that distribute electricity was presented to the House of Representatives today.

The energy sector in New Zealand is diverse and made up of a mixture of public and private entities. Most of the public entities in the sector are electricity distribution businesses responsible for distributing electricity to consumers.

We looked at how those electricity distribution businesses in the public sector were managing, maintaining, and investing in their networks to ensure that they could provide services to consumers for the long term.

We considered this in two ways. First, we analysed publicly available financial information of all electricity distribution businesses. Our analysis shows that electricity distribution businesses, as a whole, are generating a commercial return and enabling dividends to their owners. The businesses as a whole also maintain low levels of debt.

Secondly, we reviewed the asset management practices of three electricity distribution businesses (Alpine Energy Limited, Unison Networks Limited, and Waipa Networks Limited). Although we reviewed the practices of three companies, we encourage all electricity distribution businesses to consider whether our findings also apply to them. We found some effective practices that are well described in the three companies’ asset management plans. In particular, the three companies have adequate base asset knowledge and there are appropriate initiatives to improve network resilience and ensure continuity of supply.

However, there is room for improvement. Electricity distribution businesses own assets with long useful lives. It is important that they have up-to-date knowledge of their assets, especially their condition and performance. This is necessary to make informed decisions about whether to inspect, repair, or replace an asset. The three companies we reviewed were mostly focused on the short term. With a longer-term focus, the three companies can make better-informed decisions about how to manage their networks.

Improving knowledge of asset condition, performance of critical assets, and risk management strategies would complement the asset management practices that we observed. These are fundamental for electricity distribution businesses as they face continual challenges, such as extreme events and natural disasters, and as their networks continue to expand and new technologies emerge.

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