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Authority publishes initial review into 9 August outages

The Electricity Authority (Authority) has completed phase one of its review of the 9 August 2021 electricity cuts under section 16(1)(g) of the Electricity Industry Act 2010.

The Authority’s report, published today, has found shortcomings in the system operator’s tools and processes in response to the 9 August event. The key areas of concern were ambiguous and at times unsatisfactory communication processes and a miscalculation of demand response.

"The grid emergency on 9 August 2021 was a very rare and serious event. The Authority’s phase one review sought immediate assurance that any systemic and process issues associated with the system operator’s demand allocation decision support tool and communications surrounding the event have been corrected," says Authority Chief Executive James Stevenson-Wallace.

"The actions taken by the system operator since 9 August provide assurance the system operator has learned from the operational shortcomings exposed during the 9 August event. This was demonstrated on 17 August when the system operator responded with clear communication through multiple channels when a grid emergency occurred."

"We now expect the system operator to respond to the recommendations in this report to improve communications and processes for demand management events."

On 9 August the country faced the largest New Zealand demand peak on record in response to one of the coldest nights this year. New Zealand has not experienced widespread, island-wide or national, demand management since the rolling blackouts of 1992.

"The Authority acknowledges that on 9 August Transpower, as the system operator, took immediate action under difficult circumstances to avert a potentially more widespread and longer duration event," says Mr Stevenson-Wallace.

"However, the tool used for demand allocation and communication processes were unsatisfactory and contributed to the event where over 34,000 customers lost power. Household consumers and businesses were left without power on one of the coldest nights this year. That’s not good enough."

The review identified several communication and process issues and found the system operator’s tools and communication protocols had not been adequately tested for a national grid emergency.

The system operator’s notices at the time did not give enough information for distributors to understand the wider context of the event. The lack of clarity resulted in distributors and retailers not having enough information to ensure they communicated the extent of the issue with their customers.

There was confusion among distributors as to whether notices issued by the system operator were calls to immediate action or forewarning of possible future action. This ambiguity resulted in some distributors being unsure about the action required.

The Authority recommends the system operator further electricity sector readiness to respond to critical demand management incidents. This will include (but not be limited to) an annual pan-industry exercise to test processes, actions and communications and clarify responsibilities ahead of responding to a real emergency.

The 9 August event highlighted serious issues with the system operator’s load shed and restore (LSR) decision support tool which is used to generate the demand allocation. The system operator quickly suspended the use of the tool when it became apparent it was producing incorrect results.

The LSR decision support tool is used to calculate and equitably allocate how much load to shed and then restore if and when required to support a secure electricity system. The 9 August event was the first time the tool had been used in a national event outside of annual system operator staff training. Previously, it has been used for localised events involving a limited number of parties in the same geographical region.

"We recommend the system operator complete a thorough review of this tool before it is reinstated to ensure it meets the needs of the current power system," says Mr Stevenson-Wallace.

The Authority is confident the steps taken by the system operator since the event, the recommendations highlighted in this report and any further recommendations of the Authority’s phase two report will support an improved response in the future.

"The Authority takes any failure in the system very seriously. Transpower, as the system operator generally performs an excellent service on behalf of New Zealand consumers. The Authority has identified some matters for improvement and will work closely with Transpower to ensure the recommendations are implemented and safeguards are in place."

The Authority will now progress phase two of the review, the scope of which is broader than the system operator’s response to the event and will look at all aspects of the industry response.

The Authority expects to confirm the scope of its phase two review during September.

Notes for editors

-The Electricity Authority is an independent Crown Entity with a statutory objective to promote competition in, reliable supply by, and the efficient operation of, the electricity industry for the long-term benefit of consumers.

-The Authority is required under the Electricity Industry Act 2010 (Act) to contract Transpower for system operator services. We pay for those services via the system operator service provider agreement (SOSPA). Transpower as the electricity system operator is responsible for managing supply emergencies and providing information on security of supply.

-Section 16(1)(g) of the Act states the Authority’s functions as including "to undertake industry and market monitoring, and carry out and make publicly available reviews, studies, and inquiries into any matter relating to the electricity industry."

-On Monday 9 August 2021 approximately 34,000 customers across New Zealand experienced an electricity cut without warning. The biggest impact was felt in the Waikato region with over 17,000 customers disconnected.

-The Authority is using its statutory powers under Section 16(1)(g) of the Act to conduct a two phased review into exactly what happened on 9 August 2021. The first phase of the review sought immediate assurance (two weeks) and focussed on the system operator’s demand allocation tool and communication processes and protocols. The second phase will be broader than the system operator’s response to the event and will be informed by findings of phase one.

-The Minister of Energy and Resources has directed MBIE to investigate the electricity supply interruptions of 9 August 2021. Transpower is also conducting a review of the 9 August event and will report to the Authority. The Authority is communicating with both MBIE and Transpower to minimise duplication of effort in relation to these reviews and impact on the industry.

-The Authority has prepared a timeline of events from 9 August and has presented this in a chart on our website.

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