Commission files proceedings against Vector

Commission files proceedings against Vector for excessive level of power outages
The Commerce Commission will today file civil proceedings in the High Court at Auckland seeking financial penalties against electricity lines company Vector for breaching its network quality standards.

Vector serves more than half a million homes and businesses in the greater Auckland region and as a regulated business must comply with 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.

As part of its compliance with the regulations, Vector reported that it had breached its quality standards in both the 2015 and 2016 financial years. The Commission will file proceedings under the Commerce Act alleging Vector failed to adhere to good industry practice in some aspects of its network management, which resulted in increased outages over that period.

In particular, the Commission considers Vector did not meet good industry practice with regard to aspects of its:

• overall governance of compliance with the quality standards – for example, underestimating the growing risk of non-compliance, and failing to have methods to predict and plan for the effects of increased traffic congestion;

• asset life-cycle management practices;

• approach to managing reliability, such as a consolidated and documented strategic reliability management plan, which would have helped to identify key issues and solution options;

• vegetation management (i.e. cutting trees to avoid collisions with power lines); and

• management and supervision of arrangements with the field service providers whose crews undertake maintenance and fix faults on Vector’s network.

Vector has co-operated with the Commission’s investigation and confirmed it will not contest the proceedings. It has also reported further breaches of its quality standards for 2017 and 2018 that are subject to a separate investigation.

As the case is now before the Court, with a penalty hearing to follow, the Commission is unable to comment further.

Background

The current price-quality regulatory regime took effect in 2009. Vector is the second lines company to face court proceedings under section 87(1) of the Commerce Act for breaching its quality standards. Proceedings against Aurora Energy were announced last month. A number of electricity lines companies have previously received warnings or signed settlement agreements for breaching their price-quality paths. Details of these can be found on our website.

To contravene a quality standard, a lines company must exceed its annual reliability assessment in two out of three years. The maximum financial penalty that can be imposed on an electricity lines business for a breach of its price-quality path is $5 million per act or omission. If the Court imposes a penalty, then section 87A of the Commerce Act allows the Commission, or any person who has suffered loss or damage as a result of the breach, to bring a further claim for compensation against the electricity lines company within 12 months of the penalty.

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