Transpower warned for breaching its quality standards

The Commerce Commission has issued national electricity grid operator Transpower with a formal warning for breaching a number of its quality standards in the 2015/16 and 2016/17 reporting years.

The quality standards Transpower is subject to cover a range of operational outcomes like the maximum duration of outages or interruptions it can incur on parts of its network each year, the availability of assets and how it manages its assets (including renewals and refurbishing).

Deputy Chair Sue Begg said Transpower had breached a range of quality standards over the two years.

“As part of its regulated price-quality path, Transpower proposed some quality standards that it could not realistically meet, which meant the likelihood of breaching was high. Some breaches were accentuated by natural events, such as outages caused by the 2016 Kaikoura earthquake and Cyclone Cook in 2017. However, some of the breaches were also influenced by factors within Transpower’s control, including a new transformer failing due to commissioning procedures that weren’t as robust as they should have been,” Ms Begg said.

“Overall, in this instance we considered a warning was sufficient, as Transpower largely acted in accordance with good industry practice during the reporting years, and consumer harm resulting from the breaches was not significant. A report we commissioned from independent engineering consultants noted that Transpower had put in place corrective action plans in response to errors and omissions, and ensured those plans were completed.”

Transpower has recently indicated it also breached its quality standards in the 2017/18 reporting year, which is subject to a separate investigation.

“It is vital that Transpower ensures it is appropriately managing the issues it identifies on its network. Our decision to issue a warning letter was based on the particular circumstances of the breaches for the first two years and will inform any future enforcement decisions.”

The warning letter can be found on the Commission’s website.

Background

Transpower's role is to ensure electricity can be transported from where it is generated to some large electricity users and the distribution businesses that deliver it to homes and businesses all over the country. Its network is made up of nearly 12,000 km of high-voltage transmission lines (and the pylons that hold them) and more than 170 substations and switchyards. Transpower is responsible for building, maintaining and operating this network. The Commission’s role is to set the maximum revenue Transpower can recover from consumers to run the national grid efficiently.

Since 1 April 2011, Transpower has been regulated by way of individual price-quality regulation. The individual price-quality path governs Transpower's revenues for each pricing year, with the paths being reset either every 4 or 5 years. Transpower’s individual price-quality path for 2015-2020 began on 1 April 2015, and we are currently re-setting the path for 2020-2025. Read more information on Transpower's price-quality path.

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