Alpine Energy Issued With Formal Warning; Commission Secures $16.9m In Customer Refunds + $1.5m For Community Fund

The Commerce Commission has issued a warning and negotiated enforceable undertakings from South Canterbury-based Alpine Energy after an accounting error resulted in it overcharging customers by $16.9 million.

In deciding on the appropriate enforcement action, Commissioner Vhari McWha says the Commission’s focus was on ensuring Alpine returned the money it had overcharged customers with additional funds committed in recognition of the harm the error caused the wider community.

“We’re mindful that, given electricity is an essential service, consumers may have suffered unnecessary hardship as a result of this error. That’s why in addition to paying customers back the amount they are owed, we have secured a commitment from Alpine to spend at least $1.5 million to support access to electricity in the local South Canterbury community.”

Ms McWha says unpicking the effects of the error had been a lengthy but essential process to ensure the correct amount is returned to consumers.

“While we do not think the breaches were intentional, they are nonetheless very serious and preventable. The undertakings therefore also require Alpine to make improvements to its processes so it can avoid making similar mistakes in the future.”

The lines company, which services more than 33,800 customers, provided incorrect information disclosure statements to the Commission relating to its depreciation calculations. This information was used by the Commission to set allowable revenues and Alpine’s maximum allowable revenue was overstated, leading to customers being overcharged for the lines components of their electricity bills between 2015 and 2024.

As part of the enforceable undertakings, Alpine must carry out the following actions:

• Refund current customers the $16.9 million overcharged;
• Establish a programme to provide discretionary payments to former customers who would otherwise not receive a refund;
• Within two years, spend at least $1.5 million on initiatives to support access to electricity in the local community, like community resilience, affordability and energy efficiency;
• Prepare an improvement plan, setting out actions Alpine intends to take that are designed to mitigate the risk of a similar error occurring in the future.

In addition to enforceable undertakings, the Commission has issued a warning letter to Alpine.

Alpine adjusted its prices from 1 June 2024 to mitigate the impact of the error. The $16.9 million in refunds for the overcharge in previous years will be delivered by crediting the accounts of current Alpine customers. There will also be a programme to make payments to former customers who can show they are eligible for a refund.

A copy of the enforceable undertakings and warning letter are available on the Commission’s website.

Background

In deciding on the enforcement action, the Commission focussed on ensuring the strongest outcome for consumers affected by Alpine’s actions. In this case, the Commission considered Alpine’s commitment to refund the full amount of the overcharge and to pay an additional $1.5 million in support of community energy initiatives in the wider South Canterbury region to be a better outcome than a court-imposed penalty, which would go to the Crown.

Alpine owns and operates the electricity distribution network that powers consumer homes and businesses in the South Canterbury region, which includes the Timaru, Mackenzie and Waimate Districts. Alpine is partially owned by consumers connected to its network, and pays a dividend to its shareholders, which includes the community trust. This in turn results in a distribution to consumers through bill credits to retailers.

Power lines companies are regulated by the Commerce Commission under Part 4 of the Commerce Act 1986. The aim of the regime is to incentivise outcomes seen in competitive markets so regulated companies, such as Alpine, are limited in their ability to earn excessive profits, as well as having incentives to innovate, invest, and provide services at the quality consumers expect.

As a regulated monopoly, Alpine is subject to price-quality regulation by the Commerce Commission, which affects how much consumers pay for lines charges in their electricity bills and the annual limits for the number and duration of power outages that consumers experience on its network.

Alpine is also subject to the Commission’s information disclosure requirements, requiring it to publish key financial and network information on its revenue and quality performance.

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