Commission Warns Aurora It Must Continue To Address Underlying Reliability Issues

The Commerce Commission has warned power lines company Aurora Energy Limited for an excessive level of power outages in 2020. The warning relates to the last of a series of breaches of its network quality standards relating to historic underinvestment in the replacement of assets and maintenance on the network. Aurora owns and operates the poles, lines and other equipment that distributes electricity from Transpower’s national grid to over 92,000 homes, farms and businesses in Dunedin, Central Otago and Queenstown Lakes. Aurora is a wholly-owned subsidiary of Dunedin City Holdings Limited, owned by the Dunedin City Council. Aurora was previously penalised almost $5 million by the High Court for breaches of its network quality standards across 2016-2019. The Commission considered the full range of enforcement responses, including seeking further penalties, but ultimately chose to warn Aurora for its breach in 2020 noting:

• Aurora’s 2020 breach was largely inevitable due to its conduct in the years leading up to its earlier breaches, for which it had already been penalised;
• the previous penalties against Aurora act as a deterrent to similar underinvestment by Aurora or other suppliers in the future, and an additional penalty would not significantly strengthen this deterrence; and
• Aurora had already made significant investment to remedy the situation and committed to continuing to invest in its network supported by its June 2020 application for a customised price-quality path.

The Commission acknowledges the serious impact the outages had on Aurora’s consumers. The Commission is monitoring Aurora more closely as part of detailed reporting requirements placed on it as part of the customised price-quality path that was set for Aurora in 2021. The first tranche of reporting against these requirements was published by Aurora on 31 March 2022 and is available here.

Background

Aurora is regulated under Part 4 of the Commerce Act as one of 30 suppliers of electricity lines services in New Zealand. The Commission regulates Aurora by requiring it to publicly disclose information on its network and performance, as well as by capping the amount of revenue it can recover from consumers and setting the minimum standard for the quality of service it must provide.

At the time of the breaches of its quality standards, Aurora was subject to the default price-quality path, a set of revenue requirements and quality standards that apply across price-quality regulated suppliers by default. Where a supplier considers that these requirements and standards do not meet its particular circumstances, it can apply to the Commission to have its requirements and standards customised.

Aurora applied for a customised price-quality path in June 2020 seeking additional revenues to fix, upgrade, maintain and operate its electricity lines network and a lower reliability standard while it carried out this work. In March 2021, the Commission set a customised price-quality path for Aurora allowing it to recover a total of up to $563.4 million from customers over five years, and set quality standards, which were reasonably achievable but also required Aurora to arrest the deterioration of the reliability of its network.

The warning issued to Aurora can be found here.

The details of Aurora’s CPP and enhanced reporting requirements can be found here.

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