Formal Warning For The Lines Company Outages – Focus On Recovery Plan

In the wake of multiple outages and the failure to meet minimum quality standards, the Commerce Commission has accepted enforceable undertakings from The Lines Company Limited (TLC), which connects 18,000 electricity customers throughout the King Country, Ruapehu and Central Plateau.

TLC fell short of minimum quality standards due to outages in the 2018, 2019 and 2020 assessment periods and has been issued a formal warning. General Manager of Infrastructure Regulation, Andy Burgess, says the Commission’s focus is on a review and recovery plan to help TLC improve its network performance and service to customers.

“The agreed enforceable undertakings require TLC to have its network reviewed by an independent engineer, with that information forming the basis of a recovery plan that the company must deliver and report on.”

Mr Burgess says the majority of excessive outages could be attributed to poor processes and decision-making over a period of several years. This meant the network was inadequately safeguarded from known risks.

“We assessed TLC’s conduct against our enforcement criteria, the extent of detriment, seriousness of the conduct and the public interest. Our investigation concluded that there were many factors contributing to the outages, including significant adverse weather events, changes in live-line working practices, inadequate vegetation and poor asset management.

“This is very concerning, given the resulting disruption to TLC’s customers. In our view, TLC’s failure to introduce more robust asset management practices at an earlier stage played a significant role in the extent of its breaches,” says Mr Burgess.

The Commission’s decision to accept a recovery plan and issue a warning letter was made after an investigation that included site visits to inspect the network, a review of information provided by TLC and an independent engineering review from Strata Energy Consulting, which identified several areas where TLC’s practices fell below good industry practice.

The Commission has accepted enforceable undertakings that are contingent on TLC:

• engaging an independent engineering expert to report on TLC’s network;
• developing a plan to address the network and process issues identified in the report;
• reporting annually on its progress in carrying out the plan to improve the network;
• consulting with its key stakeholder groups when preparing its development plan; and
• providing information that is readily accessible to its consumers.

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

Background

TLC supplies approximately 18,000 customers and 24,000 connection points over an area of 13,700 km across the Central Plateau and King Country. The company is owned by the Waitomo Energy Services Customer Trust on behalf of beneficiaries, who are eligible TLC customers located in the northern part of TLC’s network.

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

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 certain effects seen in competitive markets so regulated companies, such as TLC, are limited in their ability to earn excessive profits, as well as having incentives to innovate, invest, and provide services at an appropriate quality that consumers expect.

To contravene a quality standard under the rules that applied between 2015 and 2020, a lines company had to exceed its annual reliability assessment in two out of three years. The maximum financial penalty that can be imposed by a court on an electricity lines company for a contravention of its price-quality path is $5 million per act or omission, with any penalty payable to the Crown.

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