Commission to file proceedings against Aurora Energy

Issued 17 September 2018
Release No. 38

Commission to file proceedings against Aurora Energy for breaching quality standards

The Commerce Commission has decided to file court proceedings against Dunedin-based electricity lines company Aurora Energy for breaching its regulated quality standards in 2016 and 2017. The Commission will be asking the High Court to impose financial penalties on Aurora under the Commerce Act.

Aurora is subject to price-quality path regulation that sets limits on the total revenue it can earn as well as the level of outages or interruptions (known as quality or reliability standards) that can occur on its network each year.

As part of its regulatory reporting obligations, Aurora disclosed to the Commission it breached its quality standards for both 2016 and 2017. The Commission has now completed an investigation of the reasons for the breaches and concluded they resulted from Aurora failing to comply with good industry practice.

Specifically, the Commission alleges Aurora under-invested in asset maintenance and renewal, which led to significant proportions of its assets – such as poles, cables and transformers – being in a deteriorated condition and at or near the end of their service lives. The Commission considers that this led to an increased level of power outages and therefore significantly contributed to Aurora’s breaches of the quality standards.

Separate to this investigation, Aurora has agreed to engage independent experts to undertake a full assessment of the state of its network. As part of the obligations applying to all electricity distribution businesses, Aurora is also required to provide a detailed asset management plan this year on how it will refurbish or replace priority assets moving forward. Both the state of the network report and asset management plan are expected to be completed by the end of October.

The Commission considers that the quality and robustness of both documents will be critically important to all Aurora stakeholders. They should provide a reliable baseline view on Aurora’s current network condition and set out its plans to get its network reliability back to appropriate levels.

Aurora has also reported it breached its 2018 quality standards, which will be subject to a further investigation.

As Aurora’s quality standard breaches will be before the Courts, the Commission cannot comment further at this time.

Background

Aurora Energy supplies electricity to more than 88,000 homes, farms and businesses in Dunedin, Central Otago and Queenstown Lakes. It is a wholly-owned subsidiary of Dunedin City Holdings Limited, owned by the Dunedin City Council.

Aurora previously breached its quality standards in 2012 and was issued with a warning.

The maximum penalty for a business that breaches its quality standards under the Commerce Act is $5 million.

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