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Topic # 248362 22-Mar-2019 12:45
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From Commerce Commission:

 

 

Auckland electricity lines company Vector Limited has been ordered by the Auckland High Court to pay a penalty of $3.575 million for breaching its network quality standard through an excessive level of power outages.

Vector serves more than half a million homes and businesses in the greater Auckland region and as a regulated business must comply with Commerce Commission regulations regarding the maximum revenue it can collect and the minimum standards of quality it must deliver. Quality is measured in the duration and frequency of power outages.

Commission deputy chair Sue Begg said Vector failed to adhere to good industry practice in some aspects of its network management, which resulted in it breaching the Commission’s regulations on quality standards in the 2015 and 2016 financial years.

“Auckland consumers have a right to expect a good quality of service from their lines company and Vector failed to deliver it,” Ms Begg said.

“Given the impact electricity outages have on consumers and businesses it is crucial that lines companies have the systems in place to identify and manage the risks present in their networks. The court has found that Vector’s governance of compliance with the quality standard did not meet good industry practice. Vector underestimated the risks it faced and did not meet best practice in managing vegetation or the life-cycle of certain aging assets. We expect better management decisions going forward, as do its customers.”

“We are aware of media reports asserting these proceedings stemmed from changes to Vector’s ‘live lines’ safety policies, which is incorrect. Vector was in breach of its quality standard regardless of that policy change and we took these proceedings because of the concerns we had with Vector’s overall decision-making and management practices.”

In her judgment released today, Justice Duffy noted: “These were serious contraventions. The size of the contravening party is an important factor in determining the seriousness of the contraventions. This is because any penalty must take account of both the size and resources of the party, and the effect on its customers. Vector is the largest electricity distribution business in New Zealand, having at least 540,000 or more customers at the relevant time. Those customers are likely to have suffered losses like those detailed [earlier in the judgment]. A significant penalty must be imposed to act as an effective deterrent to Vector and other distributors.”

The penalty imposed by the court was discounted by 35% for mitigating factors, including Vector agreeing not to contest the proceedings.

A copy of the judgment will be available shortly on the Commission’s website.

Vector has now exceeded the annual limit set by the Commission for duration of outages for five years in a row. In addition to the breaches covered by today’s penalty, Vector also breached its quality standard in 2017 and 2018. The Commission is currently investigating those further breaches and expects to make a decision about enforcement action later this year.

Background

The current price-quality regulatory regime took effect in 2009. Vector is the first lines company to incur a financial penalty under section 87(1) of the Commerce Act for breaching its quality standard. A number of electricity lines companies have previously received warnings or signed settlement agreements for breaching their price-quality paths. Details of these can be found on our website.
 
To contravene a quality standard, a lines company must exceed its annual reliability assessment in two out of three years. The maximum financial penalty that can be imposed on an electricity lines business for a breach of its price-quality path is $5 million per act or omission. Vector exceeded its annual reliability assessment for the years ending 31 March 2014, 2015, 2016, 2017 and 2018.
 
Once a penalty has been imposed, section 87A of the Commerce Act allows any person who has suffered loss or damage as a result of the breach to bring a further claim for compensation against Vector within 12 months of this penalty decision from the High Court.     

 





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  Reply # 2203343 22-Mar-2019 13:02
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3.5M is just a drop in the bucket for them..





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  Reply # 2203365 22-Mar-2019 13:38
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That's the problem with these types of fines, if it'd cost them $15M in that time to upgrade/maintain their equipment then the logical option is to pay the fine. There needs to be either personal liability for the directors or ongoing, increasing penalties that make it financially more sensible to do the work than to pay the fine. Neither of these measures are meant as some sort of punishment for Vector, but to provide an incentive for them to do the work to provide better service quality, because at the moment they're incentivised to not do it.

 
 
 
 


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  Reply # 2203446 22-Mar-2019 16:35
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Given that the major outage that caught everyones attention was caused by falling trees, predominately on private property, I wonder what Vectors response will be. I'm not entirely sure what reaction the com-com is hoping for - it isn't like Vectors equipment failed from old age, rust or water ingress (except maybe in the Penrose outage - or was that Transpowers equipment?).

 

Vectors is somewhere between a rock and a hard place. Their options are:

 

1) Do nothing. (most likely).

 

2) Cut down/cut back one heck of a lot of trees (which will bring out all the Luddites).

 

3) Sue the owners of the trees (which will be a shock to a lot of Kiwi's).

 

4) Hand responsibility for the lines to communities, similar to when some power companies 'gifted' transformers and poles on private property to the land owners, in order to escape the replacement/up-keep costs. 

 

 


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  Reply # 2203466 22-Mar-2019 17:01
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tripper1000:

 

Given that the major outage that caught everyones attention was caused by falling trees, predominately on private property, I wonder what Vectors response will be. I'm not entirely sure what reaction the com-com is hoping for - it isn't like Vectors equipment failed from old age, rust or water ingress (except maybe in the Penrose outage - or was that Transpowers equipment?).

 

Vectors is somewhere between a rock and a hard place. Their options are:

 

1) Do nothing. (most likely).

 

 

Actually, I'd guess this is most unlikely.
The ComCom has sent a really unmistakable message here that "We are not amused, and you really wouldn't want to see us grumpy"

 

tripper1000:

 

2) Cut down/cut back one heck of a lot of trees (which will bring out all the Luddites).

 

3) Sue the owners of the trees (which will be a shock to a lot of Kiwi's).

 

 

I would expect a mixture of both, because some tree owners won't want to recognise either the right to a continuous supply of the downstream consumers, or the legal entitlement of the lines company to trim interfering trees.
Cries of "Oh, but they're my trees" will doubtless be loud, but Vector will be under the pump from the ComCom on this.

 

Some of the photos I saw showed that trees had been allowed to be planted and to grow untrimmed in places where they are right in amongst the power lines.

 

tripper1000:

 

4) Hand responsibility for the lines to communities, similar to when some power companies 'gifted' transformers and poles on private property to the land owners, in order to escape the replacement/up-keep costs. 

 

 

And what "community" is going to volunteer to take on the responsibilities of a Lines Company?
Most of the existing Lines Companies were formed by amalgamation of older smaller organisations, and I can't see there being a political will for de-mergers

 

 

 

 

 

Edit: speeling misteakes


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  Reply # 2203479 22-Mar-2019 17:17
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Here the lines company, and Transpower, exercise their rights and you will never see a branch close to distribution powerlines, and not within many metres of transmission lines. Vector need to up their game if that's the problem.


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  Reply # 2203546 22-Mar-2019 18:38
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Vector are between a rock and a hard place with this ruling and other laws.

In relation to trees. Vector cannot force trees to be trimmed / cut down, where the tree / branch is currently outside of the restricted zones around power lines. But the tree is growing in such a way, that if it were to fall, it would damage the power lines. Yet the ruling says:

Vector should have placed greater focus on managing ‘out of
zone vegetation’ that posed potential reliability hazards by
seeking arrangements with relevant tree owners;

Problem though, if the tree owner doesn't agree to trim or remove their tree. Vector has to either ignore the risk from the tree. Or take legal action against the owner. Which is slow, expensive, and generates lots of bad publicity.

Health and safety: The law says that Hazards should be eliminated, as far as reasonably practical. (may not be exact but the point stands). And the way to eliminate the hazard of electrocution- Turn off the power.

Imagine having to go to court, due to a staff member having been killed from electrocution. First Question that would be asked - Why couldn't the power have been turned off before doing the work? The Judge is unlikely to accept the effect on calculated reliability scores as a valid excuse for not eliminating a major safety hazard.





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  Reply # 2203626 22-Mar-2019 21:19
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They could upgrade the dire old waitamata network that has one continuous 11kv feeder thru 3 suburbs into beach haven so that any fault anywhere takes the lot out. Old mercury areas have seperate feeders so that faults cover a smaller area and are resolved faster. Also any penelty for the constant failure of the legacy pilot wire hotwater that goes out with any storm and has lower priority to fix entire subrubs than reconnecting the power to small pockets of outage?





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  Reply # 2203636 22-Mar-2019 22:00
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Tracer:

 

Here the lines company, and Transpower, exercise their rights and you will never see a branch close to distribution powerlines, and not within many metres of transmission lines. Vector need to up their game if that's the problem.

 

 

 

 

I am very sure that the lines companies are only able to cut vegetation to within 1.5 metres of the lines now. 
Like they cant just go and cut out half a tree - they can only trim them. 





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neb

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  Reply # 2203832 23-Mar-2019 14:15
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Tracer:

Here the lines company, and Transpower, exercise their rights and you will never see a branch close to distribution powerlines, and not within many metres of transmission lines. Vector need to up their game if that's the problem.

 

 

I know that in some places they do, we were driving through some part of Ponsonby/Grey Lynn a few weeks ago on one of those streets with oak trees down each side and noticed that each tree had a huge bite taken out of the centre where the power lines ran through.

 

 

A more permanent, but somewhat more expensive, fix would be to underground the lines in places like that. Mind you long term it may be cheaper than sending crews up next to live power lines to trim the trees every few years.

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  Reply # 2205438 27-Mar-2019 01:34
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Oh Fun fact from the christchurch earthquakes - above ground power was more intact than underground. 





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  Reply # 2205464 27-Mar-2019 07:49
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raytaylor:

Oh Fun fact from the christchurch earthquakes - above ground power was more intact than underground. 



When you think about it, that makes sense. Above ground has a big of room to flex and then if the to pole connection detached it would have more again.

Given vector is primarily Auckland, earthquake risk is low..




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  Reply # 2205505 27-Mar-2019 09:53
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richms:

 

They could upgrade the dire old waitamata network that has one continuous 11kv feeder thru 3 suburbs into beach haven so that any fault anywhere takes the lot out. Old mercury areas have seperate feeders so that faults cover a smaller area and are resolved faster. Also any penelty for the constant failure of the legacy pilot wire hotwater that goes out with any storm and has lower priority to fix entire subrubs than reconnecting the power to small pockets of outage?

 

 

 

 

I worked at Vector many years ago, I remember sitting in a meeting discussing under-grounding and after listening for a while I asked, why is there no under-grounding in the West or North? This elicited a round of laughing from everyone else in the meeting and eventually someone answered me - "we don't do that, there are no shareholders there".


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  Reply # 2206145 28-Mar-2019 10:53
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PolicyGuy:

 

tripper1000:

 

4) Hand responsibility for the lines to communities, similar to when some power companies 'gifted' transformers and poles on private property to the land owners, in order to escape the replacement/up-keep costs. 

 

And what "community" is going to volunteer to take on the responsibilities of a Lines Company?
Most of the existing Lines Companies were formed by amalgamation of older smaller organisations, and I can't see there being a political will for de-mergers 

 

This has been done in the past and they sucked in a lot of people the first time around. It's not about de-mergers, but (in the past) where there was a small branch feeder - down a long private driveway for example, the demarcation point moves from the houses to the public road. Then when transformers gets hit by lightening or lines bought down by trees etc, the full cost of repair is billed to the residences because it was a job on private lines, not Vector lines. 

 

Vector would simply send a letter saying "we're gifting you the power lines on your leafy tree lined street" and move the demarcation point to somewhere where the risk of upstream failure is lower. This would be a prime tactic to placate the people vehemently objecting to Vector axing their trees, and later when the power fails Vector is absolved of any responsibility or cost. It's a win-win-win situation - 1) no protests in the first place, 2) no cost/responsibility to trim the trees in the second place, 3) no cost to repair and maintain after failure, 4) no Com-Com fining them for inadequate maintenance. 


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  Reply # 2206263 28-Mar-2019 13:29
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noroad:

richms:


They could upgrade the dire old waitamata network that has one continuous 11kv feeder thru 3 suburbs into beach haven so that any fault anywhere takes the lot out. Old mercury areas have seperate feeders so that faults cover a smaller area and are resolved faster. Also any penelty for the constant failure of the legacy pilot wire hotwater that goes out with any storm and has lower priority to fix entire subrubs than reconnecting the power to small pockets of outage?



 


I worked at Vector many years ago, I remember sitting in a meeting discussing under-grounding and after listening for a while I asked, why is there no under-grounding in the West or North? This elicited a round of laughing from everyone else in the meeting and eventually someone answered me - "we don't do that, there are no shareholders there".



The North Shore City Council used to own lots of shares in Power NZ (company that used to own the lines in North and West Auckland). But instead of paying dividends, that money was spent on undergrounding power lines. The stupid council sold those shares to make a quick buck, as they weren't receiving any cash dividend payments. Despite the council getting powerlines put underground for free.

Those and other shares were eventually acquired by Vector.





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  Reply # 2206284 28-Mar-2019 14:11
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Being blind to anything in the future beyond the next election cycle and lacking long term strategies is an endemic problem in NZ politics. 


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