Alpine admits overcharging
The community-owned South Canterbury lines company, Alpine Energy, has admitted overcharging customers by millions of dollars over the past decade.
The chairperson of its board, Warren McNabb, resigned on Saturday.
Newly appointed Alpine Energy chairperson Melissa Clark-Reynolds confirmed his resignation and said an administrative error had resulted in the “non-deliberate” over-charging of the lines component of electricity bills from 2015 until the error was discovered eight months ago.
Clark-Reynolds said the error had been discovered during an audit in August 2023, and the Commerce Commission had been advised at that time.
“The Board acknowledges the mistake and accepts responsibility for correcting it,” she said.
“We will work with the Commerce Commission to agree to the best way to do this.
“It was fixed as soon as we found it ... we are not looking to blame anyone.”
She said the error was down to a technical error, not dishonesty.
All South Canterbury consumers, both domestic and industrial, would be impacted, but the amount overcharged was yet to be determined.
“An early estimate suggests around $2 million on average a year, or about 3% of Alpine’s total revenue for the nine-year period, around $19m, but that is still an estimate,” Clark-Reynolds said.
The Timaru Herald understood Alpine Energy shareholders were only informed of the financial error recently.
Alpine Energy is owned by four shareholders: Timaru District Council’s holdings company, Timaru District Holdings Limited (TDHL), owns 47.5%, LineTrust South Canterbury owns a 40% stake, Waimate District Council 7.54% and Mackenzie District Council 4.96%.
Asked why it had taken so long to inform shareholders, Clark-Reynolds said, “They were not told back then (in August 2023) because the error had not been quantified and the impact was not known until the last few weeks.”
Clark-Reynolds said this year’s line charge rates were being reset, with a lower increase taking effect immediately through to March 31, 2025.
“The board will not pay an interim dividend for the three months ending March 2024.”
Regarding repayments to consumers,
Clark-Reynolds said this would be worked through with the Commerce Commission.
“It’s early in the process, we’ve identified the error, fessed up, and now we’re working through.
“We’re not ruling out repayments but there would be other ways, there are multiple options. We’ll have to decide what is appropriate for us and the commission.”
A Timaru trustee of LineTrust South Canterbury, Peter Binns, said Alpine Energy had advised the trust of the error.
“We were formally advised a couple of weeks ago. Obviously an error was made and perpetuated. It surprised me a bit that one of the audits didn’t pick it up. The audits are plentiful and expensive.
“I don’t know if it was human error. The same line charge error was going on for
nine to ten years and it was across the board, all customers, everyone with a connection in South Canterbury. It’s a shame.
“The only little brightness is that Alpine Energy is completely local and community owned, so the money has been going round and round locally.
“Alpine Energy has been a good sponsor of things over the years.”
Binns said Alpine Energy had discussed compensation at meetings with LineTrust South Canterbury.
“All of that will have to be worked out in the coming days, hopefully sooner rather than later.
“We’ll have to come to some arrangement with consumers. We don’t know if the Commerce Commission has courses to take, including penalties. We don’t know if there will be a penalty.”
In August last year, Alpine Energy reported its highest ever customer contribution and connection fees revenue of $7.9m in its 2022-23 annual report. Lines revenue totalled $56.7m ($53m in 2021-2022).
The same month, Alpine Energy chief executive Caroline Ovenstone confirmed changes to the business which saw it combine with Netcon, its electrical contracting company.
At the time, Ovenstone said the move was “strategic” and would help prepare for the growth expected in the lines network and the “resilience needed in the face of ever-increasing weather events”.
In November 2018, Alpine Energy was at the centre of a controversial proposal by Timaru District Holdings Limited to sell down its 47.5% shareholding in the lines company. It received more than 500 public submissions – most opposed the sale. The following month, Timaru District councillors voted unanimously against the proposal.
In 2019, the company received a stern warning from the Commerce Commission for breaching outage limits and failing to upgrade its lines.
A letter, released by the Commission at the time, criticised the company, saying it had “failed to invest sufficiently in maintaining or replacing overhead lines assets that it had identified as being old, below specification, or prone to failure in adverse weather”.