Vector to pay $3.6m penalty

Vector has been handed a $3.575 million penalty for breaching its network quality standard through an excessive level of power outages in recent years.

The charges, brought by the Commerce Commission last year, alleged a failure to adhere to good industry practice in some aspects of network management, which resulted in Vector breaching the commission’s regulations on quality standards in the 2015 and 2016 financial years.

The electricity lines company serves more than half a million homes and businesses in the greater Auckland region.

Commission deputy chair Sue Begg said Vector failed to deliver a good quality of service.

‘‘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 lifecycle of certain ageing 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 in the High Court at Auckland yesterday, Justice Ailsa 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 was discounted by 35 per cent for mitigating factors, including Vector agreeing not to contest the proceedings.

Vector has accepted the judgment and chief network officer Andre Botha said it would continue to work with the commission.

‘‘Vector acknowledges the inconvenience power network outages can cause our customers . . . We are constantly evolving our business to meet Auckland’s significant growth though ongoing investment decisions that improve long-term outcomes for customers and improve the performance of Vector’s network,’’ Botha said.

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 this penalty, Vector also breached its quality standard in 2017 and 2018, the competition watchdog said.

The commission is now investigating those further breaches and expects to make a decision about enforcement action later this year.

Vector is the first lines company to incur a financial penalty under 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.

The maximum financial penalty for such a breach is $5 million per act or omission.

Any person who has suffered loss or damage as a result of Vector’s breach can seek compensation at the High Court, within 12 months.

‘‘A significant penalty must be imposed to act as an effective deterrent to Vector and [others].’’

High Court Justice Ailsa Duffy