Auckland blackout compensation on hold

Transpower Regional Services Manager Paul Blue at the site of the fire at the Penrose substation following Sunday's major blackout. Photo / Jason Oxenham

Compensation for the blackout that left thousands of Aucklanders without power for several days won't be discussed until the exact cause is known, Vector's chief executive has said.

Simon Mackenzie told shareholders at the company's annual meeting this afternoon he was not happy with the outages.

Vector is investigating the causes of a fire at a Transpower substation in Penrose on October 5 that cut power to 85,000 Vector customers.

Board chairman Michael Stiassny said it would cost Vector $500 million to $600 million to upgrade each of its 14 substations to achieve reliability above 100 per cent - less than what Transpower would have to spend.

People in the affected areas, he said, had had 99.8 per cent reliability in the past 15 years.

Shareholder Coralie van Camp said people could have died because maintenance was not carried out at Penrose.

"This is serious and you have to stop paying all that money out in dividends and put it in maintenance," she said.

Mr Stiassny told shareholders he too was affected by the cuts but thanks to investing in Vector solar and battery power he was able to run some lights and power.

He said the power cuts brought home to people the need to start thinking about and planning for further cuts.

In the immediate aftermath of the blackout, Energy Minister Simon Bridges said he was confident that Vector had acted appropriately.

"Personally from what I've seen it does look like [Vector] have acted appropriately in the immediate response to this. But as I say, I think that's something an inquiry will need to look at."

Watch:

Power outage - Aucklanders wake to no power

John Key later announced an inquiry, saying: "It's a huge inconvenience obviously for many people and there'll be some cost. I know that the minister of energy has asked for the obvious thing which is what will shape an inquiry.

"And I guess people will have to look at the issue of compensation because people will have lost possessions through no fault of their own."

He also indicated energy prices might rise. "I know people say 'deliver me the gold-plated solution' but the gold-plated solution has implications for consumers."

Vector and Transpower have been fiercely cricised by their former board chairman Wayne Brown. He questioned why better fire prevention methods were not in place at the substation.

He said a sprinkler system should have been operating in the substation's switch-yard. He also criticised a lack of engineers on the two companies' boards, saying the deficiency could limit understanding about the practicalities and dangers of the network.

Affected businesses and homeowners have demanded compensation from whoever is responsible for the network failure. Paymark released figures yesterday showing the sweeping outages had caused an estimated $4.3 million drop in spending on Sunday alone.

Fletcher Building was forced to shut down several factories, with the company taking a financial hit in the millions of dollars.

Mr Brown said similar incidents would continue to happen as long as the companies focused more on the business side of operations and ignored the engineering intricacies.

"My contention is that Vector and Transpower will continue to have these problems because at the governance level there's not enough engineers.

"They haven't got sufficient ability to question things," Mr Brown said. "There's just not enough experienced engineers on those boards. I think there will be more failures until they change that. I just think they focus on the wrong stuff ... on shareholders and balancing, rather than performance."

He conceded that Penrose was a peculiar substation because the basalt rock meant burying the cables was too difficult.

There should nevertheless have been fire prevention measures in place, he said: "Not to have sprinklers or something in there, that's a bit odd."

Transpower has dismissed Mr Brown's comments about its board structure, labelling them "absolute rubbish".

Vector said governance matters should be referred to the company's chairman.