Auckland electricity lines company Vector has been ordered by the Auckland High Court to pay a multi-million-dollar penalty.
The $3.575 million fine has been imposed because the organisation breached its network quality standard due to a high number 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.
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," 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 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 ageing assets. We expect better management decisions going forward, as do its customers," Begg said.
In the judgment released today, Justice Duffy noted that there 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."
Justice Duffy noted that customers were likely to have suffered losses and that the fine was necessarily large to act an effective deterrent to Vector and other distributors.
The penalty imposed by the court was discounted by 35 per cent for mitigating factors, including Vector agreeing not to contest the proceedings.
In a statement today, Vector accepted the judgment handed down by the court.
Vector's chief network officer Andre Botha said the company acknowledges the inconvenience network outages can cause.
"Vector has worked constructively with the Commerce Commission throughout the settlement process for these historic breaches, and we will look to continue the conversation with them about how the regulatory environment can support the challenge of Auckland's growth and changing expectations of energy," Botha said.