Managing the assets that distribute electricity.

Electricity distribution businesses own networks that distribute electricity throughout New Zealand. It is important that they manage their networks well to ensure a safe and reliable supply of electricity to their consumers, now and in the future.

Electricity distribution businesses face a challenging future. It is important that they:

  • recruit the right staff, or have in place the right resources, to manage assets effectively and improve asset management techniques;
  • maintain resilient networks that can withstand extreme events and natural disasters; and
  • respond to emerging technologies that are beginning to affect the networks.

My Office looked at how electricity distribution businesses were managing, maintaining, and investing in their networks to ensure that they could provide services to consumers for the long term.

We considered this in two ways. First, we analysed publicly available financial information of all electricity distribution businesses. Our analysis shows that electricity distribution businesses, as a whole, are generating a commercial return and enabling dividends to their owners. The businesses as a whole also maintain low levels of debt.

Secondly, we reviewed the asset management practices of three electricity distribution businesses. We chose Alpine Energy Limited, Unison Networks Limited, and Waipa Networks Limited (the three companies) because they are different sizes, have different ownership structures, and are located in different parts of New Zealand. Although we reviewed the practices of three companies, we encourage all electricity distribution businesses to consider whether our findings also apply to them.

Examining the asset management practices of the three companies, we found some effective practices that are well described in their asset management plans. In particular, the three companies have adequate base asset knowledge, and there are appropriate initiatives to improve network resilience and ensure continuity of supply.

However, there is room for improvement. Electricity distribution businesses own assets with long useful lives, and we expect them to understand the financial effects of maintaining and replacing these assets for a substantial portion of the assets' life. Instead, the three companies' focus was largely on the short term. With a longer-term focus, the three companies can make better-informed decisions about how to manage their networks.

Improving knowledge of asset condition, performance of critical assets, and risk management strategies would complement the asset management practices that we observed. These are fundamental for electricity distribution businesses as their networks continue to expand and new technologies emerge.

I thank staff from Alpine Energy Limited, Unison Networks Limited, and Waipa Networks Limited for their help and co-operation during our audit.

Signature - GS

Greg Schollum
Deputy Controller and Auditor-General

13 June 2017

Photo acknowledgement: mychillybin © Thysje Arthur