[PEN-L:280] Auckland power blackout - inquiry conclusions

[Bill Rosenberg <w.rosenberg@xxxxxxxxxxxxxxxxxxxxxxx>]

A few months ago, at Ellen Dannin's prompting, I wrote a short report
on the several week blackout in the Central Business District of New
Zealand's largest city, Auckland. A public enquiry recently
completed. Its conclusions skirted around apportioning blame, but the
message was clear: the company was out of control of its owners, a
consumer trust, and was spending too much of its time taking over
neighbours to properly assess the risks and maintenance needs of its
infrastructure. The following report from the NZ Herald, containing
astonishing admissions from the Minister responsible, gives the
flavour. It is from
http://www.herald.co.nz/dailycom/index.html
if you want to read more.

Bill Rosenberg



Power Crisis - The report

22/07/98 Minister's approval unwise: Bradford

by Andrew Laxon and James Gardiner

The Minister of Energy, Max Bradford, acknowledged yesterday the
previous National Government's role in allowing the flawed Mercury
Energy company structure to come into being.

Mr Bradford, who blamed management failure for the crisis, said he
would not have approved the establishment plan as John Luxton, his
ministerial colleague and the previous Minister of Energy, had done in
1993.

At a press conference in Parliament after the release of the report of
the inquiry he had commissioned, Mr Bradford said the Government
should probably never have accepted the controversial plan which set
up Mercury.

Mr Bradford described the plan -- which created a confused mix of
ownership and control between company directors and board trustees --
as the product of a deal between Auckland interests.

He predicted that more Mercury heads would roll, at both board and
senior executive level.

Two senior executives have left and the chief executive, Wayne
Gilbert, died of a heart attack at his desk last week, a day before
the report was to have been released.

The company chairman, Jim Macaulay, who has terminal cancer, has
already confirmed he would step down and said last night that it would
probably be next month.

In a TV3 interview, he said Mr Gilbert "took full responsibility right
from the beginning."

Mr Bradford said Mercury, like all power-supply companies, would be
split into line and energy businesses. But he could not say whether
Aucklanders would end up paying for liabilities of hundreds of
millions of dollars for overvalued generation assets, which must be
passed on somehow to the businesses that succeeded Mercury.

He attacked the power company's bosses for "a failure of management"
as they fought takeover battles with rival power companies instead of
concentrating on the basics.

"The fact that there was no asset management plan in place, no
effective risk-management strategy and no regular monitoring of the
cables that ultimately failed [shows] the signals weren't getting
through to the right people that something was wrong and something
needed to be done."

The Government was now getting assurances from the company and the
trust that it would carry out adequate risk management in future, "as
some would say it probably should have done in the past."

He said the Government wanted no embarrassments at the Apec world
leaders conference next year, Auckland would also soon host major
international sporting events such as the America's Cup and
Aucklanders wanted reliable power every day.

But there would be a new management team and changed board in place
soon, and the Electricity Industry Reform Act would ensure a clear
separation of the roles of trustees and directors.

Appointing directors who were also trustees, as Mercury had done, was
unwise as the two groups had different responsibilities.

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