Letter to The Australian Financial Review

From: Keith Rankin
Subject: Auckland's power crisis
Date: Friday, 6 March 1998

Dear Sir/Madam

In your editorial of 28 February, you claimed that the Auckland CBD power crisis was caused by one of the four main high-voltage supply lines to the city being "accidentally severed by a construction contractor, during an unprecedented heatwave".

You also claim that the power supply company involved, Mercury Energy, is a "publicly owned corporatised distributor" which is "controlled by several local councils".

The first power cable failed on 22 January, after 2 weeks of cool weather. New Zealand was plagued by the El Nino weather pattern, which, in Auckland means cool winds from the south-west. It seems most likely that this failure was a routine outage of a 40 year-old cable that was known to be at the end of its working life. I have seen no reports in New Zealand blaming a construction contractor.

A second cable failed on 9 February. While the period from 25 January to mid February was unusually hot and humid, the weather was at the top end of the normal range for Auckland in February. This hot spell was a departure from the El Nino pattern.

Auckland's peak month for power usage is February, the hottest and most humid month of the year, the month in which air-conditioning is most needed. It is a peak month for the port, and is the peak month for overseas tourism.

Mercury Energy failed by trying to power the city under its biggest ever load, while at less than 80% of a transmission capability that Mercury knew to be frail. The newest cable was 15 years old. According to Mercury's own figures, the four cables' combined capacity was 190MVA and average peak load was 165MVA. Simple arithmetic shows that the system was overloaded following the January failure. Yet, not only had Mercury not told their customers about that failure, they didn't even started to fix the failed cable until the second cable failed.

After the second failure, central city power users were asked to cut usage by just 10%. On February 16, they were told they could ease up on their conservation measures. The failure of the last two cables, on 19 and 20 February was no accident. It was like driving the Titanic at full power into an iceberg.

Mercury Energy is nominally owned by a consumers trust. Five out of nine of Mercury's directors were appointed from outside, however, and were subject to the veto of Mercury Energy's lawyers, Russell McVeagh. Thus, as Aucklanders have only just discovered, their power supply utility is controlled by a law firm. This was the ownership structure imposed by John Luxton, the Minister for Local Government in 1992, and known as the most extreme proponent of the privatisation of public utilities.

Auckland's debacle is a result of a privately controlled utility company, under nominal public ownership, trying to sell as much power as possible during a period of peak demand, despite full knowledge that the aged transmission system was running at less than 80% and later 60% of its known capacity.


Yours sincerely, Keith Rankin


Rankin File