The Commerce Commission has accepted enforceable undertakings from electricity lines company Eastland Network Limited (Eastland) for overcharging its customers $327,000 in the 2020 assessment period.
The undertakings require Eastland to repay consumers $327,000, plus an additional $28,000 in interest.
Eastland serves approximately 26,000 consumers in Gisborne, Wairoa and the East Coast. As a regulated monopoly under the Commerce Act, Eastland is subject to price-quality regulation through a default price-quality path (DPP). This sets a limit on the total revenue Eastland can earn, which affects how much consumers pay for lines charges in their electricity bills.
The breach occurred when Eastland earned more revenue than it was permitted to earn for the 2020 assessment period.
Deputy Chair Sue Begg said as part of its reporting obligations, Eastland disclosed to the Commission that it had contravened its price path in the 2020 assessment period.
“The Commission decided to accept enforceable undertakings from Eastland under which the lines company would return its overcharge to consumers, obtain an independent report into the causes of the contravention, and report on the steps it is taking to address any issues identified,” she said.
Ms Begg said that the Commission’s investigations found Eastland’s price-setting conduct that caused the breach was not intentional.
“The fact that Eastland’s conduct was not intentional was a key factor in our decision to seek enforceable undertakings rather than seeking a pecuniary penalty.”
A copy of the enforceable undertakings for the 2020 price path contravention is available on the Commission’s website.
The current price-quality regulatory regime applying to electricity lines companies took effect in 2009. The aim of the regime is to mimic the effects seen in competitive markets so regulated companies, such as Eastland, are limited in their ability to earn excessive profits, as well as having incentives to innovate, invest, and provide services at a quality consumers expect.
The maximum financial penalty that can be imposed by a court on a lines company for a contravention of its price-quality path is $5 million per act or omission, with any penalty payable to the Crown.
The Commission has the power to accept enforceable undertakings under section 74A of the Commerce Act 1986. If the supplier fails to comply with the enforceable undertakings, the Commission may enforce the undertakings in the High Court under section 74C.