Aurora Energy to implement recommendations of independent review

12 Dec 2016

Aurora Energy supports the findings of the independent review released today and will take up its recommendations for further improvement.

The report was prepared by Deloitte for Aurora Energy’s shareholder, Dunedin City Holdings, and reviewed a number of issues in relation to the state of the network, the health and safety of Delta employees and the public, and the flow of information on those matters between the company and its shareholder. The report urges increased investment in the electricity network to accelerate risk reduction while concluding that an open health and safety culture exists and has significantly improved.

Chair of Aurora Energy, Steve Thompson, says the report found that the Aurora Energy Board and management were aware of the concerns raised and had been making progress in the five areas where the report recommends change. These include Board diversity, long term planning, organisational structure, asset management planning and health and safety.

“Aurora Energy’s own Asset Management Plan highlights the state of the network and recommends replacement of a large number of assets although the Board agrees there’s a need to increase renewal and maintenance activity.

“Historically, some parts of the network have not been adequately maintained or need replacement. Our task is to address that. The report acknowledges that the Board was aware of the issues and in recent years has significantly increased actual and planned investment in renewal and maintenance. As Chair, I will be looking at how we best further accelerate renewal and maintenance as a Board and management team.” (The details of the response to the Deloitte report are attached).

“As previously announced we will be accelerating our pole replacement programme and are committed to removing the risk of condition 0 and 1 poles from the network by December 2017. Detailed programme planning is underway in preparation to ramp up the rate of pole replacement in the New Year, with project management team resource in place for the planning phase.

“The Energy Safety Service of WorkSafe is currently auditing network safety and we are waiting on the results of that technical review. Aurora Energy will also take further remedial actions not already addressed in planned renewal and maintenance programmes.

“Aurora Energy accepts the findings of the report in full. We are already moving to address the matters raised and will start work on others immediately. Some recommendations such as the company structure and further acceleration of network renewal, involve significant organisational change and these will take longer to plan and implement.

“The Board recognises we can do better, and my undertaking as Chair is that we will,” says Mr Thompson.

Details of the Aurora Energy response

Aurora Energy will act on five areas for improvement in line with the report’s recommendations including the following.

Organisational structure

The Boards of Aurora Energy and Delta had earlier reviewed the organisational structure that was set up in 1998 and recommended to its shareholder, Dunedin City Holdings, that the electricity network asset management and service provision functions be separated.

The shareholder has today confirmed it will implement separate governance teams for the two companies and we will work through the transition from the current to new organisational arrangements including staff consultation and consideration of the financial and regulatory implications.

Board changes

While the future company structure is determined, current director Steve Thompson has been appointed Chair of both Aurora Energy and Delta Utility Services and Dunedin City Holdings director Brian Wood has joined the Boards to assist transition. Chair Dr Ian Parton has stepped down from the Boards and director Stuart McLauchlan is retiring by rotation, having served three terms.

Long term planning

Aurora Energy’s Asset Management Plan is revised each year and provides the asset planning and investment framework over a 10 year horizon. As part of the next asset management planning round, Aurora Energy will also prepare a 30-year view that includes expected asset condition and replacement over the longer timeframe. The long run model will provide the shareholder and owner a clearer understanding of the electricity network’s forward risk and expenditure profile.

Asset management planning

The report supports further increases in the rate and investment in asset renewal and maintenance to reduce risk faster and improvements to asset condition information.

Significant attention has been paid to improving Aurora Energy’s asset management capability and approach in the last five years. Most recently, its service provider Delta began consultation in July 2016 to reorganise its asset management and service functions to meet the challenges of the major uplift in programmed work and investment on the network. These changes, including new role functions and external recruitment, plus changes to the company structure all support further improvement in our asset management capability for the network.

Aurora Energy currently uses geographic information systems to record and manage its network assets. We recently completed selection of a dedicated asset management system for the network and will implement the new solution as planned.

Asset class information is ongoing work that takes time to complete on a large and complex network. Aurora Energy will continue to increase investment in asset condition monitoring and assessment across all critical asset classes to enhance risk management and asset knowledge for planning and maintenance programmes.

Health & safety

The report found Aurora Energy’s service provider Delta had an open health and safety culture and that the majority of staff interviewed feel comfortable raising issues. The company’s whistle blower policy, introduced in December 2011, was also found to be fit for purpose. Delta has recently reminded staff of the policy and the various ways to report concerns, including, but not limited to, the whistle blower policy. We will take further steps to communicate the policy and to ensure staff understand that the protected disclosure regime applies to any concerns they may have.

Further investment and improvement will also be made to the company’s online safety information system (Q-Pulse) introduced in 2014.

We will also take up the recommendation for greater transparency and public engagement on the progress we’re making to upgrade our assets.