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National grid operator pinged over Kinleith shutdown

Thursday 17th October 2013

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The Electricity Rulings Panel has handed down heavy sanctions against the national grid System Operator in a case involving an unplanned outage that closed Carter Holt Harvey's Kinleith pulp and paper mill.

In one of its toughest rulings to date, the panel fined the System Operator - an independent unit embedded in the same building at the grid owner, Transpower - for "deficient" processes causing an incident of "high severity" involving a "systemic" error on Oct. 27, 2010.

The main reason for the outage was data wrongly entered in the grid management system by the System Operator some five years earlier, and which was never picked up. Instead of setting the system to react to incidents exceeding Guaranteed Maximum Load, it was set incorrectly to "Rating" values.

The panel describes how, after power was fully restored to Kinleith, "the System Operator's immediate response ... was to set the asset ratings to the Guaranteed Maximum Load levels offered by the grid owner."

It was not until the following March that the System Operator self-reported the breach of its governing regulations. Investigations, hearings and additional alleged breaches brought by CHH meant it took another two and a half year to get a ruling.

From a maximum fine possible of $20,000, the System Operator was fined $15,000. The panel also ordered compensation, understood to be just short of $500,000, to CHH for a loss of supply that had serious consequences for an industrial operation designed to run continuously and exposed to damage if shut down without warning.

The exact compensation sum is confidential, and the System Operator will only pay $200,000 because regulations prevent it making compensation payments above that level.

Had the incident occurred just a couple of months later, the maximum available fine would also have been $200,000, after the rules were toughened to further encourage fault-free management of the national grid.

While the outage itself lasted less than four hours, the Kinleith mill was out of action for more than a day.

The failure was especially poor because CHH had been alerting the grid managers for some days before the outage to unusual operating conditions, which were causing spikes in load on that part of the grid, covering the Tokoroa area.

CHH was concerned because its back-up generators were undergoing maintenance at the time.

"Despite its efforts, it suffered a break in electricity supply," the rulings panel, chaired by Welllington lawyer Peter Dengate Thrush.

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