Aurora Energy faces court action after breaching its reliability standards for two years running.
The company, which operates the electricity networks in Dunedin, Queenstown and Central Otago, under-invested in asset maintenance and renewal, resulting in the deterioration of many of its poles, cables and transformers, the Commerce Commission said.
"The commission considers that this led to an increased level of power outages and therefore significantly contributed to Aurora's breaches of the quality standards," the regulator said in a statement. It has now filed proceedings with the High Court.
Aurora faces a maximum penalty of up to $5 million on each of the breaches for the 2016 and 2017 years. The commission noted that Aurora has also breached its performance standards for the year to the end of March.
Aurora, owned by Dunedin City Council, last year restructured its business, established a new board and brought in new management after a review by Deloitte found the firm had been underspending on maintenance for decades. The review specifically faulted the structure of the business, in which council-owned Delta Utilities – Aurora's maintenance contractor - shared common management and directors with Aurora and Dunedin City Holdings.