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Our binding decisions

Claim for loss of profit and stock following supply interruption (D/98/93)

Case number: D/98/93
Date of Decision: 14 January 1999
Decision accepted by the customer: Yes

A business customer contacted EIOV, as he was dissatisfied with his electricity company's response to his claim for loss of stock and loss of profit following unplanned electricity supply interruptions. Specifically, the customer stated that he operated two ice-cream shops in a shopping centre. He calculated his losses (for both shops) at $640 for loss of stock and $900 for loss of profit.

The customer had written to his electricity company, claiming $1,540 to cover both loss of stock and loss of profit. The electricity company acknowledged that unplanned supply interruptions had affected the shopping centre, and advised that they had been caused by a fuse exploding in an indoor substation. The company denied liability for the event, however, on the basis of customer service, it offered the customer $640 to cover loss of stock. The company advised the customer that it did not reimburse for consequential loss resulting from power interruptions, including loss of profits. The customer rejected this offer, and continued to seek $1,540.

The customer was also dissatisfied with the manner in which the company had handled his claim. He stated that he phoned repeatedly, seeking a reconsideration of his claim. It took approximately four months for the company to advise the customer that it would not alter its original offer.

As part of its investigation, EIOV requested details from the company of the nature and cause of the supply interruptions. Suggestions for resolution were sought. In its response, the company provided EIOV with a copy of its internal report into the incident. This report stated that it was likely that the substation fuse had exploded as a result of a combination of a high load and high ambient temperatures, leading to an overloading of the fuse.

EIOV sought independent technical advice about the case. EIOV's technician advised that, as part of a maintenance regime, the company arguably should have detected that the transformer was running close to capacity on hot days, and accordingly should have taken corrective action prior to the incident.

EIOV also obtained legal advice regarding the case, and in particular regarding the substantiation of the customer's claim. EIOV's legal advice was that, on the basis of the information provided, the loss of profit for the two shops was $584.74 (and not $900 as sought by the customer).

During EIOV's investigation, the company increased its offer to the customer, however, the customer remained dissatisfied. The case proceeded to a Binding Decision.

In her Binding Decision, the Ombudsman took into account a number of factors, including the evidence provided by both parties, and EIOV's independent technical and legal advice. The Ombudsman also considered good industry practice and relevant law, codes and regulations.

The Ombudsman took the view that, taking into account EIOV's technical advice, the company could have prevented the power interruptions if it had adequately monitored the load prior to the event. The Ombudsman considered it fair and reasonable in all the circumstances that the company should pay the customer an amount equal to the loss of stock and loss of profit that had been substantiated.

Accordingly, the Ombudsman directed that the company pay the customer the sum of $1,224.74 (being $640 for loss of stock and $584.74 for loss of profit). Additionally, the Ombudsman directed that the company proceed with its installation of load monitoring equipment at the shopping centre, so as to improve the reliability of supply.