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Our binding decisions

Supply upgrade / information provision (D/98/125)

Case number: D/98/125
Date of Decision: 30 June 1999
Decision accepted by the customer: Yes

The customer contacted EIOV and stated that his electricity company had refused to reimburse him for part of the cost of installation of a high voltage electricity extension line which he had financed to provide supply to his woolshed.

The customer stated that in September 1995 he paid $16,290 for a 780-metre extension of a power line to his woolshed. He stated that he had understood from discussions with company representatives during the planning stage of the works that if other customers took supply from this line within ten years and six months he would be entitled to reimbursement of part of the cost of the installation.

In August 1998, his neighbour applied for connection to supply. The closest point of supply for this connection was from the line to the customer's woolshed. The customer subsequently contacted his supplier to inquire about reimbursement of part of the cost of the line, and was informed by company representatives that cost-sharing did not apply in this case. His supplier advised that he would be entitled to reimbursement of part of the cost of the installation of this line if a new customer took a low voltage connection from the line within ten years and six months from the date of the installation. However, as the new customer's connection, in this case, was a high voltage connection, no rebate was applicable. The supplier referred the customer to the Supply Contract signed prior to the commencement of the work.

EIOV opened an investigation and received from the company and the customer documentation and other information relating to the extension line financed by the customer. The company advised that neither of the company representatives involved in discussions with the customer could recall having made any unconditional statement regarding cost-sharing, and given their experience with supply extensions and dealing with customers, it was most unlikely that such an unconditional statement was made. The customer stated that at no time during the discussions prior to signing the contract was he advised of any conditions which applied to the cost-sharing arrangement, except that a new customer had to take supply within ten years and six months. He stated that he was not advised cost-sharing would not apply to a high voltage connection taken from his line.

The customer advised that he had considered several alternatives for providing supply to his woolshed, including the purchase of generators and the construction of a dam and mini-hydro electric scheme. He had made his decision to proceed with financing the extension line on the belief that this would be the most economic alternative, given his awareness that a number of his neighbours were either currently planning, or had the possibility of, development of their properties, subject to the availability of supply. He had an expectation of a number of new connections within the following five to ten years. It was on this basis, and in the belief that any connection, either high or low voltage, would make him eligible for cost-sharing, that he proceeded with the extension line. He stated that, although the initial cost was high, reimbursement from his supplier following his neighbour's connection to supply, and the connection of at least one other neighbour in the short term would bring the outlay down to a more acceptable level.

EIOV obtained legal advice on the supply contract, and in particular on the supplier's reliance on the supply contract in maintaining its position on cost-sharing in this case. This advice indicated:

  • Clause 29 of the Group Extension Contract stipulates that the supplier may pay to the customer a share of the costs of the extension work should a further customer connect to the extension within ten years and six months. Note 4 of the Group Extension Contract stipulates that a contribution to the original capital cost will be made by the company only where a further connection is made at low voltage. The Notes are preceded however by a statement:
  • "These are for information only and do not form part of this contract."

The law provides that the construction least favourable to the party putting forward the contract should be adopted against it. The electricity company disputed the applicability of this principle.

The case proceeded to binding decision by the Ombudsman. The Ombudsman found that the onus was on the company to provide the customer with a clear explanation in relation to the obligations of both parties. This explanation would include the circumstances in which the customer would receive reimbursement of part of his costs and the factors that may prevent him receiving any reimbursement, such explanation being provided prior to the customer entering into an undertaking of this dimension. While it appears that the customer relied upon his understanding of his supplier's verbal representations, and notwithstanding that his supplier had a different view of those representations, the contract which was intended to formalise the arrangements was lacking in clarity on the matter of cost-sharing.

The Ombudsman found that, as a result of the installation of the extension line financed by the customer, the supplier had the expectation of at least two and possibly up to fourteen new customers. In the short term, the electricity company had benefited by connecting the customer's neighbour to the high voltage extension, notwithstanding that the electricity company did not fund construction of that extension. On the basis that its contract did not fully articulate, it is unfair for the electricity company to benefit by way of the neighbour's business without passing some of that benefit on to the customer.

Accordingly, the Ombudsman determined that the electricity company pay to the customer the sum of $5,080. This sum was derived from the difference between the cost to the customer of the extension line and electricity usage and the amount the customer would have paid for generators, including running costs of the machines over a ten year and six month period, minus $400, deducted on the basis that the customer accepted a certain risk of loss by not seeking legal advice. The $400 represented the probable fee charged by a solicitor to peruse and provide advice on a contract.