The secret payout for city gas outage

LANE NICHOLS

A $3 million damages claim against Wellington City Council for a mass gas outage that crippled the central city has been quietly settled out of court.

But officials are refusing to reveal details of the settlement or say how much was paid out to prevent the case going to trial.

Powerco sued the council in 2007 for negligence after a burst water main flooded its Wellington gas network in 2006. The gas outage crippled parts of the central city for weeks and caused millions of dollars in lost business.

Hotels went without hot water, bars could not wash glasses, and restaurants were forced to barbecue food or shut down. Those with insurance took a hit but survived. However, some smaller ventures without cover were forced to close permanently.

Despite calls for compensation, no money was paid out by the council to downtown businesses affected by the burst water main.

As Powerco contractors dug dozens of holes around central Wellington to drain gas pipes and restore the network, the council initially claimed ownership of the water main before back-tracking as the threat of financial liability for the crisis loomed.

When Powerco filed proceedings in the High Court to recoup costs, it alleged the failed pipe was obsolete and not recorded on council planning records from the 1960s onwards.

The council vowed it would defend the case, claiming the pipe was a former private connection for firefighting.

But The Dominion Post can reveal the case was quietly settled by the parties' insurance companies in 2009 without fanfare. Scant details of the confidential settlement have only just emerged.

Though the council is elected and funded by ratepayers, it is refusing to say how much the settlement cost, revealing only that it did not involve direct ratepayer funds.

"No compo was paid to any local businesses," a council spokesman said. "There was, however, a financial arrangement reached between Powerco's insurers and the council's insurers."

Another council spokesman said he was unable to provide details of the settlement because of a secrecy clause.

"I cannot say anything. There was a confidential settlement. We're legally bound."

Powerco acting general manager gas Don Elers said the company met council representatives and their insurers in 2009 and came to a "mutually acceptable agreement". He would not release details.

"Powerco's goal was to ensure we maintained our positive working relationship with the Wellington City Council," he said.

"We both serve the good people of Wellington and it's important that we work well together for the benefit of our mutual customers so that they can continue to enjoy the great benefits of connecting to natural gas."

Restaurant Association president Mike Egan said the outage was devastating for the city's hospitality industry. Small businesses did not have the money or time to challenge the council in court for compensation so had simply put the saga behind them and moved on.

"Powerco can do it because it's a big boy, and good on them. It's good the council got spanked by this because deferred maintenance is a problem, and that was an 80-year-old pipe."

The water main failure and resulting gas outage highlighted the fact that "maybe they've been a bit remiss", Mr Egan said. "I'm sure they've learnt their lesson."

- © Fairfax NZ News