Consultation paper on transmission pricing proposal
We have released the Transmission Pricing Methodology (TPM) second issues paper and proposal.
In the paper, we propose to alter the way transmission charges are shared among transmission customers so that charges are linked to the transmission services delivered and the costs involved. This will substantially improve efficiency for the long-term benefit of consumers.
We propose that two of the key charges in the current TPM be replaced with two new charges which are designed to provide far better price signals. These new charges are an area-of-benefit charge and a residual charge.
The current TPM is complex and sends the wrong signals to transmission users. It encourages wasteful use of the transmission grid, and investment in transmission and generation assets that is not in the best interests of electricity consumers and the New Zealand economy. The economic cost to New Zealand exceeds $200 million and if no change is made, in the future consumers could pay hundreds of millions of dollars more for electricity than necessary.
The consultation paper seeks submissions from interested parties.
Consultation paper on distributed generation pricing principles
We have released a consultation paper on our review of the distributed generation pricing principles (DGPPs). The changes proposed in the paper will improve efficiency and competition for the long-term benefit of consumers.
In the paper, we propose to remove the DGPPs from the Electricity Industry Participation Code 2010 (Code). We propose that avoided cost of transmission (ACOT) payments should be made to distributed generators only when that provides benefits to consumers by reducing transmission costs.
We also suggest that distributors should set network charges for distributed generation using the same pricing principles they use for setting charges for other customers.
Under the current approach to ACOT, distributed generators are paid to operate to avoid transmission charges rather than to defer or reduce transmission investments and costs. This just leads to higher transmission charges on other distributors and their consumers, which is a ‘pass the parcel’ outcome that’s of no benefit to consumers overall.
We are proposing that Transpower reach individual agreements with distributed generators about the terms for ACOT payments if Transpower determines that a distributed generator reduces Transpower’s costs. Through their trial demand response regime, Transpower is making individual agreements with consumers to reduce demand or start up their own generation when called upon. Our proposal would put distributed generation on the same footing.
We consider that our proposal will not materially affect greenhouse gas emissions because 95% of consents for new electricity generation are for renewable sources of generation. Recently, about 80% of New Zealand’s electricity supply has been from renewable sources, and the same proportion has occurred for distributed generation.
We are confident that our proposed changes will not adversely affect the reliability of the electricity system.
The consultation paper seeks submissions on these issues from interested parties.
View livestream briefing on the TPM and DGPP consultation papers
We are holding an initial stakeholder briefing from 10am to 11.30am today, following the release of the TPM and DGPP consultation papers.
We intend to livestream the briefing and then make this available in video format from our website.
We will also arrange one-on-one meetings with parties who request them, and hold workshops in Auckland, Wellington, Christchurch and Invercargill in late May or early June. We will notify the details of the workshops in a future issue of Market Brief.
Auckland International Airport Limited (Auckland Airport) is exempted (no. 240) from complying with the obligation in clause 10.25(1)(b) of the Code to ensure all electricity conveyed is quantified in accordance with the Code. This exemption applies only to Auckland Airport’s network supply point AAL0331AIALEN.
The Gazette notice, including reasons for the approval, is available on our website.
We remind participants that it is their responsibility to register with the Authority as a participant, and ensure the information they provide for registration is up-to-date.
Please check that all information is up-to-date, including contact names and any details that may have changed.
Failure to register or to update information is an offence under section 31 of the Electricity Industry Act 2010.
The participant register is available on our website.
We have published a consultation paper outlining six operational issues with the current scarcity pricing regime. The paper includes proposed Code amendments to resolve these issues.
