Distribution Pricing

The objectives of the project were:

• an initial preference for a voluntary approach which the distributors can be evaluated and monitored against;
• distribution pricing that ensures line losses and constraints are managed;
• market entry by retailers is facilitated and competition is enhanced by standardising and simplifying tariff structures and contractual arrangements (if required);
• barriers to demand-side participation are removed (if required);
• any consequential changes in rural line charges are consistent with changes in urban line charges; and
• the impact of the low fixed charge requirement is addressed.

The last substantive work on distribution pricing was undertaken by the Pricing Approaches Working Group (PAWG). The Commission used the final PAWG paper as a starting point for the project as it received support from industry participants at the time.

In February and April 2009, the Commission engaged distributors through the Electricity Networks Association (ENA) to better understand changes in pricing since the PAWG report was published.

The Commission asked distributors to report on how their pricing methodologies may have changed since 2005, and in particular the steps they had taken in implementing part or all of the PAWG recommendations.