Distribution Pricing

The conference was recorded and video of the proceedings is available below. For ease of viewing, the video has been split by session.

The Authority consulted on the “Implications of evolving technologies for pricing of distribution services’ in November 2015. Submissions indicated there is widespread agreement among stakeholders that a move towards more service-based and cost-reflective distribution pricing is needed to promote the long term benefit of consumers.

The Authority’s view is that this process is best led by industry particularly as each distribution business faces a unique set of circumstances. Distributors are best placed to account for their distribution services and the pricing of those services as they transition to more service-based and cost-reflective pricing arrangements. The conference was an opportunity to explore in more detail the issues raised in submissions on the November 2015 consultation paper.

In his concluding remarks to the conference, Dr Brent Layton, the Chair of the Authority observed that:

• there is strong consensus that change to distribution pricing is required. The reasons why change is required are largely outlined in the Authority’s 2015 consultation paper, but this continue to be refined
• there is also strong consensus on the issue of retailer pass-through of distribution price structures. Retailers are responsible for determining how the costs of distribution services are passed on to their customers. Retailers are the customer of the distributor. The competitive retail market provides incentives on retailers to ensure efficient pass-through
• there remains divided views around the strength of incentives to change. From the Authority’s perspective we are looking for the outcomes that would be expected in a workably competitive market
• The Authority has not formalised its view on what success looks like. The Authority will continue to facilitate industry-led adoption of efficient distribution price structures.

This workshop had the following objectives:

1. understanding retailers' concerns as to the aspects of distribution pricing that can be a barrier to retail competition;
2. identifying what aspects of distribution pricing may be relatively easily standardised, including confirming common terminology and definitions for distribution access and pricing, as well as the basis for a common tariff format across distributors (including standardisation of customer categories);
3. seeking feedback from stakeholders on revised draft pricing principles and methodological requirements; and
4. discussing the merits, or otherwise, of a more or less mandatory approach.

As part of the preparation and facilitation of the workshop, the Commission approached a retailer (Mercury Energy - Nigel Williams) and a distributor (Orion - Rob Jamieson) to consider what matters could be discussed and progressed under item (2) above. Interested parties were encouraged to contact the representatives mentioned above with suggestions as to what could be standardised by mutual agreement between retailers and distributors.

The Commission factored in appropriate material provided or discussed at the workshop into its final approach.

The following presentations were made at the workshop: