Review of Part 6 - Distributed generation pricing principles

Part 6 of the Code contains provisions relating to the connection of distributed generation. Schedule 6.4 sets out pricing principles to be applied for the purposes of Part 6.

The distributed generation pricing principles determine:

• the payments by distributors to distributed generators for providing network support 
• the charges payable by distributed generators to distributors for providing network services.

Charges that are payable by a distributed generator (to the distributor for providing connection services, ie connection to and use of the network) or by a distributor (to the distributed generator because it provides network support by avoiding transmission and distribution costs) must be determined in accordance with schedule 6.4 pricing principles.

Most distributors make avoided costs of transmission (ACOT) payments to distributed generators according to the transmission charges they help the distributor avoid (as a result of operation of distributed generation on their network). The ACOT working paper, prepared as part of the Transmission Pricing Methodology (TPM) review, suggests that the practice of ACOT payments may not be consistent with the efficient operation of the electricity industry for the long-term benefit of consumers. This is because a practice has arisen whereby a majority of distributors calculate their ACOT payments according to the transmission charges they avoid (as a result of the operation of distributed generation on their network) rather than on the basis of the economic costs avoided.