The 2019 distribution pricing principles

(a) Prices are to signal the economic costs of service provision, including by:

(i) being subsidy free (equal to or greater than avoidable costs, and less than or equal to standalone costs);

(ii) reflecting the impacts of network use on economic costs;

(iii) reflecting differences in network service provided to (or by) consumers; and

(iv) encouraging efficient network alternatives.

(b) Where prices that signal economic costs would under-recover target revenues, the shortfall should be made up by prices that least distort network use.

(c) Prices should be responsive to the requirements and circumstances of end users by allowing negotiation to:

(i) reflect the economic value of services; and

(ii) enable price/quality trade-offs.

(d) Development of prices should be transparent and have regard to transaction costs, consumer impacts, and uptake incentives

The Distribution Pricing Practice Note

Distribution pricing reform needs to speed up to realise consumer benefits and to facilitate an efficient transition to a low-emissions future.

Distribution pricing is important as it affects how consumers use electricity, how distributors and others manage load, when distributors invest in new (or replacement) poles and wires or network alternatives, and the timing, level and location of investments in new technology, such as distributed energy resources or demand management.

The latest version of the Distribution Pricing Practice Note is linked below (version 2.2, October 2022). This includes additional guidance on connecting distributed generation and an additional appendix in the practice note on pass-through of transmission charges. Version 2.2 builds on:

  • Version 2.1 (May 2022), which included further guidance on the permissibility of locational pricing
  • Version 2.0 (December 2021), which provided substantially more guidance to distribution networks on what good distribution pricing looks like, and gave clarity on the Authority’s expectations and timing
  • Version 1 (August 2019, now Appendix B in version 2.2).

New entry on Development page:

The Authority has published an update(external link) to the 2nd edition of the Distribution Pricing: Practice Note (version 2.2), providing additional guidance on connecting distribution generation and an additional appendix on pass-through of transmission charges. 

Read a flyer on how distribution pricing works here(external link)

Distribution pricing methodologies are required by the Electricity Distribution Information Disclosure Determination 2012(external link)

The Commerce Commission requires every distributor to publish an annual pricing methodology that describes how prices are calculated, the changes in prices, and the extent to which the pricing methodology is consistent with the distribution pricing principles. These pricing methodologies should be posted on every distributor’s website.

For more information see the Authority's web pages on distribution pricing scorecards. 

Distribution pricing work programme 2022

The Authority is committed to promoting the ongoing reform of distribution pricing. This year we will be focusing on:

  • assessing and addressing any pricing issues, such as first mover disadvantage, for new and expanded connections
  • supporting distributors with pass-through of new transmission pricing to distribution pricing, and
  • progressing analysis of possible regulatory options to drive faster reform, including listening to distributors thoughts and ideas on how reform should be progressed. 

Noting these priorities, and that the 2nd edition of the Practice Note was published in December 2021, the Authority has decided not to undertake a scorecards assessment of distributors’ 2022/23 pricing methodologies. Instead, we are giving distributors more time to understand and implement the guidance within the updated Practice Note. 

We will continue to engage with distributors this year to promote reform and expect to restart the scorecards process for their 2023/24 pricing methodologies.

The Authority will also be considering how best to work with the sector on the merits (or not) of pass-through by retailers of price signalling for both transmission and distribution pricing.