Targeted reform of distribution pricing

Consultation overview

Our distribution networks will have a crucial role to play in our transition to a low-emissions economy, and the rapid electrification of our economy. We need billions of dollars of investment to help make this change happen. Efficient distribution pricing is at the forefront of ensuring investment happens in the right place, at the right time.

To that end, the Electricity Authority released an issues paper that recommends:

• pricing that signals the cost of using the network at certain times of high demand
• pricing that does not distort the use of the network during off-peak periods
• efficient allocation of shared costs between consumer groups
• connection pricing that is both efficient and consistent
• retailer response to distribution pricing signals.

They requested feedback on the proposals included in the issues paper. Consultation closed on 30 August 2023.

Electricity Authority consultation: Targeted reform of distribution pricing(external link)

Our recommendations

Our feedback to the Electricity Authority recommends they:

• actively consider the effects of distribution pricing options on domestic and small business consumers
• investigate and consult on the case for a single comprehensive pricing methodology
• require metering equipment providers (MEPs) to reprogramme meters where possible, rather than replace them
• require retailers to use half hour data for electricity invoicing rather than the cumulative meter registers
• introduce pricing based on each consumer group’s consumption (standardisation of installation control point (ICP) referenced network pricing) as the preferred network pricing methodology
• introduce a national mechanism to ensure domestic and small business consumers pay a consistent and transparent share of target revenue, at a rate lower than is typically paid today
• adopt option 6.23(c) for target revenue to mandate specific approaches
• take a balanced approach to connection charges that favours low capital contributions for domestic and small businesses and full (or close to full) cost recovery for large users for whom the capital cost is part of a business investment decision
• mandate that retailers pass distribution pricing features through retail pricing, without disadvantaging consumers who cannot shift their usage
• include consideration of wider issues when developing options for distribution pricing regulatory options, including:
  • consumer generation
  • intermittent generation
  • data access
  • cost to change meters
  • multiple trading relationships, and
  • consumer education.