The Authority has today released a consultation paper entitled ‘Transmission Pricing Methodology; issues and proposal’.
The consultation paper reviews the current arrangements for the Transmission Pricing Methodology (TPM), which specifies the method for Transpower to recover the costs of providing transmission grid services, and proposes a number of changes to that methodology to enhance efficiency for the long-term benefit of electricity consumers.
The Authority is proposing that the TPM should include a charge for transmission grid services that is in proportion to the private benefits that parties receive from those services. This approach is expected to bring efficiency gains by increasing market scrutiny of transmission investment proposals.
The Authority’s proposal allows this charge to automatically shift over time with changes in grid use and configuration, without the need to fundamentally review the methodology.
The Authority believes the flexibility of its proposed approach, and the explicit link to private benefits, should create a durable approach to the TPM and reduce the costs associated with ongoing lobbying and legal challenges for and against changing the TPM. It should also reduce the frequency with which the TPM needs to be reconsidered due to material changes in circumstances and provide greater regulatory certainty and efficiency benefits as a result.
The overall effect of the proposed changes to the TPM on the average household electricity bill will be a minor reduction in electricity costs relative to what they would otherwise have been.
The following supporting documents have also been released:
- a TPM overview paper, and
- questions and answers
Submissions are due on 30 November 2012, with cross submissions due on 21 December 2012