6 December 2016 - Removing subsidies to generators will save New Zealand consumers millions of dollars
The Electricity Authority today announced it has decided to remove subsidies for generators connected to local electricity distribution networks (called distributed generators).
This will lower prices for New Zealand electricity consumers who are currently funding the subsidies.
Once fully implemented, this change will save consumers between $25 million to $35 million per year.
The Authority has decided to amend the distributed generation pricing principles so that ‘avoided cost of transmission’ (ACOT) payments are only made when distributed generators actually reduce transmission costs to consumers and improve the reliability of supply they receive.
Chief Executive of the Electricity Authority, Carl Hansen says “the current rules mean consumers are paying for distributed generation that doesn’t reduce costs for them. Over the last eight years, the rate of ACOT payments has increased by 79%. Effectively, New Zealand consumers are subsiding the owners of distributed generation.
Perversely, the more transmission capability we have, the higher the rate of the ACOT subsidy under the current rules. Another perverse feature is that the current rules encourage distributed generation to be built in locations that increase future transmission costs rather than avoiding transmission costs.”
This change will be progressively introduced in different parts of the country from 1 April 2018 and will be fully implemented by 1 October 2019.
Following feedback from consultation the Authority has decided not to proceed with its proposal to remove a regulated price ceiling for what local electricity distributors can charge generators to connect to their networks. This issue may be revisited in the future after final decisions about how the costs of the transmission grid are allocated are made, and electricity distributors have made more progress with setting cost-reflective charges.
More information is available at http://www.ea.govt.nz/development/work-programme/pricing-cost-allocation/review-part-6-dg-pricing-principles
For more information:
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