Default distributor agreement
Default Distributor Agreement decision
16 Jun 2020
The Authority has released the Default Distributor Agreement (DDA) decision paper. We are implementing a series of default terms which make it easier for distributors and traders to enter into contracts for distribution services, data exchange and dividend payments.
The decision paper amends the Code to introduce default terms written by the Authority. These default terms include:
- the DDA Template which provides retailers access to local distribution networks on more reasonable terms.
- the Data Template which allows distributors to access consumption data on reasonable terms.
- two default agreements for a distributor’s shareholder trust to pay dividends to beneficiaries on the network (Income Payments).
The Code amendment will come into effect on 20 July 2020. The Data Template and Default terms for Income Payments will be available for use immediately. We expect the first five distributors will have their DDAs available for use before 17 December 2020. The remaining distributors will have their DDAs available for use before 15 February 2021.
We consider the default terms will streamline negotiations for network access and data exchanges between distributors and traders, and deliver long-term benefits for industry and consumers.
The default terms are being introduced to address long-standing contract negotiation problems between distributors and traders, which industry have been unable to resolve to date.
Last updated: 16th June 2020
Last updated: 16th June 2020
Last updated: 16th June 2020
Questions and Answers
20 Sep 2019
Frequently asked questions about the Authority's Default Distributor Agreement (DDA) proposal.
The Authority welcomes questions on the Default Distributor Agreement (DDA) proposal.
We’re keen to ensure submitters are well informed about the proposal, including by publishing frequently asked questions we receive, and our responses to those questions. We will update our website regularly with new questions and answers.
You can also download our four-page Infomation for industry participants PDF to get an overview of the proposal.
1. Why is the Authority proposing to regulate distributor agreements?
There are several reasons why the Authority is proposing to regulate distributor agreements.
We want to streamline access to networks and reduce the cost of negotiating agreements
industry participants have been telling us for some time that there are problems with negotiating contracts for distribution services, including lengthy delays; the voluntary MUoSA did not resolve this because it wasn’t used enough by participants.
Participants have alleged distributors are inhibiting access to local distribution networks in New Zealand and therefore limiting competition.
We are concerned that competition between retailers and distributors for contestable services may be being inhibited because of delays or one-sided distributor agreements.
Section 42(2)(f) of the Code requires that we promote more standardization in distribution agreements.
2. Why does the default only apply to distributors and retailers?
We are considering DDA-style arrangements for more and different types of network users. The terms in the proposed DDA are tailor-made for the distributor-retailer relationship; specifically, the interposed relationship when a retailer contracts with a distributor on behalf of the consumer. But, if industry needs it, we can consider what terms may be suitable for a DDA-style agreement for other network users.
3. What would happen to my existing Use-of-System Agreement (UoSA)?
A distributor and a retailer who both want to keep their existing UoSA can do so. They can agree to an ‘alternative’ agreement. This would mean transferring their existing UoSA terms into the new alternative agreement.
4. Will the default agreement be permanent?
The default agreement is designed to be flexible. The proposal would allow industry participants to mutually agree to terminate the default agreement and replace it with an alternative agreement at any time.
5. What if we want to negotiate a bespoke agreement?
The proposal allows you to negotiate an alternative agreement. Participants could negotiate and agree to contract under an alternative agreement rather than the default agreement.
6. What if a distributor/retailer refuses to engage in a meaningful negotiation with me?
You can opt for default terms to apply at any time during the negotiation period.
The default distributor agreement (DDA) would act as a binding distributor agreement 5 business days after one or both parties give notice to use it. The DDA would streamline access to the distribution network until an alternative agreement (if desired) is negotiated.
The default data template would also streamline access to historical consumption data, until an alternative (if desired) is negotiated.
7. Would all of Part 12A apply to me?
No. Specific schedules in Part 12A would apply depending on your and the other party’s participant type. Clause 12A.2 of the amended Code would help you determine which schedules apply. This modular design would mean that specific schedules in the Code can be updated without affecting all industry participants. It would also mean we could add extra schedules in the future to streamline access to services you want.
8. What if we both want to include some extra terms in our agreement?
You would be able to include extra terms in your agreement. The proposal allows for additional services to be appended to your contract by mutual agreement. We would also provide some default terms for additional services which one or both parties could opt to use, and therefore must apply. These default terms for additional services would be provided because we recognize that some additional services must apply in order to fulfil the distribution service.
9. Is the DDA an arrangement per distribution network, or a national contract?
There will be one DDA per distribution network, but the core terms of each DDA will be nationally consistent. Each distributor can write operational terms in their DDA which reflect how they undertake particular business protocols on their network.
10. Who is responsible for supplying copies of the agreement to the Authority?
Traders who enter into a distributor agreement must provide a copy to the Authority.
11. Why do we need a time limit on contract negotiations?
The 20 business day negotiation period ensures that there is certainty. If an agreement cannot be reached during the negotiation period, the DDA will apply. Both parties can agree to a different, longer negotiation period if desired.
12. If a DDA or a Default Data Template is terminated, can we opt back in?
If a participant meets all required obligations as set out in the Code, they are able to opt back-in. We invite participants to provide submissions on this point.
13. Do the Authority’s consultation guidelines apply to distributors when they consult with retailers on their DDA?
We have included the obligation for distributors to consult, but have not prescribed a consultation method.
14. Side agreements - what are these?
The suggested amendments to Part 12A of the Code would allow for participants to enter into any other agreement or arrangement, provided that the terms of the other agreement or arrangement —
(a) do not address the subject-matter of the terms of a DDA; and
(b) do not relate to the service or services described in a DDA; and
(c) are not inconsistent with, and do not modify the effect of, any DDA or alternative agreement.
1. The proposal mentions core, operational, recorded, collateral and other terms. What are the differences?
We propose five different types of term:
Standardized terms written by the Authority and occurring in every default agreement.
Protocols written by a distributor to reflect local practices.
Terms that meet the particular requirements of the Commerce Act 1986; including these terms would provide for an all-encompassing agreement, but inclusion is not mandatory.
Further terms that a distributor may propose to include in their default agreement; however, a retailer could opt to reject the inclusion of these terms.
Any other term the distributor and the retailer agree to include in their alternative agreement.
2. Who will have the right to control load on the network?
The default agreement would be structured to allow whoever has obtained the right to control load to do so. The only exemption is in the case of a grid emergency event (as defined in Part 1 of the Code).
3. There are some additional services related to the distribution network that are not covered in the default agreement proposal. How would we continue to provide or receive them under the proposal?
The proposal allows both parties to mutually agree to append additional services to their agreement. These can be default additional service terms provided by the Authority, or bespoke additional services negotiated by both parties.
4. What if I want to have a side agreement with other industry participants or third-party companies outside the distributor-retailer relationship?
The proposal would allow side agreements to run alongside the main default or alternative agreement. This would include agreements with third parties. However, the side agreement may not override any terms in the main distributor agreement.
5. Will the audit provision in the data template create a lot of expense if multiple retailers require an audit?
The audit provisions in the data template are there to give retailers assurance that data collected under the data template will not be misused. The cost of an audit falls on the retailer if the distributor is found to be complying with the data template. Participants are free to use alternative terms for data exchange by mutual agreement.
6. Will the Authority include a Most Favoured Nation clause?
We have not included Most Favoured Nation clauses which requires each distributor to offer any term it negotiates with one trader to all traders. This is because even-handed treatment is already achieved through three mechanisms:
(a) All participants have access to the DDA.
(b) The DDA should promote more standardisation of distribution services, as it serves as a starting point for negotiation.
(c) Any amendment to the operational terms of a distributor's DDA apply to existing distributor agreements that include those terms, which are deemed to be amended accordingly.
7. What would trigger Recorded Terms to be amended at a later date?
Recorded terms are not subject to the Code. However, future changes in the interpretation of the Commerce Act 1986 may make it necessary to amend Recorded terms. Subclauses 22.1(c) and (d) of the DDA template would allow participants to amend the default agreement if the:
(a) change is required by law, or
(b) subject matter of the change is regulated by the Commerce Commission and the change is allowed as a result of a determination of the Commerce Commission.
8. Can retailers recover costs of meeting obligations in Appendices A, B and C of the Code.
We have included provisions which allow retailers to recover the reasonable cost of providing information under Schedule 12A.1 Appendices A, B and C. These schedules relate to dividend distribution and the data template. If requested by the distributor, a retailer must give a quote for supplying the information before supplying the information.
9. Have you considered that some distributors charge for distribution services in advance? Does the proposal affect this?
The DDA template covers billing information as both core and operational terms.
Clause 9 of the DDA template includes core terms which relate to some aspects of billing information and payment, such as: calculating tax, the issuing of tax invoices, due date of payment, and dispute resolution processes.
Schedule 2 of the DDA template is an operational term, which allows distributors to accommodate some business practices on their network. Examples include: data formats, procedures and timeframes for providing information.
10. Do retailers need to agree to adopt the default additional services, eg, trust dividend payments
Schedule 12A.1 Appendices A and B will apply if the distributor opts in to them. See Schedule 12A.1 clause 7(2) for clarification.
11. How do we enter into, update and amend agreements?
Part 12A.1 clause 4 onwards describes the process of entering into distributor agreements generally. For the DDA, the trader gives notice to trade, the distributor must offer their DDA, and one or both parties can opt for the DDA to apply. Alternatively, both parties can negotiate and mutually agree to contract under an alternative agreement. The Code provides a 20 business day window for negotiating agreements, but this period can be amended by mutual agreement.
Both parties can agree to update or amend their default agreement subject to clause 22 of the DDA Template. Note, any amendment to the default will convert it into an alternative agreement.
12. Within the DDA template, how do we identify the different types of terms?
There are five levels of terms:
(a) Core terms will be included in all default agreements and should be unchanged.
(b) Recorded terms will be identified as recorded terms and will be included inside a self-contained box. We have highlighted these with a grey box.
(c) Operational terms can only occur in the schedules of the default agreement (Schedule 1 to 8). We have highlighted these with a green box.
(d) Collateral terms must be identified by the distributor, and the retailer has the option to reject these.
(e) Any other terms will be mutually agreed by the retailer and distributor.
13. In the DDA template, what does the reference ‘distributors agent, or other third party’ mean?
We use the generic definition of Distributor’s or Trader’s equipment when talking about Metering Equipment in the DDA. We do so to accommodate the variety of Metering Equipment arrangements that exist today and may exist in the future. In defining Distributor or Trader Equipment, the reference to ‘agent, and or other third party’ can mean an agent, or any other third party with whom the Distributor or Trader has contracted to install or maintain Metering Equipment on a Customer’s Premises.
14. How would existing parties responsible for meter certification and compliance know when additional metering equipment has been installed by another party?
There is no obligation to give notice of installing Additional Metering Equipment under Clause 12.11 of the DDA template to either party. However, the additional metering equipment must:
(a) not interfere with any other equipment owned or used by the other party; and
(b) be installed and maintained in accordance with Good Electricity industry Practice.
If installing or maintaining additional Metering Equipment causes damage to or invalidates existing equipment certifications, Clause 12.12 of the DDA template would require the party responsible for installing the additional equipment to meet costs to correct the damage and re-certify.
1. From time to time I need to pay dividends to the beneficiaries on my network. How could I do this under the proposal?
We propose including two different protocols in Part 12A of the Code to help industry participants pay dividends to beneficiaries. These are 12A.1 Appendix A and 12A.1 Appendix B. These would provide for two different ways for distributors to pay dividends: via the retailer or directly to the beneficiary.
2. I need access to consumption data for network management and/or developing efficient distribution prices. How could I get access to this data under the proposal?
The amended Code (Part 12A.1 Appendix C) would include a data template that gives you access to consumer’s historical consumption data. There would be strict terms on how this data could be used and the retailer would have the right to audit data storage and use.
3. What if I do not like the terms in the proposed data template? Do I have to use it to access data?
The default data template is a backstop for access to data. You can negotiate alternative terms with the retailer if you are unhappy with the terms in the data template. This could be as simple as modifying one or more terms in the data template, negotiating an entirely bespoke data template, or something in between.
4. What if the retailer keeps breaching our default agreement? What could I do?
We have included breach and termination clauses for the default agreement. The proposed Part 12A of the Code (Clauses 11 and 14) deals with agreement breaches. At a high level, breaches must be remedied by the retailer. We have included some dispute resolution protocols in the proposal to help remedy the breach. If a retailer does not remedy the breach, it could ultimately lead to the distributor terminating the default agreement. The proposed Clause 15 deals with terminating a default agreement.
5. What if I change my practices or there are changes in legislation? The DDA will lock-in an outdated distribution model.
We have designed the default agreement to evolve with changing business models. Distributors can update their operational terms to reflect changing practices. They can also update recorded terms based on changing legislation. Otherwise, both distributors and retailers can agree to replace their default agreement with an alternative agreement better suited to their needs.
1. What if a distributor continues to refuse access to their network, even when we want to use their default agreement?
Under the proposal, if the required 5 business days period has elapsed since you gave notice to trade under the DDA, then the distributor would be in breach of the Code.
2. What if the distributor’s operational terms in their default agreement are unfair?
We have included a dispute resolution process for operational terms. Retailers would have the right to dispute the distributor’s operational terms within the first 20 business days of the DDA becoming available on the distributor’s website. This includes submitting an appeal to the Rulings Panel to get the operational terms amended. If there is no appeal in this timeframe, the DDA can be used as the distributor agreement.
3. What if I’m using the default agreement but a distributor is asking for more than two weeks-equivalent prudential or security payment? Could they do this under the DDA proposal?
Distributors can require a security payment for a reasonable estimate of two weeks-equivalent for providing the distribution service. The distributor could ask for additional security when using the default agreement, but they would need to pay the trader an additional interest payment. Amended Code would require the distributor to pay you base interests + 15% APR interest on any additional security. The distributor and retailer can agree to alternative prudential terms.
4. What happens if the distributor adds some extra terms to their default agreement? Would I have to accept these extra terms?
These cannot be imposed without your consent. Any extra terms in the default agreement beyond core, operational and recorded terms would be called ‘Collateral terms’. The Distributor will be required to clearly identify that these collateral terms are in the agreement so that you can inspect them. The amended Code (Part 12A) would give you the right to refuse inclusion of these ‘collateral terms’ in the default agreement.
5. What if the distributor breached our default data template (Appendix C) agreement? What could I do?
We have included data breach and termination clauses for defaulting parties. The proposal would require the distributor to remedy the breach. We would also include a dispute resolution process and a protocol for the retailer to terminate the data agreement. Upon termination of the agreement, the distributor would be required to destroy the existing data it gained as a result.
Default Distributor Agreement consultation timing
21 May 2019
Following the recent Court of Appeal decision.
The Authority has made some minor changes to its proposed Default Distributor Agreement (DDA), and will be ready to release the DDA proposal for consultation in June. We are, however, conscious of the other demands on stakeholders during this period. This includes the two price-quality path consultations being released by the Commerce Commission at the end of May, and the transmission pricing consultation that we are expecting to release at the end of June.
We will be discussing this with the Electricity Network Association (ENA) and the Electricity Retailers’ Association (ERANZ) to better understand whether their members would prefer us to consult on the proposed DDA as soon as possible, or to delay consultation.
We welcome any direct feedback you would like to provide to us on this question. Please email your feedback to email@example.com by 5pm on Friday, 31 May.
Final Court of Appeal decision on the Default Distributor Agreement
9 Apr 2019
Appeal Court final decision, March 2019
On 13 March 2019, the Court of Appeal released its second decision on the Authority’s right to introduce a Default Distributor Agreement (DDA). The decision allows us to proceed with a DDA proposal (as indicated by the first decision issued in November 2018).
The DDA is designed to promote competition and efficiency in the electricity industry by achieving more standardisation of contracts for distribution services.
The Court of Appeal’s decision re-confirmed the Authority has power to regulate distributors’ contracts. This includes powers to prescribe a particular contractual structure; for example, the DDA template. We can also prescribe specific terms to be located within that structure and some types of mandatory contractual terms; for example, prescribing core terms in the DDA. The ability to prescribe terms helps the Authority achieve more standardisation of distributor agreements.
The Court has said the Authority can prohibit some terms in distributor agreements. This will depend on an analysis of legitimacy in each particular case. However, two clauses from the 2016 DDA proposal that would ban distributors from including other terms in contracts would be unlawful. We are currently analysing the prohibition of specific terms and conditions in the DDA template.
The Court stated we can regulate quality issues that fall outside the purposes of the Commerce Act 1986. The limitation is that we may not regulate or mandate quality standards as that term is used in Part 4 of the Commerce Act. The Court of Appeal did not define what these quality standards are. We have already addressed this concern with a ‘recorded terms’ approach; that is, identifying terms that may fall within the scope of other regulatory agencies.
In January, we released the draft DDA material (as at August 2018) for information only. We will continue developing the DDA proposal in line with our statutory objective and expect to put out a consultation paper in mid 2019.
Updated drafts of the Default Distributor Agreement (DDA) material
15 Jan 2019
The Authority has published updated drafts of the Default Distributor Agreement (DDA) material, for the information of interested parties.
The Court of Appeal has requested additional submissions from the parties involved in the case before it can make a final decision on all aspects of Vector’s claim that the Authority does not have the power to introduce a DDA. As part of our submission, we will provide the draft proposed DDA template and amendments to Part 12A.
So that all interested parties have access to the same information, we have published the draft DDA template, draft Part 12A, and also the draft DDA consultation paper on our website. We are not consulting on these documents at present; they were provided for information only. We intend to continue developing the DDA proposal consistent with our statutory objective and will consult on a further version in the near future, once we have the final decision of the Court of Appeal.
Compared with the previous DDA proposal released for consultation in January 2016, the main changes relate to the introduction of a third category of terms in the DDA which we have called ‘recorded terms’. Recorded terms are ones required by the Code, but distributors and retailers are free to negotiate these terms as they see fit. In the revised draft proposal, some terms that were previously given as ‘core terms’ have been re-categorised as recorded terms. Recorded terms are provisions which we believe are arguably within the scope of the Commerce Commission’s authority to regulate.
Court of Appeal partial decision - update
18 Dec 2018
Appeal Court update
On 30 November 2018, the Court of Appeal released a partial decision on the Authority’s right to introduce a Default Distributor Agreement (DDA). The Court of Appeal’s decision allows us to proceed with our DDA proposal.
The Court of Appeal’s decision confirmed that the Code may:
- require a particular contractual structure and specific terms to be located particularly within that structure
- prescribe some types of mandatory contractual terms
- prohibit some terms in particular circumstances.
The DDA is designed to promote competition and efficiency in the electricity industry by achieving more standardisation of contracts for distribution services.
We’re still waiting for a final decision as to whether the DDA falls within the jurisdiction of the Electricity Authority or the Commerce Commission. We will continue developing the DDA proposal in line with our statutory objective.
Court of Appeal judgment Vector v EA
4 Dec 2018
Court of Appeal request additional submissions
On Friday, 30 November the Court of Appeal issued its decision regarding Vector’s claim the Authority does not have the power to introduce a Default Distribution Agreement (DDA).
The Court has requested additional submissions before it can make a final decision on all aspects of the claim.
High Court declines Vector application for declaratory judgment
31 Jul 2017
On Monday 31 July 2017 the High Court issued its decision rejecting Vector’s arguments that the Authority does not have power to introduce a default distribution agreement. The Court found the Authority has a broad power to amend the Code, reflecting its central role as market regulator.
Summary of submissions: Default agreement for distribution services
20 Dec 2016
The Authority is continuing to develop a code amendment proposal to introduce a default distribution agreement. In 2017 a second consultation will be released on the proposed DDA, based on the submissions received.
We consider the DDA proposal should enhance retail competition and, importantly, facilitate development and uptake of innovative technology and business models by the electricity industry, which will benefit consumers.
The summary of submissions below captures the responses to the first consultation (released on 26 January 2016) and further consultation on question 3 (released on 11 October 2016).
Last updated: 20th December 2016
Response to submissions and next steps: More standardisation of use-of-system agreements
24 Feb 2015
The Authority has published its response to submissions and next steps relating to more standardisation of use-of-system agreements.
The Authority has decided to proceed with developing a Code amendment proposal for its preferred option of establishing a default UoSA, but will make a final decision to amend the Code next year. In the meantime, the Authority expects distributors and retailers to continue to negotiate UoSAs comparable to the key components of the existing MUoSA. If this occurs then amending the Code may not deliver net benefits and the Authority would reconsider its decision to amend the Code.
The Authority considers that more standardised use-of-system agreements would promote the Authority’s statutory objective by reducing transaction costs for retailers and distributors, and by improving the conditions that would lead to enhanced retail competition across more network areas in New Zealand.
More standardisation of use-of-system agreements
18 Nov 2014
The Authority has published the following documents in relation to the consultation on more standardisation of use-of-system agreements:
The Authority intends to consider submissions, its response to submissions, and the next steps for this project in February 2015.