Transmission Pricing Methodology background
The Electricity Authority (Authority) is responsible under section 16 of the Electricity Industry Act 2010 for making and administering the Electricity Industry Participation Code 2010 (Code) which includes, as a schedule, the Transmission Pricing Methodology (TPM).
What is the transmission pricing methodology (TPM)?
Most of New Zealand’s electricity is generated a long way from where it is used. That means we need infrastructure in the form of a national transmission grid to transport electricity around the country. Transmission costs pay for the national grid and make up approximately 10 per cent of the average consumer’s total power bill.
That national grid is owned and managed by Transpower which is a regulated monopoly. Because there is no competition, the maximum cost Transpower can recover is set by the Commerce Commission and the way it allocates its charges is determined by the transmission pricing methodology (TPM). Transpower develops a TPM that is consistent with guidelines determined by the Authority.
The current TPM was established in 2007. At the time it was agreed that it would be reviewed in a couple of years.
The TPM review
The transmission pricing review project started in 2009. The then Electricity Commission had identified major problems in the existing transmission pricing methodology (TPM) and major benefits in making changes to it, particularly efficiency benefits.
The Electricity Commission became the Electricity Authority in late 2010 and began consulting on changes to the TPM in January 2012. This is a significant project in which there are many interested parties.
The Authority confirmed its ongoing commitment to the TPM review in June 2018. You can find out the current status of the project and the process to date on our Overview page.