The Authority will prepare a new cost-benefit analysis (CBA) for the review of the Transmission Pricing Methodology (TPM) guidelines.
As announced in our Market Brief on 26 April 2017, we have decided to prepare a new CBA as part of our review of the TPM guidelines. This will replace the existing CBA (prepared by Oakley Greenwood), which has been found by the Authority to contain computational flaws and weaknesses in the implementation of the methodology used to estimate costs and benefits.
We first identified calculation errors in the CBA in February 2017. At that time we asked Oakley Greenwood to fix the errors and explain their corrections to all interested parties via an online Q&A session about calculations. We also invited interested parties to submit to the Authority on any further issues arising from the Q&A session.
After further review we then found more calculation errors. We have decided the errors identified are sufficiently serious that we can no longer reasonably rely on the existing CBA as a basis for our decision-making on the TPM guidelines.
We intend to release a further consultation paper on the new CBA in late calendar year 2017 or early 2018.
Subject to the results of the new CBA and the review of submissions on the further consultation paper, we expect to publish our decision on the TPM guidelines in the first half of the 2018 calendar year.
In our view, the current TPM guidelines are not durable and recent technology developments reinforce this view. For example, expected reductions in the prices of large-scale batteries will make it profitable in the near future for parties to install batteries to manipulate demand to avoid transmission charges. We remain committed to a 2020 implementation of new TPM guidelines as we’re intending to undertake further work with Transpower to address implementation issues while obtaining the new CBA.