As electricity travels through power lines, a proportion of energy is lost as heat, due to the resistance in the lines. The losses are higher, the greater the distance the electricity travels and the lower the voltages of the line.
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Importance of distribution losses
Loss factors directly impact the cost of electricity faced by all consumers.
Distributors need to calculate and allocate for losses arising on their networks, so that the reconciliation process can account for these losses.
The reconciliation loss factor is used in:
- the reconciliation process by the reconciliation manager to allocate volumes of electricity at grid exit points (GXPs) to participants (both buyers and sellers from/to the clearing manager)
- the retail pricing process by retailers for the sale of electricity to consumers
- in the case of GXP charging networks, the calculation of network charges.
Distributors are required by the Code (clause 7(1)(e) of Schedule 11.1) to assign every point of connection a loss category code and associated loss factors and to populate this information in the Electricity registry.
See our guidelines to understand the calculation methodology and processes surrounding distribution loss factors.
Types of losses
There are four types of losses within a network:
- Technical losses
The difference between energy actually injected into a network and energy actually delivered to points of connection. These losses can result from the inevitable physical loss of electricity in networks.
- Non-technical losses
The difference between the volume of energy actually conveyed at points of connection and the volume of energy reported as conveyed at the same points of connection. These losses can result from theft, metering errors and data handling errors.
- Reconciliation losses
The difference between reported energy injected into a network and the reported energy extracted from the network. Reconciliation loss is the combination of technical and non-technical loss.
- Unaccounted for electricity
This is calculated from the difference between reported energy injected into a network and the reported energy extracted from the network after it has been adjusted for losses.
Electricity sector legislation is complex and technical. See our guidance on industry‑specific best practice.