Better transmission pricing supports our low-emissions future

Following the conclusion of a significant structural reform and consultation process, the Electricity Authority has decided to adopt a new Transmission Pricing Methodology (TPM).

The TPM determines how the grid owner, Transpower, recovers the $800 million annual cost of running the national transmission grid from its transmission customers. The grid transports electricity across 12,000 kilometres of transmission lines from where the electricity is generated to industrial customers, and through distributors’ networks to our homes and workplaces.

Rob Bernau, Director of Network Pricing, says getting transmission pricing right is critical and the reforms will make it easier for the electricity sector to support New Zealand’s transition to a low-emissions future.

“The Authority believes households and businesses should pay for the service they receive according to how much they are expected to benefit from it, so the new TPM is centred around a benefit-based charge.

“The old approach was not fit for purpose, smearing transmission costs across the country and encouraging industrial consumers and regional distributors to invest in their own batteries or generation (including diesel generation) simply to avoid paying transmission charges. This meant other New Zealanders had to pay more.

“Another key change in the new TPM is to address the current ‘first mover disadvantage’. Under the new TPM, the transmission customer who first funds the capital cost of a connection asset (the first mover) only pays for what they need – not any extra capacity that Transpower decides to build – and so is on a level playing field with any second mover who connects later.

“The new TPM will encourage investment in renewable generation and electrification of industrial processes – the right investments in the right place and at the right time.

“This will ultimately bring forward investment in new, cheaper renewable generation. The TPM will also help future-proof the system to meet increasing demand and use of distributed energy resources, like EVs, batteries and smart appliances.

“The benefits of the new TPM are significant - over time, it will reduce the cost of electricity at peak times and lead to lower prices overall.

“The new TPM reflects years of review, analysis and valuable input from across the sector. The Authority is confident the new TPM will provide stable and robust transmission pricing, support New Zealand’s transition to low emissions energy, and deliver the best outcomes for consumers,” says Mr Bernau.

Transpower will now implement the new TPM in prices from April 2023.

Read the decision paper.