Efficient distribution pricing is for the long-term benefit of consumers. Efficient distribution pricing provides signals that help households and businesses to consume the right amount of electricity, at the right time, and in the right place.
In 2019 the Electricity Authority published the distribution pricing principles below, to set clear expectations for efficient distribution prices.
The 2019 distribution pricing principles
(a) Prices are to signal the economic costs of service provision, including by:
(i) being subsidy free (equal to or greater than avoidable costs, and less than or equal to standalone costs);
(ii) reflecting the impacts of network use on economic costs;
(iii) reflecting differences in network service provided to (or by) consumers; and
(iv) encouraging efficient network alternatives.
(b) Where prices that signal economic costs would under-recover target revenues, the shortfall should be made up by prices that least distort network use.
(c) Prices should be responsive to the requirements and circumstances of end users by allowing negotiation to:
(i) reflect the economic value of services; and
(ii) enable price/quality trade-offs.
(d) Development of prices should be transparent and have regard to transaction costs, consumer impacts, and uptake incentives
The Authority has published a Practice Note to help distributors interpret and apply the distribution pricing principles.
Distribution pricing methodologies are required by the Electricity Distribution Information Disclosure Determination 2012
The Commerce Commission requires every distributor to publish an annual pricing methodology that describes how prices are calculated, the changes in prices, and the extent to which the pricing methodology is consistent with the distribution pricing principles. These pricing methodologies can be found on every distributor’s website.
Note: The 2010 ‘Distribution Pricing Principles and Information Disclosure Guidelines’ prepared by the Electricity Commission were withdrawn by the Electricity Authority in June 2019. Those guidelines are no longer needed given the Commerce Commission’s detailed disclosure requirements.
The Authority monitors distribution pricing
Adopting more efficient distribution prices is a priority for the industry. Each year the Authority monitors distributors’ progress in developing more efficient pricing. The summary assessment for 2019 can be found below.