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Efficient network infrastructure investment and operation
Open Consultation

Settlement residual allocation methodology

How the settlement residue is allocated amongst transmission customers, as prescribed in the Electricity Industry Participation Code 2010.

  • Distribution
  • Transmission
  • Prices

    • Open consultation

    We're seeking feedback on our proposed changes to the Benchmark agreement

    Changes to the Benchmark agreement for SRAM funding to reflect the new TPM

    Submissions due by 30 June 2023

    View consultation

    Overview

    We have decided to amend the Code (effective 1 April 2023) to provide for the development of a new settlement residual allocation methodology (SRAM), based on the simple method for the benefit-based charge in the transmission pricing methodology. We have also introduced requirements for distributors to pass through settlement residue to their customers.

    We believe this method best aligns with our statutory objective by improving the efficient operation of the electricity industry and promoting competition. Find out more in our Settlement Residue Allocation Methodology decision paper.

    The new SRAM introduces requirements on Transpower to pay its customers settlement residual rebates. Transpower expects to incur implementation costs to calculate these rebates. By mid-2023, we intend to propose amendments to the benchmark agreement and the Code to ensure Transpower is compensated for its efficiently incurred costs.

    The proposed amendment would include a new provision in the benchmark agreement which requires transmission customers to pay Transpower a SRAM processing charge that may be deducted from any SRAM payment.

    We intend to propose a Code change to require all existing transmission agreements to be updated to include the SRAM processing charge provision. This would include transmission agreements that are not based on the benchmark agreement, such as older connection contracts. We will carry out this work in two stages:

    • Stage 1 - 2023 narrow review of SRAM-related Code amendments and changes to reflect the new TPM
    • Stage 2 - 2024 broad review of the benchmark agreement and sector changes over the last 15 years. Assessment of what, if any, changes are needed of the common quality requirements in Part 8 of the Code.

    Subject to final confirmation, we expect to invite stakeholder feedback on Stage 1 from 17 May to 30 June 2023.

    Timeline

    Coming up

    • 2024

      Review —

      Benchmark agreement and Part 8 of the Code

    Past activity

    Project background

    This project looks at how to improve the settlement residual allocation methodology to:

    • encourage more efficient use of the grid;
    • support the right investments being made at the right time and in the right places; and
    • over time, lead to relatively lower electricity prices for consumers.

    Our aim is to improve the efficient operation of the electricity industry and enhance competition.

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