FAQs: New rules for connection pricing methodologies

1. A user should cover the costs they incur, so shouldn’t a new connection pay a 100% capital contribution and system growth charge?

Connection charges are part of the cost of obtaining distribution services, with new connections also paying monthly charges once connected.

On most distribution networks, new connections have historically paid less than 100% of their direct cost up-front, with the remainder of their connection costs rolled into the distributor’s cost base and recovered across all users through monthly charges. As long as connection charges are not too low, connection applicants are still paying their full connection cost over time and contributing to shared costs.

If new connections have to pay a bigger share of costs up front and still pay the same monthly charges as existing customers, then they pay more in total than existing users. These higher costs will flow through to other activities, such as building new housing, expanding businesses, and electrifying transport and heating.

If higher costs stop or delay new connections, then there are fewer users to share the largely fixed and shared costs of the network – meaning higher costs for existing users.

More balanced pricing still ensures connection growth pays for its growth costs, while not making connection growth also pay a disproportionate share of other costs.

See section 5 of our Distribution connection pricing consultation paper for more details.

2. If an existing connection agreement is a long-term contract, does it need to be reconsidered under the new Code requirements?

The new requirements do not apply retrospectively to existing connection agreements. Part 6B of the Code does not apply to any connection application received by a distributor prior to 1 April 2026 (under clause 6B.2(1)(a)).

3. If a quote is provided before the new rules for connection pricing methodologies come into effect, but the quote is updated once the new rules are in effect, which rules apply?

The new rules apply to connection applications received on or after 1 April 2026. The new rules would not apply to an updated quote for a connection application received prior to 1 April 2026.

4.  Which organisation addresses customer complaints about connection pricing?

In most instances, customers have the option of raising a complaint or alleging a breach of the Code through the Electricity Authority, or lodging a complaint through Utilities Disputes Limited.

The Authority introduced four measures to reform connection pricing in July 2025. These new connection pricing requirements are supported by access to a dispute resolution procedure in the Code that enables complaints to be made to the Authority where parties consider these requirements have not been met.

Note that Utilities Disputes Limited cannot accept a complaint for consideration if it is about the price a distributor chooses to set for their services. However, it may consider whether appropriate information about charges has been made available to the customer and whether charges for services have been correctly applied.

Customers can also lodge a complaint with the Commerce Commission for issues about competition or contestability, fair trade and consumer guarantees, such as concerns around unfair contract terms.

1. How should a distributor define the minimum scheme for pricing connections?

The minimum scheme should be defined with reference to the distributor’s connection and operating standards, which should reflect the distributor’s asset management policies and practices.

2. How should the minimum scheme be determined for a posted connection charge?

There are three key steps for distributors establishing a posted connection charge:

• determine the eligibility criteria – eg, single-phase residential connections within a certain distance of an existing overhead pole.
• consider the minimum scheme for a representative connection of that type (ie, the ‘notional’ minimum scheme). As with any minimum scheme, this is done with reference to the distributor’s connection and operation standards, which should reflect their asset management policies and practices.
• apply their connection pricing methodology to the notional minimum scheme to determine the level of the posted charge. The level of the posted charge should be published by the distributor, along with eligibility criteria and a standardised charge reconciliation.

Eligible connections pay the posted charge, without a need to develop quotes for each connection.

Setting posted connection charges is optional for distributors. They are most useful for higher-volume, smaller-value connections, such as ‘standard’ residential or small business connections.

See Example 1A of this guidance document.

3. If the customer has priced, scoped and paid a third party for a connection without involving the distributor, is the distributor required to pay out on an ‘above minimum scheme’ build if the consumer wanted a higher spec?

No. The customer has entered a contract with the third party to pay for connection works. The distributor is not required to contribute to that cost.

4. Do livening fees make up part of the connection charge?

The term ‘connection charge’ includes all the costs imposed on a customer for a new or upgraded connection, excluding

• connection administration fees and
• any pioneer scheme contributions.

‘Connection administration fees’ cover the administrative costs of a connection including assessing and processing connection applications and completing connection inspections. If a livening fee only covers administrative costs, such as inspection or compliance checks, then it can be treated as a connection administration fee and therefore be excluded from the connection charge.

However, if a livening fee relates to physical connection works (eg, energising the line) it must be included in the connection charge.

5. Do distributors need to include capacity costing charges as part of the connection charge?

A distributor can choose not to allocate capacity costs to connections at all.

If a distributor does charge connection applicants for network capacity costs (in whole or in part) from 1 April 2027 they must be determined using the capacity costing methodology. In most cases, this means allocating costs using posted rates and assessing how much capacity the connection will consume at each network tier.

These posted capacity rates will also need to be used for connection charge reconciliation from 1 April 2026. There are exceptions, including ‘extension-like’ upgrades and some upgrades with large-capacity increments (under clause 6B.5(2) of the Code).

A distributor cannot choose to allocate capacity costs in any other way, eg, by requiring applicants to pay for the full cost of a network upgrade (outside the permitted exceptions)

6. Can a connection charge include associated costs that accrue over a longer time?

The new pricing requirements do not restrict the overall level at which connection charges may be set. We’re considering if further reform is needed.

However, for charge reconciliation purposes the standard approach to ongoing costs is to make an adjustment to assumed incremental revenue. This recognises that a portion of monthly charges goes toward covering these costs. Each distributor has its own operating expenditure (opex) adjustment factor that it applies to all connections.

For charge reconciliation for connections with special pricing, distributors instead apply a scaling factor to adjust capital costs for associated ongoing costs. For actual charging, distributors have flexibility to instead recover ongoing costs via ongoing charges.

For any type of charge reconciliation, distributors should also adjust costs and revenues based on their timing – ie, apply discount factors to bring all values to a common base year.

For more guidance, refer Examples 1A and 3A of the Worked examples of distribution connection pricing - guidance document.

7. How should connection costs incurred from both the minimum scheme and enhancements be allocated?

The distributor should first determine the cost of the minimum scheme and then allocate any additional costs to the enhancement. For example, if traffic management costs are incurred to install both the minimum scheme and a customer-selected enhancement, then any additional traffic management cost required to install the customer-selected enhancement (over and above the minimum scheme) must be allocated to the customer-selected enhancement.

8. Does the distributor need to consider the local community’s preferences (eg, a preference for underground connections) when establishing the minimum scheme?

The reference point for the minimum scheme is the distributor’s connection and operating standards. Undergrounding, for example, would be incorporated into the minimum scheme only if specified in the distributor’s standards.

How should a distributor manage local council requirements when determining the minimum scheme?

The reference point for the minimum scheme is the distributor’s connection and operating standards. Thes should align with the distributor’s asset management policies and practices, which should include complying with relevant legislative and regulatory requirements, including local council requirements.

9. How should the cost of works undertaken by the connection applicant be factored into the minimum scheme and determining distributor enhancements?

For charge reconciliation, works undertaken by the connection applicant must be treated consistently in both the connection charge term and incremental cost term. This can be zero, or a non-zero value.

10.  Is the minimum scheme the design the customer requests for their connection? If not, is there a consistent way to separate customer-selected enhancements from minimum scheme costs?

The minimum scheme means the least cost solution for any connection works, defined with reference to the distributor’s connection and operation standards, which should reflect the distributor’s asset management policies and practices.

Customer-selected enhancements are non-standard design configurations requested by the connection applicant and agreed upon with the distributor. For example, a residential customer on a standard tariff requesting increased capacity from a single-phase to two- or three-phase supply would be a bespoke configuration if it falls outside the distributor’s standard design configuration for residential connections. For larger customers, this would involve a discussion with the distributor on the minimum scheme and appropriate connection size.

Other types of customer-selected enhancements may include requests for more expensive routing, underground instead of overhead lines, a different type of pole or requests for a pole moved to a certain location.

1, Why does clause 6B.5 (2) of the Code exclude the distribution substation and low voltage mains network tiers, but clause 6B.5 (3) applies to all network tiers?

Clause 6B.5 (2) applies when a connection customer is expected to consume greater than 80% of the nominal capacity of a network tier (excluding the distribution substation and low voltage mains network tiers). In this situation, the distributor can use estimated capacity upgrade costs for the network tier instead of posted capacity rates. The connection is consuming most of the upgrade, so it is reasonable that the actual cost can be used instead.

Clause 6B.5 (3) applies when the estimated cost per unit to add capacity is much more expensive (more than 150% of the applicable posted capacity rate for that network tier). It also applies when the estimated cost per unit is much less expensive (less than 80% of the applicable posted capacity rate for that network tier) than the network (or network zone) average. In either of these situations, the distributor can scale up or down the capacity rate for that network tier to account for the significant difference in capacity cost.

Limiting the clause 6B.5(2) exemption to the upper tiers means it will only apply to larger connections that would use 80% of a high-capacity network element. For example, in the Authority’s worked examples the capacity of the HV feeder is 6 MVA. This balances the benefits of the capacity costing approach against risk of socialising dedicated costs.

The same consideration does not apply for clause 6B.5(3), which has the effect of reducing the extent capacity rates are averaged across elements with diverse cost profiles.

2. Distributors may have assets that were initially part of Transpower’s network. Do distributors need to treat these ex-transmission parts of networks as part of the ‘sub-transmission’ tier when calculating capacity costings?

Yes. The demarcation from sub-transmission to transmission should be based on ownership, rather than voltage or capacity.

3. Can the Authority provide additional guidance on calculating the network capacity rate at each network tier, particularly on using information that can be made publicly available? 

We are engaging with the ENA and Link Economics as they develop a standardised approach to calculating network capacity rates at each network tier.

There are different approaches to calculating network capacity rates. Our implementation guidance materials are based on a library of network upgrades, costings and capacities, adaptable to different network asset configurations. This library would not require annual bespoke updates. Adjustments could be made for cost escalation, design changes (such as updated standards), or new cost data. These inputs can also support Asset Management Plans by providing placeholder costs for longer-term planning, using consistent cost estimation building blocks. This is one approach.

Capacity costing rates are averaged across the network and averaged over time, so are not intended to capture all details of specific upgrade projects in the near-term planning horizon.

1. What happens to rebates to a pioneer if they sell their asset?

A distributor can decide whether pioneer status applies to an applicant, the connection itself, or some other approach. A distributor is required to set out in their pioneer scheme policy whether, and in what circumstances, the status of a first pioneer or subsequent pioneer may transfer to a a new occupant or owner of that connection.

Note, the pioneer scheme requirements were clarified following the technical consultation on the Code drafting. The amendment clarified that distributors have discretion in their pioneer scheme policy to specify how eligibility is managed.

2. Why does the pioneer scheme not apply to connections that are priced using posted connection charges?

Posted connection charges are designed to be used for high-volume, low-value connections with relatively consistent costs. By definition, posted charges are consistent from one applicant to the next, so there is no position-in-queue dynamic to address through a pioneer scheme.

3. How is a real estate development defined?

We’ve defined real estate development in the Code to mean a development of land for the purpose of on-selling, including its development in one or more of the following ways:

(a) subdivision

(b) the construction of commercial or industrial premises (or both)

(c) the construction of multiple new residential premises.

Note, the definition was refined following the technical consultation on the Code drafting.

4. Pioneer schemes don’t apply when the connection is for the construction of commercial or industrial premises. Does this mean pioneer schemes don’t apply to any commercial or industrial connections?

A real estate development is a development of land for the purpose of on-selling. Therefore, a distributor isn’t required to have a pioneer scheme to a commercial or industrial connection if the purpose is to on-sell the premises. If the purpose of the development is not to on-sell the premises, then the pioneer scheme requirements apply.

Note, the definition of a real estate development was refined following the technical consultation on the Code drafting.

5. Does the definition of real estate development capture multi premises buildings?

A multi premises building is only captured if the purpose of the development is to on-sell the premises.

Note, the definition of a real estate development was refined following technical consultation on the Code drafting.

6. Are embedded networks excluded from pioneer schemes?

Embedded network owners are not required to operate pioneer schemes.

An embedded network could be required to make pioneer scheme contributions when connecting to the primary network and could receive rebates as a pioneer in one of the primary network's pioneer schemes.

7. How does a pioneer scheme fee work and who pays it?

A pioneer scheme fee is deducted from a pioneer scheme contribution before rebates are paid to the pioneers. The pioneer scheme fee must only cover the reasonable costs of administering the pioneer scheme.

8. Can a first pioneer only opt out of applying a pioneer scheme at the time of the pioneering connection works, or can they opt out later?

The first pioneer can only opt out at the time of the pioneering connection works. Once a pioneer scheme is in place, it is not possible for the first pioneer (or subsequent pioneers) to opt out of the pioneer scheme. However, under subclause 6B.7(1)(a) of the Code, the pioneer scheme can be ended early if each pioneer to the pioneer scheme and the distributor agree in writing.

9. Is it only pioneers who are still connected to the relevant pioneering connection works that qualify for rebates?

Clause 6B.8 (which relates to determining connection charges, contributions and rebates for pioneer schemes) was amended following the technical consultation to ensure that the Code reflects the policy set out in the decision paper.

The amendment makes it clear that pioneers do not still need to be connected to the pioneer scheme to receive rebates. In addition, a new subclause (6B.8(6)) requires that the distributor determines whether, and in what circumstances, the status of a pioneer may transfer to a different person or persons (eg, a successor asset owner). The distributor will need to include this in their pioneer scheme policy.

10. How long is a distributor required to search for a pioneer to pay them a rebate?

While the Code does not directly specify this, distributors should put in place practices that prevent the loss of contact with pioneers as much as reasonably possible. In addition, a distributor can specify in their pioneer scheme policy that, if they are unable to find a pioneer (after a reasonable effort to find them), the status of the pioneer can transfer to someone else (eg, the successor asset owner) under subclause 6B.8(6) of the Code. This subclause requires the distributor to determine whether, and in what circumstances, the status of a pioneer may transfer to a different person or persons.

11. Are customer-selected enhancements and distributor-selected enhancements considered part of pioneering connection works when a pioneer scheme applies?

A pioneer scheme needs to cover the costs of the pioneering connection works (see clauses 6B.8(2)(c), 6B.8(3)(a), and 6B.8(4)(a) of the Code (Connection Pricing Requirements) Amendment 2025). This includes the costs of any customer-selected and distributor-selected enhancements. We will consider whether the Code should be amended to allow customer-selected and distributor-selected enhancements to be excluded.

12. Does a connection applicant also need to contribute to pioneer schemes they are not directly connecting to?

A connection applicant can only be required to pay a pioneer scheme contribution for pioneering connection works they are connecting to. They cannot be required to pay a pioneer scheme contribution for pioneering connection works they are not directly connecting to (see, for example, clauses 6B.8(3)(a) and 6B.8(4)(c) of the Code (Connection Pricing Requirements) Amendment 2025).

For example, a pioneer scheme (Pioneer Scheme A) is set up for an extension and then later another pioneer scheme (Pioneer Scheme B) connects to Pioneer Scheme A (eg, to run down a side valley). The first pioneer of Pioneer Scheme B will be required to pay a pioneer scheme contribution for Pioneer Scheme A (if the contribution would be $1,000 or more in December 2025 dollars).

However, subsequent connections to Pioneer Scheme B cannot be required to pay a pioneer scheme contribution for Pioneer Scheme A because they are not directly connecting to the Pioneer Scheme A’s connection works. These subsequent connections to Pioneer Scheme B will need to pay a pioneer scheme contribution for Pioneer Scheme B (if the contribution meets the $1,000 threshold in December 2025 dollars).

We understand this could create a first-mover disadvantage for the first pioneer of a second pioneer scheme that is connecting to an existing pioneer scheme. We will consider whether the Code should be amended to avoid this outcome.

13. How can a distributor comply with the pioneer scheme requirements if they use a third party to install connections and won’t know whether pioneer scheme requirements apply until the assets are vested to the distributor?

In this scenario, the distributor needs input from the third party to inform their decision on whether to establish a pioneer scheme.

The reason for establishing a pioneer scheme is to encourage pioneers to invest by reducing their first-mover disadvantage. As such, it is desirable for the distributor to inform the applicant early in the process that they may be eligible for rebates in future.

The value of the pioneer’s contribution is one input for deciding whether to establish a pioneer scheme, so the distributor will need to ensure the third-party supplies that information early in the process. The distributor may also need to ensure the third-party monitors and advises of cost variations so it can track whether an ineligible connection becomes eligible (ie, if the contribution increases above the threshold).

14.  Does a pioneer scheme need to be published or only developed?

Under clause 6B.9 of the Code, a distributor must publish its pioneer scheme policy and publish the details of each pioneer scheme it administers, applying the requirements in clause 6B.7.

Distributors do not need to publish this information for any pioneer schemes that begin before 1 April 2026.

1. Why is the Authority using the mid-point vanilla weighted average cost of capital (WACC) in the incremental revenue calculation?

This approach is consistent with the input methodologies approach for dealing with the time-value of cashflows.

2. Why is the WACC adjusted for inflation?

Inflation is excluded from WACC and cashflows for consistency – ie, because cashflows are expressed in real terms without inflation added.

3. How is the WACC adjusted for inflation?

The adjustment to remove inflation is required to be consistent with inflation projections for the year ahead from the most recent Monetary Policy Statement published by the Reserve Bank of New Zealand. Our worked examples of distribution connection pricing guidance walks through the adjustment.

4. When can localised historical cost recovery be applied?

The Code accommodates localised historical cost recovery schemes, but doesn’t specify how they should operate. Our worked examples of distribution connection pricing guidance includes an illustrative example

5. How should recoverable costs be forecast in determining incremental revenue?

The estimate of incremental revenue is the sum of the incremental distribution revenue estimate and the incremental transmission revenue estimate. These are estimates of the revenue from lines services (excluding connection charges and connection fees) that the distributor receives over the connection’s revenue life.

‘Year one’ revenue from a connection may be estimated using a top-down approach (based on consumer group revenue) or a bottom-up approach (based on tariffs and tariff metrics). ‘Year-one’ revenue can then be adjusted for forecast changes in overall revenue paths (distribution and transmission), tariff structures, and connection demand.

Our worked examples of distribution connection pricing guidance shows how incremental revenue is estimated.

6. Does a distributor need to reconcile all applications in a year that were priced or just those applications that proceed?

A distributor should reconcile all quotes in the same pricing year that the quotes are issued.

7. If a distributor charges more than incremental cost for a connection, how does this show up in the reconciliation formula?

If a distributor charges more than incremental cost for a connection this would be shown by the connection charge being higher than the incremental cost. This would lead to the network contribution being higher than the incremental revenue for that connection.

8. What does active cost-recovery scheme mean?

This should be an “active localised historical cost recovery”. A localised historical cost recovery is defined in the Code.

9. How do revenue adjustment and tariff adjustment factors work?

We’ve provided guidance on how to apply revenue adjustment and tariff adjustment factors in example 1A of the distribution connection pricing guidance document.

A revenue adjustment factor is used to adjust the revenue forecast for each year to reflect movements in the distributor’s overall target revenue.

A tariff adjustment factor is used if the distributor is intending to rebalance or restructure its tariffs in a way that may further affect the future revenue from a particular connection.

10. Do the new connection pricing methodologies rules prevent having a minimum capital contribution to ensure the connecting party meets at least some of the asset stranding?

The new rules do not set a specific level for connection charges and distributors are not required to price at incremental cost. Distributors retain discretion in how they set connection charges. The new rules also allow distributors to use posted connection charges and standard rates.

11. How often does the discount rate need to be updated for estimating incremental revenue?

The Code (clause 6B.11(4)(c)(ii)) requires incremental distribution revenue and incremental transmission revenue estimates to be discounted using a specified discount rate. The specified discount rate is equal to the most recent available mid-point estimate of vanilla weighted average cost of capital (WACC) made by the Commerce Commission in accordance with the Electricity Distribution Information Disclosure Determination, less an adjustment to remove inflation consistent with inflation projections for the year ahead from the most recent Monetary Policy Statement published by the Reserve Bank of New Zealand.

The Commerce Commission updates the WACC annually, while the Reserve Bank issues a Monetary Policy Statement quarterly.

The Code is currently not explicit on how often the discount rate needs to be updated and we will consider whether an amendment is needed to address the ambiguity.

Currently, the Code could be interpreted to mean that distributors need to update the discount rate used for estimating incremental revenue five times per year (once when the WACC estimate is released, and four times when each of the Monetary Policy Statements are released).

It could also be interpreted to mean that the adjustment to remove inflation is done using the most recent Monetary Policy Statement at the time the most recent WACC estimate is made by the Commerce Commission. This interpretation would mean that the discount rate only needs to be updated once per year. We favour this interpretation. This is the interpretation we have relied on in our guidance material.

12. Are assets dedicated to the consumer excluded from the reconciliation?

Assets dedicated to the consumer need to be included in the reconciliation if the assets are owned by the distributor. If the asset will remain owned by the consumer, then it should not be included in the reconciliation.

13. How are downgrades treated in the reconciliation?

The rules only apply to new connections and upgrades. A connection charge reconciliation does not need to be done for a downgrade.

14. Where in Part 6B of the Code does it specify including avoided cost of distribution (ACOD) and incremental costs of distributed generation in the incremental costs?

Clause 6B.2(3) of the Code states requirements for a connection application with both load and distributed generation. They are:

• The connection enhancement cost allocation and capacity costing requirements are applied to the load component of the application before the requirements in Part 6 of the Code are applied to the distributed generation component of the application.
• Requirements for the pioneer scheme and connection charge reconciliation methodologies are applied to the connection as a whole, covering both load and distributed generation.

Part 6B does not alter the existing distributed generation pricing principles in Part 6 of the Code that require distributors to set charges based on net incremental cost.

When applying the charge reconciliation requirement to a hybrid connection, a distributor should include incremental costs and revenue determined under Part 6. This could include additional extension costs, a modification to network capacity costs (reduction or increase), additional connection charges and a modification to incremental revenue (reduction or increase).

15. How are distributors expected to forecast revenue adjustment factors for 30 years for a residential connection?

Clause 6B.11(4)(b)(iii) requires a distributor to adjust revenue estimates for subsequent disclosure years by forecast change in revenue per connection, in real terms, for any years for which the distributor has a reasonable revenue path. The distributor should determine revenue adjustment factors for the years they have specific revenue forecast information and assume that revenue remains at the same level in real terms beyond this time.

16. Will the Authority calculate and publish the discount rate for incremental revenue given it’s consistent across all distributors?

We will consider whether there is a logical place for the Authority, Commerce Commission, or someone else to publish the discount rate or the information required to calculate the discount rate.

17. When should reconciliation be done if the distributor provides no connection quote (because a third party provides and quotes for the connection works)?

There are three charge reconciliation requirements on distributors in clause 6B.10 of the Code:

1. Clause 6B.10(1) requires the distributor to provide a reconciliation during the connection process, if a connection applicant asks. This requirement would apply regardless of whether the distributor is involved in supplying a quote.
2. Clause 6B.10(3) includes obligations to supply connection charge reconciliation amounts (and supporting information) to the Authority if requested. This requirement would apply regardless of whether the distributor is involved in supplying quotes.
3. Clause 6B.10(2) includes obligations linked to the distributor providing a quote. These obligations remain, regardless of how delivery of works and pricing is structured. As such, the distributor must ensure the third party meets these requirements when supplying quotes. This is likely to involve information exchange between the distributor and the third party as part of the quotation process.

18. When will the Authority provide further information on the data format and submission process for connection charge reconciliations?

We aim to finalise the connection charge reconciliation process in early 2026. We will provide further details to distributors once they are available. 

19. Where a distributor wants to use the reconciliation calculation (CC = (IC - IR) + NC) to set the customer contribution (CC), how should the NC (network contribution) term be set?

Distributors have discretion in setting the NC term. It can be set to zero or a positive number. If it is set to zero, the customer contribution would be at the ‘neutral point’. This means new (or upgraded) connections cover all their own costs, but do not contribute to shared and sunk network costs. Setting the NC to a positive number means new (or upgraded) connections contribute to shared and sunk network costs.

Setting an NC closer to the ‘balance point’ requires the distributor to look back at what existing similar connections cost (IC) and were charged (CC and IR) on average to calculate the NC. This NC can then be used as an input for determining connection charges for similar connections in the future. The distributor would apply this to each consumer group.

For bespoke or large connections where there aren’t a lot of similar existing connections, a distributor can still define size and type of connection and determine the typical contribution to network costs for connections of that size and type.

The NC may depend on how far back the distributor looks and whether their capital contribution policies have changed or remained stable over time.

20. Are shared upstream costs already accounted for in the NCC (network capacity costing) term in the incremental cost estimate calculation?

The NCC is usually only a subset of total upstream costs so it only reflects the cost of replenishing consumed capacity. The sum of NCC charges is not expected to match the total cost of upstream network assets and operating costs. Other costs that may contribute to NCC could include:

• non-network costs
• transmission costs
• renewal costs (for dedicated and shared assets)
• upstream costs not recovered through NCC charges (or localised historical recovery scheme (LHCR) scheme).

1. What future information disclosures is the Authority expecting to require?

The relevant teams in the Authority are working to establish the reporting processes under clause 6B.10(3). This includes outlining the information that distributors are required to provide to the Authority under this clause, the form of the reporting (eg, a standard reporting template for tabular data), frequency of reporting, and the manner in which distributors must provide the information (eg, Secure File Transfer Protocol (SFTP).

Clause 6B.11 outlines what must be assessed and included in a reconciliation. Distributors will need to keep a record [JH3] of assumptions that apply specifically to individual connections. If a distributor uses a posted connection charge or standard rates, they will need to track the number of connections on those rates.

Note that the reconciliation requirements are framed around quotes, so when setting up systems a distributor should consider linking quotes and jobs together (ie, so if the same application generates multiple quotes the distributor has a record of it). Likewise, it would be useful to record events that happen after a quote such as ‘quote accepted’, ‘quote abandoned’, ‘payment received’ and ‘connection commissioned’.

2. Will the information disclosure requirements include specific disclosures for any adjustments made to the weighted average cost capital (WACC) charge that is used for the connection agreement?

The reconciliation calculations must use the specified WACC value for adjusting the timing of cashflows to a common base.

The fast-track connection charging requirements do not fully prescribe how a distributor must determine connection charges. However charges are determined, the outcome is recorded as the value of the connection charge.

A distributor’s methodology may involve using a different discount rate to that used in the charge reconciliation. This should be recorded in the distributor’s connection pricing methodology.

1. Is a distributor required to do a reconciliation for a connection where all connection assets are installed by a network approved contractor and then vested with the distributor?

Yes, the distributor is required to do a reconciliation for connections where connection assets are vested assets. The reconciliation will, at a minimum, include information about network capacity cost (NCC) and incremental revenue (IR).

2. Do the guidance materials provide direction on how to value and treat vested asset elements of the scheme?

The guidance material does not currently address valuation and treatment of vested assets.

Clause 6B.11(7) requires a distributor to treat in-kind contributions “…consistently as between CC and IC (either both zero or both the same estimated value).” Vested assets are a type of in-kind contribution (ie, instead of paying cash the customer builds an asset and hands it over).

Examples of how a distributor could choose to apply this could include:

• where a distributor records vested connection assets in their regulatory asset base at a non-zero value, they may choose to use that same value as part of the connection charge and the extension cost
• vested assets costs could be estimated based on the distributor’s own cost book and recorded at the estimated value in both terms
• vested assets could be recorded at zero cost in both terms.

In all cases, the treatment produces the same:

• assessed network cost contribution (NC)
• ratio between network cost and incremental revenue (NC/IR).

3. Do you expect a distributor to rebate a connecting party a part of the bill they paid to the network approved contractor for a vested asset?

The guidance material does not currently address treatment of vested assets. Distributors retain overall discretion of their policies on vested assets, including whether they rebate a connecting party for any vested asset costs.

1. How are hybrid and BESS connections dealt with under the new rules for connection pricing methodologies?

The distribution connection pricing guidance document includes examples (3c and 3d) that illustrate how the new rules would work for connections that have both load and generation.

2. Part 6A of the Code has an avoided cost of distribution (ACOD) provision for distributed generation – does Part 6B have a similar provision for a load connection with battery storage that only reduces demand at the connection?

If a distributor chooses to recover upstream capacity costs via connection charges, they must comply with the capacity costing requirements in clause 6B.5.

This involves the distributor determining capacity demand assumptions for the connection (and for each network tier). If a connection has battery storage, then the distributor may consider this as a reason to apply lower capacity demand assumptions. This would (typically) flow through to a lower connection charge.

However, battery storage will not always justify lower capacity demand assumptions. A distributor is required to have “reasonable regard to relevant information” when determining capacity demand assumptions.