FAQs: Proposals to address up-front connection charges and distributor obligations

We recognise that contestability and dispute resolution provisions are important to some stakeholders. These two areas are part of the Authority’s ongoing work programme to reform network connection processes and pricing, but are outside the scope of this current consultation.

We introduced four measures to reform connection pricing earlier this year. 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.

We take a whole-of-system view when carrying out our work, which is underpinned by our drive to deliver an efficient and competitive electricity system that works for the long-term benefits of consumers.

We are currently undertaking work on the next stage of our work to improve the Distributed Generation Pricing Principles. This work is being carried out alongside our work to improve distribution connection pricing methodologies. We will seek a coordinated response if and where proposals share common issues, coordination adds value, and it is practical to achieve.

The Electricity Authority and Commerce Commission engage regularly on distribution connection pricing and other matters. The Authority’s regulatory framework provides for statutory interaction with regulation under Part 4 of the Commerce Act 1986.

Under section 54V of the Commerce Act, the Authority is required to consult with the Commission before amending the Code in a way that is likely to affect the Commission’s exercise of its functions and powers in relation to distributors. We have formally consulted with the Commission on the Code amendments for connection pricing methodologies and will continue to engage as this work continues.

Under section 54V (5) of the Commerce Act, the Authority can ask the Commission to reconsider a distributor’s price path, and the Commission may do so if it thinks it necessary or desirable, to account for the impact on a distributor of the Authority amending the Code. The Authority has been engaging with the Commission on what this process would entail.

In the first instance, we invite people to read the paper and contact us directly if they have any questions.

We will regularly publish new Q&As on this webpage and let people know through our email distribution list when new information is available.

We will consider Q&A sessions where there is a need identified.

To receive email updates when new information is added to the webpage, and other related updates, please email connection.feedback@ea.govt.nz with ‘subscribe’ in the subject line.

The four fast-track measures introduced earlier this year allow for a case-by-case objection process as they are supported by access to a dispute resolution procedure in the Code. These provisions enable complaints to be made to the Authority where parties consider these fast-track requirements have not been met. In some instances, this may result in a change that is satisfactory to the parties.

However, the proposed targeted intervention mechanism potentially goes further than the fast-track measures. The proposal aims to limit increases in connection charges and reduce the level of up-front charges so the allocations of broader networks costs are consistent for groups of network consumers. As proposed, the dispute resolution provision would apply to the applications made under a distributor’s amended pricing approach.

The proposed targeted intervention mechanism enables case-by-case screening and deeper examination of, for example, a distributor’s reliance level and trend, the network- and region-specific circumstances, atypical activity, and forecast network capex programmes.

By 2021, the Authority was supporting more cost-reflective distribution pricing through monitoring compliance with distribution pricing principles, supported by guidance set out in the distribution pricing practice notes and occasional open letters to distributors. Scorecards were used to assess, monitor and comment on distributors’ pricing methodologies. This approach had some success, with some notable improvements in pricing methodologies by some distributors.

However, change wasn’t happening as consistently or as quickly as needed, and in 2023, we released an issues paper outlining five key areas of distribution pricing for possible reform, one of which was connection pricing.

This work continued into 2024, when we consulted on proposed fast-track measures to improve connection pricing methodologies. We are progressing four of the five fast-track measures from that consultation.

However, further work was needed to consider how to best address inefficiently high up-front charges. This is the focus of the current consultation paper, and we welcome feedback on our proposed solution to address high up-front charges.

We note, this proposal could go further for some distributors than what was previously proposed, as it could reduce high up-front connection charges in some cases.

Reforming connection pricing methodologies is complex and the timing of changes has implications for the Commerce Commission’s regulation of electricity lines services that needs to be considered.

Based on the most recent information disclosure data submitted by distributors to the Commerce Commission (2025 disclosure year):

• Vector’s reliance level was 79%, forecast to reach 142% by 2030
• Powerco’s reliance level was 27%, forecast to remain below 40% out to 2030
• Wellington Electricity’s reliance level was 36%, forecast to remain below 40% out to 2030.

We recognise contestability is an important issue for some stakeholders. This is part of the Authority’s ongoing work programme to reform network connection processes and pricing.

The focus of the proposals is on connection pricing methodologies including a connection charge reconciliation. The reconciliation breaks down a quoted connection charge into incremental cost, incremental revenue and network cost components.

Connection assets can serve subsequent customers, with continued cost recovery for distributors. Pricing should be based on connection assets rather than the customer or type of connection applicant.

The connection revenue lives specified for the reconciliation methodology, (30 years for a residential connection, 15 years for a commercial connection), are shorter than the connection asset life.

Distributors also have flexibility in setting the connection revenue life, where reasonable, and in requiring a security such as guarantees or bonds. For larger connections with individual or special pricing, distributors have flexibility as to how they structure cost recovery (up-front vs. ongoing charges).

For both transmission and distribution, the Authority is seeking to ensure pricing methodologies promote efficient usage and investment decisions. Requiring the use of a benefit-based approach (like the one used for transmission pricing) would still require a method to allocate and most efficiently recover some common costs. As common network costs still need to be recovered, the proposed application of the balance point concept as a way to allocate such costs remains relevant.

The contribution to shared network costs would be measured for an 'average' connection for a given consumer group.

For most consumer groups, comparison between connections would be in absolute terms. For large connections, comparisons between connections would require a scale metric.

Under the proposed targeted intervention process, the Authority would undertake an in-depth and nuanced analysis of different factors at play.

This could include the impacts of regionally differentiated pricing on the distributor’s connection pricing efficiency given there is a link between connection charges and lines charges within each region.

Given the range of connection scenarios, there is not a bright line test to determine when up-front charges are ‘excessive’. The proposal for constraining connection charges focuses on the balance point principle and enables the Authority to undertake deeper examination of what may be driving high up-front charges. As noted in paragraph 7.4 of the consultation paper, broader connection pricing efficiency will be considered in future stages of reform.

There are two paths for dispute resolution – one for those who can be regulated under the Code (mostly industry participants), and one for those who are not.

Those not regulated under the Code can challenge connection quotes by raising a complaint with the distributor (clause 6B.13 of the Code).

The distributor is required under the Code to attempt to resolve the dispute in good faith. If this fails to reach a resolution, you can lodge a complaint with the Authority and we would investigate. You can also report a breach or possible breach of the Code under regulation 9 of the Electricity Industry (Enforcement) Regulations 2010 or make a complaint to the distributor under regulation 5 of the Electricity Industry (Enforcement) Regulations 2010 at any time.

This dispute resolution process only applies to concerns about the new connection pricing rules we announced in July and that come into effect on 1 April 2026. If the concerns relate to a connection application received by a distributor before 1 April 2026, the connection applicant can reapply after this date and then the steps above would apply.

If this is not an option for your circumstances, there may be other options for recourse through Utilities Disputes Ltd and/or within the Commerce Commission’s jurisdiction. We will be discussing potential options with Commerce Commission staff to understand if there are any further options that may help resolve disputes.