06 Dec 2022
Transpower has announced to generators, local lines companies, and large industrial customers connected directly to the national electricity transmission grid how the $830 million of annual electricity transmission costs will be charged out.
The new transmission charges, which apply for the year from 1 April 2023, give effect to a new transmission pricing methodology (known as TPM) designed by the Electricity Authority (Authority).
Transpower Head of Grid Pricing Rebecca Osborne said the Electricity Authority has designed the new methodology to more closely reflect the costs and expected benefits of electricity transported across Transpower’s 12,000 kilometres of transmission lines.
There should be no surprises across the electricity industry about the transmission charges we are announcing today, she said.
“We've consulted with customers along the way and provided information as the elements have developed, including updating our indicative prices in April, May and August and providing indicative rates information in early November.”
“Total transmission revenue, as set by the Commerce Commission, remains the same, but how it is distributed among Transpower customers has changed.
“The Authority expects the new approach to transmission charges to encourage investment in renewable generation and electrification of industrial processes.”
The main change in the new transmission pricing methodology is a move to a benefit-based approach where customers pay in proportion to the benefit they are expected to receive from some historic and all future transmission investments.
The previous methodology spread the cost of the HVDC link connecting the two main islands across South Island generators and spread the cost of all other interconnection assets across local lines companies and major industrial users.
In general, this means cost increases for local lines companies and some of the largest industrial customers in the north of the country because they are further away from where the bulk of generation is located in the South Island.
It also means North Island generators will begin contributing to the cost of the interconnected transmission assets and South Island generators will contribute less.
The new transmission charges are available on Transpower’s website.
Impact on retail consumers
How transmission charges are passed on to businesses and households connected to local lines companies is not something Transpower has control or influence over. Each local lines company decides how to pass these charges on to their consumers, taking into account guidance provided by the Authority. Transmission charges typically make up 8-10% of the average consumer’s total power bill.
Background
The Commerce Commission determines the total revenue Transpower, as the owner and operator of the national electricity grid, can recover each year through transmission charges. The way Transpower recovers its revenue from its customers is set out in the transmission pricing methodology.
The lines and substation assets that make up Transpower’s electricity transmission grid fall into two general categories. Connection assets connect generators, local lines companies, and major industrial customers directly to the grid and are paid for by those customers connected at each grid connection point.
Interconnection assets make up the backbone of the grid and enable the national wholesale market for electricity. Costs for interconnection assets are therefore spread much more widely across Transpower’s customers and electricity end-users.
For further information please contact:
Nathan Green, Principal Communications Advisor, 0273875256
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