New Zealand Gazette – 2006 – No. 123

Page 3624

✨ Electricity Transmission Pricing



3624

NEW ZEALAND GAZETTE, No. 123

30 OCTOBER 2006

90

As part of its consideration of transmission pricing, the Commission should
consider whether there would be net benefits in providing for a mechanism
whereby investments in transmission alternatives receive payments reflecting
some or all of the value of avoided transmission investment. This is a complex
subject, and the Commission will need to take into account, among other
things, practicalities, effects on incentives to invest in alternatives, and the
extent of assurance that grid reliability standards will be met.

Pricing for connection to and use of the national grid

91

Transpower should determine its total revenue requirement (covering both
sunk and new investments) subject to the constraints of Part 4A of the
Commerce Act 1986. A transmission pricing methodology should determine
how this total revenue is recovered from parties under the agreements for
connection to and use of the grid. The transmission pricing methodology
should include the allocation of any net FTR auction income, rentals and
FTR-related payments.

92

The Electricity Commission should prepare and consult on a paper on pricing
issues. The Commission should determine the pricing methodology after
consideration of proposals from Transpower and consultation with affected
parties.

93

Prior to the determination of a new pricing methodology by the Commission,
the Act requires connected parties to continue to pay Transpower for
connection and access to the national grid on the basis of Transpower’s
current pricing methodology.

Cost recovery and pricing principles

94

The Government expects transmission services to be priced as efficiently as
possible and, subject to Part 4A of the Commerce Act 1986, Transpower’s
charges to recover the full economic costs of its services.

95

The principles to be applied by Transpower in developing the transmission
pricing methodology, and the Electricity Commission in approving it are:

  • the costs of connection should as far as possible be allocated on a user
    pays basis

  • the pricing of new and replacement investments in the grid should
    provide beneficiaries with strong incentives to identify least cost
    investment options, including energy efficiency and demand
    management options

  • pricing for new generation and load should provide clear locational
    signals

  • sunk costs should be allocated in a way that minimises distortions to
    production/consumption and investment decisions by grid users and
    consumers

  • the overall pricing structure should include a variable element that
    reflects the marginal costs of supply in order to provide an incentive
    to minimise grid constraints, and



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Online Sources for this page:

VUW Te Waharoa — PDF NZ Gazette 2006, No 123


Gazette.govt.nz — PDF NZ Gazette 2006, No 123




✨ LLM interpretation of page content

🏛️ Grid Reliability Standards and Investment (continued from previous page)

🏛️ Governance & Central Administration
Grid Reliability, Investment, Transmission Network, Standards, Electricity Commission

🏛️ Pricing for connection to and use of the national grid

🏛️ Governance & Central Administration
Transmission Pricing, Revenue Requirement, Commerce Act 1986, FTR Auction, Grid Connection

🏛️ Cost recovery and pricing principles

🏛️ Governance & Central Administration
Cost Recovery, Pricing Principles, User Pays, Locational Signals, Sunk Costs