Pricing methodology regulatory disclosures for electricity networks

Preparing electricity distribution pricing methodology and pricing roadmap regulatory disclosures, 2019

Electricity networks in New Zealand must disclose a pricing methodology document each year that explains how they set their prices. The pricing methodology describes how the network determines its revenue requirement, how it allocates the revenue to customer load groups, the pricing structure that is used for each load group, and how each price is determined. The Pricing Methodology must also describe how each network’s pricing compares with the Electricity Authority’s Distribution Pricing Principles. Networks are also encouraged by the Authority to disclose a pricing roadmap which sets out their plans for distribution pricing reform.

In 2019, Link Economics assisted four networks to prepare their Pricing Methodology disclosures and pricing roadmaps. The support we provided included updating the disclosures, including context on the network and the planned investment to address future demand growth. We also provided a more thorough analysis of how the pricing compares with the distribution pricing principles. The roadmaps we prepared set out a plan for how each of the networks intend to reform their pricing.

The Authority produced distribution pricing scorecards which assessed the pricing methodologies and roadmaps. Three of the networks we assisted scored second equal out of 29 networks, and the other scored third equal.