Cost allocation study for the Electricity Networks Association

Project by Link Economics Group

infrastructure pricing nz

Review of cost allocation methodologies in New Zealand, Australia and the UK for the Electricity Networks Association (ENA), 2019

The 2019 Electricity Pricing Review highlighted that cost allocations used by distribution network businesses may need to be reconsidered. The ENA engaged Link Economics to review existing cost allocations and compare these to methodologies used in Australia and the United Kingdom.

We surveyed how each of the 29 networks determine load/customer groups for the purposes of cost allocation, how the networks split their revenue requirement into separate components for the purpose of allocating to load groups, the cost allocators used to allocate each component of the revenue requirement to load groups, and the resulting allocations to residential and business customers. Our report highlighted points of similarity and variation across the 29 networks. The report was used by numerous distribution networks when reviewing their approach to cost allocation.

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