Net­works urged to move on price re­form

Whanganui Chronicle - - Business -

Elec­tric­ity lines com­pa­nies have been told to ac­cel­er­ate changes to their pric­ing and not wait un­til the next reg­u­la­tory pe­riod start­ing in 2020.

The Elec­tric­ity Au­thor­ity, frus­trated by the lack of ac­tion by some net­works, has writ­ten to the di­rec­tors of all dis­tri­bu­tion com­pa­nies telling them the need for change is ur­gent.

With­out change, the charg­ing struc­tures of many lines com­pa­nies risk in­creas­ing peak pe­riod de­mand to the cost of all con­sumers, while po­ten­tially also rais­ing charges to house­holds with­out so­lar pan­els.

“The au­thor­ity needs to see the dis­tri­bu­tion net­works act with am­bi­tion and ur­gency on re­form­ing their price struc­tures. They should put in place con­crete tran­si­tion plans now, rather than wait,” it says in a six-page pa­per. “Con­sumers ex­pe­ri­ence the ad­verse ef­fects of in­ef­fi­cient prices now. The size of the prob­lem will only con­tinue to grow with the up­take of EVs, so­lar pan­els and bat­ter­ies. Dis­trib­u­tors should not wait un­til 2020 to start their tran­si­tion to more ef­fi­cient prices.”

To keep the pres­sure on, the reg­u­la­tor plans to rate the 29 lines com­pa­nies based on the ef­fi­ciency of their charg­ing struc­ture early next year.

Net­work charges ac­count for more than a quar­ter of av­er­age res­i­den­tial power bills. This rises to about 37 per cent when the costs of na­tional grid op­er­a­tor Trans­power are in­cluded.

But be­cause most are based on flat per-kilo­watt-hour charges, they pro­vide no price sig­nal to con­sumers as to when they should use more or less elec­tric­ity. They also risk al­low­ing house­hold­ers in­stalling so­lar pan­els to avoid their fair share of net­work charges, in turn putting more of that cost on fam­i­lies with­out so­lar.

Net­works are al­ready work­ing to change the way they charge and the Elec­tric­ity Net­works As­so­ci­a­tion (ENA) has been lead­ing a tech­ni­cal pro­gramme on the op­tions avail­able.

At least eight lines com­pa­nies, sup­ply­ing more than 40 per cent of the coun­try, of­fer time-of-use charges for house­holds. Three oth­ers also charge based on net­work peak de­mand.

But there are con­cerns among net­works as to how shift­ing to de­mand-based or time-of-use pric­ing could im­pact con­sumers with­out the means, or un­der­stand­ing, to adapt their us­age. Avoid­ing com­plex­ity is an­other driver.

The Lines Com­pany, based in Te Kuiti, last year scrapped its decade-old de­mand-based charges due to on-go­ing op­po­si­tion from some cus­tomers who didn’t un­der­stand or trust it. The com­pany has since opted for time-of-use charges in­stead.

Last month the ENA said the changes planned are the big­gest in 100 years and many of its mem­bers wouldn’t start the work un­til 2020.

Among the is­sues yet to be re­solved was the ru­ral-ur­ban cross-sub­sidy that ex­ists on most net­works. “Changes must be sup­ported by con­sumers, and other im­por­tant stake­hold­ers such as elec­tric­ity re­tail­ers. That’s why dis­cus­sions on pric­ing re­form need to fo­cus on the end-con­sumer and en­cour­age con­sumers’ ac­tive par­tic­i­pa­tion around pric­ing op­tions,” the ENA said in its sub­mis­sion to the Gov­ern­ment’s re­view of elec­tric­ity pric­ing. “Pric­ing re­form must not be dic­tated by eco­nomic the­o­ries, as the im­pacts on peo­ple are more im­por­tant.”

The au­thor­ity says it has been heart­ened by the ENA’s work, but dis­ap­pointed by the plans of some net­works which have “lacked rigour and com­mit­ment to time­frames.”

“Given the cost pres­sures faced by con­sumers and the loom­ing com­mer­cial im­pli­ca­tions for elec­tric­ity dis­tri­bu­tion busi­nesses of in­ef­fi­cient in­vest­ments, the need for price re­form is more ur­gent than ever.”

It plans a con­sul­ta­tion shortly on changes it may make to its prin­ci­ples for dis­tri­bu­tion pric­ing. But in the mean­time it has pro­moted three op­tions, none of which it con­sid­ers com­plex and all of which would be an improve­ment on cur­rent mod­els.

Each would com­prise a fixed charge. Op­tions would then in­clude a sea­sonal time-of-use charge, a static de­mand charge, or a dy­namic de­mand charge.

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