electricity pricing

Passing through Transpower's transmission costs

Transpower's recent transmission pricing methodology (TPM), effective from 1 April 2023, has driven a rethink of our price structures.  

Prior to 1 April 2023, distributors were allocated transmission charges mainly based on their share of peak usage.  The recent TPM removes any peak signal in transmission prices.  In addition, in October 2022, the Electricity Authority published its latest version of the Distribution Pricing: Practice Note that provides principles and guidance on the treatment of transmission charges by distributors when setting line charges, focusing on the recent TPM.  Changes are therefore necessary in our transmission pricing approach.

From 1 April 2023, we have introduced a bulk grid exit point (GXP) based pricing method for the recovery of transmission pass-through costs.  Under this method, the transmission price has ceased to be a unit charge and is instead calculated by an apportionment approach, using each electricity retailers’ historic volume share at each GXP to determine their fixed monthly transmission charges. The transmission pass-through cost will now be bulk charged to retailers and direct/billed customers and no longer tied to individual installation control points (ICPs, which are points of supply connection between the local network and consumers).

We believe this approach to transmission cost recovery is more consistent with both how we are charged by Transpower under the recent TPM and with the Electricity Authority's pricing guidance for unavoidable, fixed-like and location-based charges.

This approach means that there are two components to the Vector line charges: the electricity distribution network charge and the transmission pass through charges. The network charge remains ICP based, but the previously including transmission component has been removed. Please note how we charge electricity retailers for transmission costs may be different to how your electricity retailer charges the transmission costs to you.

For further explanation, please refer to our pricing methodology.

Changing your Vector pricing category

Our pricing categories depend on the connection type and metering configuration at your property. It may be possible for you to change your pricing category, but you may need to make changes to your connection. Please contact your electricity retailer to find out more.

Capital contributions 

Vector’s line charges are set to recover the costs of owning and operating the electricity distribution network as it currently exists. When you add a new connection or enhance an existing connection to Vector’s electricity distribution network, you will typically be required to pay an upfront one-off capital contribution that covers the incremental costs that would be incurred by Vector from augmenting the network that Vector would not otherwise face ‘but for’ the new connection or upgrade. That is, the capital contribution would include the full cost of the connection at the point of supply and a development contribution towards the capital investment we make in the infrastructure that supports overall network growth. Charges for new and enhanced electricity connections differ depending on the complexity of the connection.

Click here for more information on electricity connections.
Click here for detailed information on capital contributions.