Transmission Rentals

Transmission rentals are the surplus created in the wholesale electricity market once purchasers have been invoiced and generators have been paid. Nodal pricing is used to calculate wholesale electricity prices based on marginal costs at injection and offtake points. Surpluses arise because:

• losses are priced at the marginal loss rate while loss quantities are determined by the average loss rate (which is lower than the marginal rate)
• when a constraint occurs, consumers pay for all the energy consumed at nodes “downstream” of the constraint at the (higher) marginal prices set at those nodes, but some of the energy consumed at the “downstream” nodes is generated at “upstream” nodes where the prices are lower, and generators injecting at those nodes receive those lower prices.

Each month Transpower allocates the transmission rentals back to customers in accordance with the methodology set out in Transmission Rentals (Losses and Constraints Excess Payments).

Transmission rentals are the surplus created in the wholesale electricity market as a result of nodal energy pricing, which prices transmission losses and constraints at marginal cost. More details on how transmission rentals arise and how the rentals Transpower receives are allocated are in Transmission Rentals.