Past TPM developments

The Electricity Industry Participation Code 2010 provides for both the Electricity Authority and Transpower to review an approved Transmission Pricing Methodology (TPM). 

 

Reasons for review of the TPM

The Electricity Authority may review the TPM if it considers there has been a material change in circumstance (clause 12.86 of the Code). We may also review the TPM under clause 12.85 of the Code. In October 2012 the Electricity Authority initiated a clause 12.86 review of the TPM.  Go to Electricity Authority's 2012 proposal to view our supporting analysis and information.

Through 2013 and 2014 it released a sequence of working papers on various policy and practical aspects of our pricing for further consultation. In June 2015 it published a TPM Options paper which we made a submission to in August 2015, which can be viewed, along with other submissions, here.

 

Transpower TPM operational review

The Electricity Authority approved variations to the TPM after our operational review under clause 12.85 of the Code.

The changes are intended to affect grid use behaviours from September 2015 which are then reflected in charges from April 2017.

In summary, the  variations approved are

  1. Upper North Island and Upper South Island regions have RCPD charges based on  N = 100 trading periods (from N = 12 trading periods).
  2. The Capacity Measurement Period (CMP)  is reduced to six (winter) months: the September – August year now excludes six months November – April. This applies to the Upper North Island, Lower North Island and Lower South Island regions. Upper South Island retains the full CMP (a full year)
  3. A new provision for remedying any adverse pricing effects when Distributors create a GXP-tie
  4. South Island generators are charged for HVDC based on their average MWh

Further explanation of the changes is available here [ pdf 291.43 KB ].

The Electricity Authority approvals bring to a close this operational review.

Operational review process timeline

Code amendment proposal update

On 13 February 2015 Transpower submitted a proposal to amend the TPM.  On 3 March Transpower briefed the Authority Board on that proposal. One matter discussed was whether the solution we had proposed to the problems identified in the lower South Island (LSI) RCPD region could be addressed through a general solution that could potentially benefit all consumers.

On 24 March we submitted to the Authority two further additional components to our 13 February proposal.  These are:

  • RCPD capacity measurement period (CMP) change. This component would remove the, generally non-peak, period from November – April (inclusive) from the RCPD capacity measurement period.

  • RCPD quantity adjustment provision. This component would authorise Transpower to adjust a customer’s RCPD quantities in specific circumstances to remove an RCPD deterrent to extraordinary consumption.

On 14 April, the Authority wrote to Transpower advising that it had approved four components of our proposal for consultation (its consultation can be found here). At the same time, the Authority referred three proposals back to Transpower (under clause 12.91 of the Code). On 8 May, 2015, we responded to the Authority on the proposals it referred back to us. All correspondence is below. 

Correspondence and supporting material
Letter from the Authority to Transpower 16 March 2015 [ pdf 77.41 KB ] 
Letter from Transpower to the Authority 24 March 2015 [ pdf 375.48 KB ]
Additional component: RCPD CMP change [ pdf 522.71 KB ]
Additional component: RCPD quantity adjustment provision [ pdf 371.84 KB ]
Letter from the Authority to Transpower 14 April 2015 [ pdf 1.44 MB ]
Transpower response to Authority 8 May 2015 [ pdf 482.63 KB ]

Transpower response to Authority Appendix B HVDC charging 8 May 2010 [ pdf 360.18 KB ]

Additional documentation and supporting materials are posted on the Authority’s TPM operational review page.

Code amendment proposal

We have completed our first operational review of the TPM. On 13 February 2015, we recommended that the Electricity Authority consider five amendments to the TPM:

  • change the basis for allocating HVDC costs to South Island generators from peak (MW) to average (MWh) injection
  • increase the number of charging periods from 12 to 100 for the Upper North Island and Upper South Island regions
  • put bespoke arrangements in place to improve pricing stability in the Lower South Island and to support increased summer production at the Tiwai aluminium smelter
  • modify the averaging approach for lines maintenance costs
  • put a mechanism in place to deal appropriately with reverse flow situations.
Proposal documents
Code amendment proposals cover letter [ pdf 292.89 KB ]
HVDC Code amendment proposal [ pdf 371.67 KB ]
RCPD N Code amendment proposal [ pdf 229.98 KB ]
NZAS Code amendment proposal [ pdf 378.78 KB ]
Line rates Code amendment proposal [ pdf 378.86 KB ]
Reverse flows Code amendment proposal [ pdf 195.72 KB ]
Background and supporting information paper [ pdf 1.26 MB ]
Scientia Consulting HVDC report [ pdf 1001.11 KB ]
Price effects analysis and RCPD [ xlsx 74.7 KB ]

Consultations

We published an initial consultation on the TPM operational review in July 2014, followed by a second consultation on 13 November 2014.

Read the consultation papers and submissions

TPM analysis

We are publishing analysis to help inform stakeholders.

Presentation: two RCPD scenario analyses 17 October 2014 [ pdf 598.91 KB ]
Scenario Upper North Island Region N = 12 to N = 100 CMP10/13 [ xlsx 761.62 KB ]
Scenario Upper North Island Region N = 12 to N = 100 CMP 13/14 [ xlsx 909.02 KB ]
Scenario Combine Upper North Lower North and Lower South Island Regions [ xlsx 7.23 MB ]
HVDC market impact of MWh charge: report by scientia consulting 13 October 2014 [ pdf 1.32 MB ]

Operational review update paper

We published an update paper on 22 September 2014.

Update paper [ pdf 647.27 KB ]

Background information

On 21 May 2014 we initiated a review of the TPM to address a number of potential problems identified with the current TPM. If we find out that variations to the TPM are needed, we will propose these variations to the Electricity Authority.

We intend to consult stakeholders on the nature and size of those problems and on the options available, under the current guidelines for addressing these.

Electricity Commission TPM Guidelines for Transpower [ pdf 47.91 KB ]

TPM  supplementary material (2006) [ pdf 1.84 MB ]

We have consulted the Electricity Authority, mindful of their ongoing TPM review. They have indicated that they support this work. We intend to work with the Electricity Authority to ensure our review is complementary to theirs and to minimise burdens on, and uncertainty for, stakeholders.

Potential problems Possible solutions
Having completed investments that enhance capacity into the Upper North Island (UNI) region, the existing pricing signals (designed to signal future investment need) may be inefficient.

We propose to do more analysis on these issues and to investigate options such as 'detuning' the UNI (by increasing the number of RCPD peaks) and reviewing the definition of RCPD regions.

There is a history of unstable pricing signals in the Lower South Island (LSI) region given the size of the Tiwai smelter relative to regional demand.  In addition, LSI peak demand is not a driver for transmission investment in the region.
Successive reviews have identified problems with HAMI as an allocator for HVDC charges. We propose to consider changing to an energy (MWh) allocator for HVDC charges, an 'incentive-free' charging option or a HAMI charge based on multiple peaks.
The four-year averaging period for maintenance costs has created a significant uplift in the maintenance rate for poles as historic costs are allocated against a declining number of assets. We propose to consider a shorter averaging period, or an approach based on the average rate ($/km) rather than average cost.
Charges are not allocated as expected if energy flows into a distributors' network at one GXP and back into the grid at another GXP. We will consider a rule that corrects for the double-counting that occurs in this situation.

While there may be some relatively straightforward solutions to these potential problems, we need to do further work to understand each problem, explore the options available and test these with stakeholders before finalising our view.