Pricing Roadmap (updated 2023)

This webpage is to be considered the primary and current resource for our Pricing Roadmap.

Introduction – Why is Our Pricing Changing?

Waipā Networks, like all New Zealand electricity network operators, is facing both challenges and opportunities from increased use of new customer technologies such as solar generation, battery storage, electric vehicles and energy management.

We also have factors to consider specific to our own network and the communities we serve.  The local population is forecast to increase 32% by 2050 along with significant industrial and commercial expansion due to our proximity to the “Golden Triangle” of Hamilton, Tauranga and Auckland.  Electric vehicle uptake is expected to ramp up adding around 20-30% of a household’s energy use along with the installation of public rapid charging stations for on-the-go purposes.  Businesses, including commercial transport, are likely to install charging stations to service their fleets. Decarbonisation strategies specific to our area are expected to be developed as businesses and organisations work with local government to achieve the best outcomes for our communities.

Significant investment in our Network is therefore required to ensure it is both robust and responsive into the future. To ensure that investment is managed efficiently we need to change the way our electricity is priced.

Traditional electricity prices have been based primarily on rates for the amount electricity used, however the actual cost to network operators to supply customers depends on factors such as:

  • how much power you use at the same time (Maximum Demand),
  • what time of day you use the power (Time of Use),
  • the times when people are collectively using the most power (Network Peaks),
  • the limitations of the sections of network that get power to your property (Network Capacity/Constraints).

Traditional electricity pricing means that some customers pay less than the actual cost to supply electricity to their property while others pay more.  This becomes even more of an issue with new technologies such as solar generation and electric vehicles.  A customer with solar generation would pay less on their power bill, however the cost to supply their property doesn’t reduce as Maximum Demand and Network Peaks usually occur in the evening when the sun isn’t shining.  Electric vehicles can significantly add to Maximum Demand and Network Peaks depending on what time of day they are charged.  Conversely, if a customer has battery storage installed this can help reduce these cost factors if used efficiently.

Shifting from traditional to more cost-reflective pricing ensures more efficient use of the network, efficient investment in new technologies and more fairly reflect the cost to supply customers.

This Pricing Roadmap outlines the plan and timeframe to shift towards more cost-reflective pricing.

What Key Factors Are Considered In Determining The Roadmap

Waipā Networks has a number of factors to consider when developing and updating this Roadmap including:

  • Customers: Engaging with customers to meet their needs and ensure pricing and costs are understood.
  • Electricity Retailers: Engaging with Retailers to better manage transitional price changes and minimise potential price shock to customers.
  • Regulation: Including price/cost impacts of directives from the Electricity Authority and Commerce Commission as well as broader regulatory considerations.
  • Network Cost Drivers: Relating to maintenance and capital investment in the existing network, well planned investment to meet growth, as well as Transmission charges.
  • Waipā Networks Pricing Principles & Objectives: These broadly govern our approach to our pricing strategy and are as follows:
    • Fair and equitable – pricing is fair across customers and equitable – supporting both the network’s need for investment while ensuring that costs are prudently managed.
    • Transparent – Waipā Networks Limited’s pricing should be transparent so that customers, if they choose, can adapt their behavior to optimize their electricity costs.
    • Reflective – Waipā Network’s Limited’s pricing should reflect our expenditure profile and drivers.
    • Simple – pricing should be as simple as practical, facilitating both customer understanding and Retailer uptake.
    • Consistent – pricing should be predictable and year on year volatility should be avoided.
    • Reliable – the return from network income should enable Waipā Networks Limited to invest in network reliability and generate an acceptable return for Waipā Networks Trust.

Key factors are covered in detail in our Pricing Methodology as published on our website.

What Progress Has Been Made So Far?

Waipā Networks first published its Pricing Roadmap in 2017 which outlined its intended transition to more cost-reflective pricing through the staged implementation of mass market Time of Use (TOU).  Although other types of pricing such as those based on demand or capacity were considered, Time of Use was the easiest for customers to understand and therefore most likely to be offered by Electricity Retailers to their customers.  The demand and capacity pricing approaches however were identified as being more cost-reflective than TOU and the intention was to reassess these once TOU had been fully implemented.

The TOU staged implementation began with new and Distributed Generation connections with the final stage originally mapped to be completed by 2019. Waipā Networks used newsletters and online media to engage with customers regarding the changes. However, feedback from Electricity Retailers regarding the delayed rollout of Advanced Meters in the Waipā area combined with limitations in Retail billing systems meant full TOU implementation was not completed until 1 April 2022.  Coinciding with that date, Waipā Networks adjusted its Time of Use time periods to better reflect peaks as well as aligning with other upper North Island networks time periods to help assist Electricity Retailer uptake.

In 2021 Waipā Networks developed a Cost of Supply Model (COSM) which provided the ability to better identify the costs associated with the different customer groups.

From 1 April 2022 Waipā Networks increased its Residential Fixed Daily Charge in accordance with the phasing out of the Low Fixed Daily Charge (LFC) regulations.  This, along with an associated increase in the General Fixed Daily Charge, allows Waipā Networks to recover a higher proportion of its costs through fixed charges thus better reflecting its cost structure.  This approach to the LFC will continue until it is completely phased out in 2027.

What Work Is Currently Underway?

Following analysis provided by the COSM, on 1 April 2023 Waipā Networks began a process to remove cross-subsidies between its Residential, General and Capacity Contract pricing groups. Particularly impacted were the Residential and General groups, which had experienced no differential in their kWh prices for a number of years despite the General group having a lower cost of supply.  As removal of the cross-subsidy sees a significant relative increase for the Residential group Waipā Networks has decided to transition the change in pricing over a 3-year period to minimise price shock.

We also plan this year to review the impact of the mass market shift to Time of Use through assessing if this has been reflected in Electricity Retail price plans and analysing any potential shift in customer demand through price signaling.

Waipā Networks updated introduced a Connection Fee in 2023 for new and upgraded connections to recover the upstream capital costs of new investment which until that point had been borne by the existing customer base. A review of impact of this fee and the broader Capital Contribution Policy will be conducted later in the year.  Part of this review will be to ensure capital investment policies and practices help minimise any first-mover disadvantage and encourage efficient investment in new technologies.

Also in 2023 we are commencing a project to design and implement a Customer Relationship Management System (CRM) which, in conjunction with our recently implemented GIS/network information systems, will:

  • Allow better engagement with key stakeholders including customers and Electricity Retailers.
  • Improve analysis of customer price impacts including management of price shock and energy hardship considerations.
  • Support development of future pricing options beyond Time of Use.
  • Deliver improved management of capital contributions and refunds to first-movers.

What Does the Future Look Like?

Customer adoption of new technology is accelerating particularly with regards to electric vehicle uptake and so Waipā Networks intends to progress its shift to more cost-reflective pricing to ensure customers receive appropriate price signal and are able to make informed investment decisions.   This will include the continued removal of cross-subsidies across existing pricing groups, while also assessing potential cross-subsidies based on geographic location and the impact these have on customers.  We will also explore the introduction of new price plan options based on capacity and demand.  Development of a price option specifically for electric vehicle charging is also planned.

Customer Engagement Is Critical

Waipā Networks engagement strategy when introducing our Time of Use plans focused on awareness and education, however a more comprehensive approach will be required for future pricing to meet both customer and Network investment needs. The implementation of the CRM system will be the first stage of this process with a detailed engagement plan published late in 2023.

The table below outlines the current roadmap.  This will be reviewed on an annual basis and updated on our website.