• Explanation of levy
  
• Levy rates

Levy rates 2009/10

The Commission has published its annual levy rates for the 2009/10 year. Retailers and other participants use these rates to calculate the levies they on-charge to consumers.

The Commission’s expected expenditure for the 2009/10 year is $97m. This represents an increase of $9m (10%) over the expenditure used as a basis for the 2008/09 levy rates. While the Commission has made savings in its own operating costs, the increase has arisen from costs passed on to the Commission under two major contracts. Firstly, a major systems upgrade under the System Operator contract with Transpower NZ Ltd to manage the increasingly complex nature of the electricity system. Secondly, a price index increase in the cost of the contract with the Crown to maintain the Whirinaki power station as a reserve energy source.

The formula used by retailers to calculate the levy rate charged to consumers means that increases in the levy component of a consumer’s bill may vary from retailer to retailer.  In general terms the 10% increase in levies charged to retailers by the Commission would mean an increase in the levy rate in the region of 0.01 to 0.02 cents / kWh. For an average household using 9,000 kWh of power per annum the increase in the annual levy cost will be around $1.00 – $1.50 per annum.

Background

The Electricity Commission was established in September 2003 by the government to oversee and regulate the electricity industry and markets in accordance with the Electricity Act. Its primary duty is to ensure delivery of electricity to all consumers in an efficient, fair, reliable, and environmentally sustainable manner.

The Commission is funded by an appropriation from Parliament, recovered by a levy on the electricity industry. Different rates are levied on generators, retailers, lines companies, and the transmission operator, Transpower. Levy rates for these companies vary every year depending on the Commission’s expected annual costs, the allocation of those costs to its activities and the volume of electricity generated, purchased and conveyed and/or the number of consumer connections.

A large component of the Commission’s budget is spent on agreements with service providers, which are contracted by the Commission to carry out the operation of the electricity market. These agreements are with Transpower, which is contracted to manage the electricity system in real time, and with other companies that administer the electricity market. This spending by the Commission,  and other spending concerned with the management of the wholesale and retail markets, replicates that which was previously recovered from industry participants, through voluntary arrangements or through Transpower’s connection agreements.

Before the Commission was established, market administration and compliance costs were incurred and absorbed by the industry under self-regulation. Now that these costs are paid for by the electricity industry through a levy, they are more easily identifiable and transparent.

• consumer protection and enhanced retail competition;
• managing security of supply―minimising and managing risk of power shortages through the provision of reserve capacity and short-term demand management to overcome capacity constraints;
• transmission governance―developing a framework for Transpower’s planned $1.5 billion upgrade to ensure it is appropriate, robust and timely;
• demand and supply modeling―to support better market operation and capacity planning functions; and
• hedge market development―promoting transparent and liquid hedge markets, particularly those with limited physical cover.

The Commission does not directly charge its levy to end consumers. The net impact to consumers from the above levy changes will depend on each retailer’s consideration of these changes and how it may choose to pass on these changes to its individual consumers. 

For information about the levy amount included within your electricity account, please contact your retailer.