Guidance published on LRMC-based distribution rebates and updated eligibility of business consumers

The Electricity Authority Te Mana Hiko (Authority) has published guidance giving distributors practical advice about how to calculate long run marginal cost (LRMC) and use it when deciding their pricing, including rebate payments for injection during periods of peak demand.

From 1 April 2027, the peak injection rebates distributors pay must be based on LRMC of demand. While the requirement applies specifically to injection rebates, we strongly encourage distributors to use the guidance more broadly when developing other cost-reflective network pricing.

This will end the transitional arrangement for the first pricing year (from 1 April 2026) during which we allowed distributors to use the differential between their existing peak and off-peak consumption pricing (with appropriate cost factor adjustments) to set rebate levels.

We consider one year as sufficient time for distributors to adapt their pricing methodologies, and note that the majority have already moved to LRMC-based rebates and pricing.

Benefits

Using the LRMC to improve how both rebates and pricing reflect actual costs will have benefits for both consumers and distributors.

The improved cost reflectivity of peak injection rebates is expected to encourage better decision making on investment in and use of solar and batteries and encourage a shift towards peak injection in the long run. This is expected to reduce or defer the need for distributor network investment, slowing price increases for all consumers over time.

Knowing that the pricing is more accurate and transparent will also give households and eligible business consumers more confidence when choosing whether to install solar and a battery.

Monitoring and compliance

Changes we made to the Electricity Industry Participation Code 2010 (Code), as part of our 2025 decision requiring distributors to pay rebates for peak injection, require distributors’ pricing methodologies to disclose how LRMC was calculated and converted into a rebate. Consumers can be assured the Authority expects distributors to comply with this requirement and that we will monitor and follow up accordingly.

Guidance publication

We have published Guidance on Estimating and Applying Long Run Marginal Cost for Distribution Pricing as a new Appendix D to the existing Distribution Pricing: Practice Note.

Eligibility of business consumers guidance updated

We have also updated Part 6 of the existing Distribution Pricing: Practice Note to reflect the updated eligibility of business consumers to mandated rebates for peak injection. This relates to Code changes resulting from our January 2026 decision to amend the rebate eligibility criteria to business consumers with a connection capacity of up to 45kVA, but whose maximum deliverable distributed generation capacity is up to 45kW.