DISCLOSURES

Settlement residual allocation methodology

Settlement Residual Allocation Methodology – SRAM

 

Introduction

As part of its ongoing efforts to ensure the equitable distribution of system administration costs, the Electricity Authority has introduced significant amendments to the Electricity Code and the benchmark transmission agreement. Effective from 1 October 2023, these changes introduce default terms allowing Transpower, the national grid operator, to recover its costs related to the administration of the Settlement Residual Allocation Methodology (SRAM).

Key Amendments Overview

The recent amendments are pivotal, as they automatically incorporate specific terms and conditions into all existing transmission agreements, including those agreements not originally based on the benchmark framework. This inclusion is vital for maintaining the integrity and fairness of cost allocation across the electricity market.

SRAM Cost Recovery

Transpower’s SRAM plays a crucial role in the electricity market, ensuring that the costs associated with electricity transmission are fairly allocated among retailers. The amendments facilitate Transpower in recovering the administration costs associated with SRAM from market participants, thereby promoting a more balanced financial responsibility among stakeholders.

Methodology and Allocation

The methodology underpinning the SRAM cost allocation to retailers is centered around the Revision 0 billing volume for the first 11 months of the 2023/24 financial year. This approach ensures a transparent and equitable basis for cost distribution, reflecting the usage and impact of different market participants on the national grid.

Role of Buller Electricity

Buller Electricity has been designated the responsibility to distribute the SRAM administration costs among retailers. This distribution will occur annually and is designed to ensure that all retailers contribute fairly to the costs incurred by Transpower in administering the SRAM, based on their respective impacts on the grid.

Conclusion

The amendments to the Electricity Authority Code and the benchmark agreement represent a significant step towards a more transparent and equitable electricity market in New Zealand. By establishing a clear mechanism for the recovery of SRAM administration costs, the Electricity Authority aims to ensure that all market participants bear a fair share of the system’s operational costs. These changes underscore the commitment of the Authority and industry stakeholders to maintain a balanced and efficient energy sector.