The Problem: “Socialised” Distribution Charges
Right now, every New Zealander pays averaged delivery prices to get electricity to your home.
That means you pay roughly the same line charge whether your power travels:
- 1 km from your neighbour’s solar roof, or
- 1,300 km all the way from Benmore Dam in the South Island to your hot-water cylinder in Auckland.
The true delivery cost isn’t the same — not even close — but the system hides it.
Long-distance users get a discount they don’t realise they’re getting.
Local generation and efficient consumers overpay.
It’s a relic from an era when power only flowed one way and the grid was designed for big central stations, not rooftop solar and EVs.
The Auckland Example
A simple way to picture it:
If it costs about $0.0015 per kWh per km to move electricity through poles and wires, then:
- Supplying 10 kWh from a solar rooftop to a nearby house (1 km) costs 1.5 cents.
- Sending the same 10 kWh from Benmore to Auckland (≈1,373 km) should cost $20.60.
But both consumers pay the same averaged “delivery fee.”
That’s not efficient, and it’s not fair.
Electricity flows along the path of least resistance (Kirchoff’s Law), so distributed generation naturally supplies local consumers first. DER reduces upstream flows, lowers congestion, and should be priced and rewarded accordingly
Why It’s Now Economically Backward
- It hides the real cost of using long stretches of network.
- It discourages local generation that could relieve pressure on the grid.
- It pushes Electricity Distribution Businesses (EDBs, network companies) to over-invest in poles and wires, because that’s how they earn their regulated return.
- It blocks innovation—why build smarter, local energy systems if the price never reflects distance or congestion?
The result is a system that’s expensive to maintain, slow to decarbonise, does not reflect the true cost of delivering electricity and unfair to the communities investing in their own energy resilience.
The Good News — Technology Has Caught Up
We now have the tools to fix it:
- Smart meters record usage by time and place allowing true cost calculations.
- Distributed Energy Resources (DERs) — rooftop solar, home batteries, EVs, and community microgrids — can both consume and supply electricity close to each other.
- Dynamic Locational Pricing (DLMP) can calculate the real cost of delivery at each point in the network in real time.
This isn’t theory anymore. Other countries are doing it.
When local energy reduces stress on the grid, the price at that node drops — rewarding consumers who help.
When a line is congested, the price rises — signalling that local batteries or V2G EVs should discharge to relieve it.
Update: Check out how microgrids of energy routers could facilitate these changes, The Energy Internet
Flipping the Old Model
The old model:
Fixed charges, central generation, consumers pay whatever’s averaged.
The new model:
Dynamic prices, local generation, consumers get paid for helping the system.
Instead of endless capital expenditure and higher fixed fees, DLMP turns data and distributed technology into efficiency. You can choose to buy cheap local or expensive from far away.
Consumers become participants, not just payers.
What It Means for You
- Cheaper power when you use or share it locally.
- Income opportunities from EV-to-grid and smart batteries.
- Lower national costs by avoiding unnecessary network upgrades.
- Fairness — everyone pays in proportion to the real service they use.
The Bottom Line
“We built the old grid for the 20th century. We can price it for the 21st.”
We can optimise the way we use the old grid just by changing the way we price using its assets. Dynamic, location-based pricing will reward those who generate, store, and use energy wisely — saving billions for New Zealand while putting value back in consumers’ hands.
The Energy Minister has to instruct the Electricity Authority to change the rules presently prohibiting a rational system to transport electricity.
Let’s make electricity pricing reflect reality, not history.