Capital contributions are payments that may be required for new or upgraded connections to Power and Water’s electricity network. The purpose of these contributions is to ensure that costs for a customer’s new or upgraded connection are paid for by that customer and not shared by everyone connected to the network.

The Utilities Commission has approved a revised Network Capital Contributions Policy to apply from 1 July 2014.

This revised policy replaces the Distribution System Extension Policy (DSEP) and the previous Networks Capital Contribution Policy, and will ensure more equitable outcomes for both new and existing networks users and make the capital contributions process more efficient and simple for network users to follow.

The capital contributions regime has been established in accordance with the provisions of the Electricity Networks (Third Party Access) Act.

For developers

A developer is a person or a corporation who arranges connection services for a network user or the power servicing requirement of a development to allow the provision of connection services to expected future network users. A development includes subdivisions, multi-dwelling developments, amalgamations or rezoning/specific use developments.

For all developments, the developer will be responsible for meeting the following costs:

  • All connection assets dedicated to the development, from the point of the connection
    to the shared network. Connection assets are gifted to Power and Water and
    maintained and operated by Power and Water.
  • Network costs associated with the provision of the connection, including design
    certification, contract inspection and final connection and commissioning costs.

Power and Water will fund the augmentation of upstream shared assets if it has been allowed for within Power and Water’s network planning horizon.

Subject to approval by Power and Water, a network user may elect to make a capital contribution in the form of contributed assets, a financial payment or a combination of both. Power and Water may, under certain circumstances, require a prudential guarantee from developers.

For subdivisions, amalgamations and re-zonings

No change – developer contributes full costs associated with assets downstream of the connection point to the shared network.

For Serviced Lots

Under DSEP, a capacity charge of $50 for kVA increases in demand above the existing supply and $5000 for additional substations required applied. Under the new NCCP, any activity on a serviced lot requiring a development permit will be treated as a development. The developer will contribute the full cost associated with the dedicated connection assets.

For small and large individual network users

A small individual network user is an existing or potential end-use customer that has alow voltage connection and/or a projected (or actual) demand less than 4MVA.

For upgrade to serviced property

Under DSEP, a capacity charge of $50 for kVA increases in demand above the existing supply and $5000 for additional substations required applied. Under the new NCCP, the capital contribution is based on the present value of the costs associated with the upgrade less 50% of the present value of the projected future tariff revenues.

For extensions to unserviced areas

Under DSEP, a network extension charge of $15 000 per km for single phase and $21 000 for three phase applied. This was shared equally between applicants, less the total of all $2000 Overriding Statutory Charge placed on blocks not participating to a maximum of 50% of the extension charge. A network connection charge of $5000 for single phase and $8000 for three phase also applied. Under the new NCCP, the capital contribution is based on the present value of the costs associated with the upgrade less 50% of the present value of the projected future tariff revenues.

A large individual network user is an existing or potential end-use customer that satisfies either of these criteria:

  • A high voltage connection and a projected (or actual) demand of 4MVA or greater; or
  • Is connected to (or seeking connection to) a dedicated supply that is different or remote or separate from the remainder of the supply network.

The identification of large individual network users will be at the discretion of Power and Water.

The only change under the proposed new NCCP for Large Individual Network Users is that the capital contribution calculation has been modified to allow for projected future tariff revenues earned from the connection to be offset by shared network costs, in recognition of the attribution of incremental network tariff revenue to the costs of the existing network.

A capital contribution from a small or large individual network user will only be required if the cost of the required works cannot be fully recovered by Power and Water through future network tariff revenue, offset by shared network costs, over a 15 year period for large individual network users and a 30 year period for small individual network users. Subject to approval by Power and Water, a network user may elect to make a capital contribution in the form of contributed assets, a financial payment or a combination of both.

A cost sharing scheme may apply to small and large individual network users. Network users that make contributions to connection assets that are subsequently used by other network users may be entitled to a proportionate rebate of costs, based on use of the network by the existing and new users.

Power and Water may, under certain circumstances, require a prudential guarantee from small and large individual network users.

For generator users

A generator user is a network user who has been granted access to the electricity network by the network provider and who supplies electricity into the electricity network at an entry point.

The generator user will be responsible for meeting the following costs:

  • Connection assets dedicated to their connection; and
  • Augmentation of upstream shared assets.

Power and Water may fund, on a proportional basis, network assets with a capacity above the optimal size required by the generator user where other network users may benefit from the connection or augmentation works to the shared network.

Subject to approval by Power and Water, a network user may elect to make a capital contribution in the form of contributed assets, a financial payment or a combination of both.

All generator users seeking the provision of network access services will be required to enter into formal access agreements with Power and Water, unless otherwise agreed by both parties.

There are no major changes for the generator user.

More information about the network capital contributions policy

Prior to 1 July 2014, Power and Water’s capital contributions framework was set out in two separate policies:

  • Distribution System Extension Policy (DSEP), which covered extensions to unserviced areas and the development of serviced lots; and
  • Networks Capital Contributions Policy (NCCP), which applied to the new or upgraded network connections of larger network users and generators.

The Utilities Commission has approved a new Network Capital Contributions Policy (new NCCP) to apply from 1 July 2014. The main changes are:

A single new policy will replace Power and Water’s two separate policies and will apply to all network users.

  • Capital contributions will apply to all new connections based on full cost recovery principles, including extensions to unserviced areas.
  • The capital contribution calculation has been modified to allow for projected future tariff revenues earned from the connection to be offset by shared network costs
    (50%), in recognition of the attribution of incremental network tariff revenue to the costs of the existing network.
  • All capital contributions will have to be paid in full prior to connection – there will be no loans provided.
  • A cost sharing scheme will apply to address equity concerns.

Implementation of the new policy will ensure more equitable outcomes for both new and existing networks users, and make the capital contributions process more efficient and simple for network users to follow.

A Dedicated Connection Asset is a connection asset for a single network user.

An Upstream Shared Asset is a network system asset that is used in the conveyance of electricity to more than one network user.

The following diagram is an example of Dedicated and Upstream Shared Assets.

Example diagram of dedicated connection assets and upstream shared assets for network capital contributions

Network users contribute the full cost of Dedicated Connection Assets as these costs are directly attributable to the network user. However, the funding of augmentation to Upstream Shared Assets differs depending on the class of network connection.

Network users that make contributions to connection assets that are subsequently used by other network users are entitled to a proportionate rebate of costs, based on use of the network by the existing and new users.

Cost sharing rebates are made for a period of up to five years from the time of connection of the first network user. Cost sharing rebates will not apply to developers.

For more information please contact us.