Each month Network Tasman receives settlement residue payments from Transpower (the operator of the national transmission network).

These settlement residue payments occur because the wholesale electricity market (wholesale market) produces surplus funds. The wholesale market is settled each month using half-hourly spot prices. Downstream spot prices are generally higher than upstream spot prices, due to transmission losses and congestion. These price differences mean consumers pay more for electricity than generators receive. As a result, after wholesale market settlement, surplus funds are left over: the settlement residue.

Transpower must pass on this settlement residue to its customers (including Network Tasman). If Transpower
retained these funds then it would over-recover its costs, ie, customer payments in aggregate would exceed Transpower’s transmission network costs.

Similarly, Network Tasman is required to pass on the settlement residue we receive on to our customers (electricity retailers and directly billed customers) in proportion to the transmission charges each customer pays to Network Tasman. The full methodology for passing on these revenues is set out in our annual pricing methodology.

In addition to disclosing our allocation methodology, we are required to publish an annual breakdown of the settlement residues we have paid to each of our customers. The breakdown for the 2023/24 pricing year can be found here.