Loss rental rebates (LRRs) are the difference between the price and quantity of electricity generated and the price and quantity of electricity received, creating a difference in cost, which is only known later on. LRRs are allocated to electricity distributors around the country including Vector in Auckland.
This is complicated so stick with us as we try to explain it.
Vector’s electricity lines business is regulated by the Commerce Commission which decides how much we can earn over a five-year period. In simple terms, revenue not recovered in one year can be recovered in later years.
Given the impact of Covid-19 and lower use of electricity in Auckland, we are changing our recent approach of distributing LRRs and in the coming year will instead use them to help minimise any future prices increases that might occur. We want to smooth the impact of future price increases for customers by using loss rental rebates effectively as a ‘shock absorber’.
It is important to note that customers will not be disadvantaged by this. In one way or another, these funds will be used for consumers – either through limiting price increases or distributed directly to our customers.