01 July 2011Archived News
Latest trends in network and energy prices
This article considers the latest trends in network and energy prices, and opportunities to significantly reduce your electricity costs through tariff analysis, planning and renegotiation of your electricity supply contracts.
Increase in network costs
Network costs make up roughly 50% of delivered electricity costs and are regulated by the Australian Energy Regulator. Network tariffs are revised each year on 1 July in all states except Victoria, where revisions occur on 1 January. The table to the right shows the approximate network increases by state from 1 July 2011 and their total cost impact.
The increases shown are averages across a range of tariffs. In some cases specific sites could see a different increase, or even a decrease in rare cases. Although network prices are regulated, most customers will have a choice of tariff that can be applied to billing.
Energetics can assist by reviewing your portfolio and advising the optimal tariff arrangement for your business. In a tariff optimisation project carried out in June 2011 for one of Energetics’ clients, Energetics identified over $170,000 savings per year for electricity accounts in just one network area.
Low energy costs
Electricity market prices, which determine the energy cost component of your electricity contract, have remained low and stable during the last 12 months. This means that most customers who are renewing contracts agreed in the last three years will achieve a reduction in the negotiable portion of delivered electricity costs. Market prices are not expected to remain at current low levels, with long-term price drivers indicating that prices will rise in the coming years. The graph below shows recent price trends in electricity contract for 2011/12 in NSW, Qld, Vic and SA.
Current low market prices represent a good opportunity to forward contract beyond the expiry date of your existing agreement. Many end-users are taking the opportunity to recontract early to provide forward budget certainty and to lock in the low contract rates that are available. A client who recently re-contracted their electricity commencing 1 July 2011 has reduced their future energy costs by $515,000 a year.
How can Energetics help?
The energy market presents both risks and opportunities to your business. Energetics regularly provides market briefings for our clients and can identify opportunities for immediate cost savings. Energetics is happy to deliver a short briefing for your business to help you develop a strategy to minimise your energy costs.