The National Energy Customer Framework: are there opportunities for your business?
The National Energy Customer Framework (NECF) is a new development that applies in some jurisdictions of the National Electricity Market (NEM). Its aim is to standardise the protections for small site owners and promote full retail contestability. NECF is a suite of legal instruments that regulate the sale and supply of electricity and gas to retail customers and requires adherence to the National Electricity Rules (NER) for states that legislate to adopt the framework.
Cost savings opportunities may be created for customers through aggregation of the small accounts in their electricity portfolio. While only a small number of businesses may be eligible, the savings potential can be large.
This article outlines both the background and the opportunity for business.
The NECF was developed by State, Territory and Commonwealth Energy Ministers through the Council of Australian Government’s Standing Council on Energy and Resources and currently applies in:
the Australian Capital Territory (commenced 1 July 2012)
Tasmania (commenced 1 July 2012)
South Australia (commenced 1 February 2013)
New South Wales (commenced 1 July 2013)
Queensland (commenced 1 July 2015)
The NECF does not yet apply in Victoria, Western Australia or the Northern Territory.
Cost savings opportunities may be created for customers through aggregation
Under NECF electricity retailers can aggregate some or all of a business customer’s small accounts, providing the customer has given their explicit informed consent. This is covered in rules 4 and 5 of the National Energy Retail Rules. With consent, retailers may aggregate or switch a number of small market sites that are below the contestable threshold to become large sites. The network cost component would still be payable and the small market meter would be replaced with a large site meter.
Small accounts are typically charged at a significant cost premium to large accounts, presenting considerable savings opportunities for customers by aggregating eligible small category accounts to be billed as a large customer.
How does a business assess the opportunity?
In order to determine eligible accounts and assess the cost implications of aggregation, detailed analysis is required to compare current total costs for small accounts to possible total costs should the account be converted to large account.
This analysis requires six steps to be completed. Within those steps consumption and cost data needs to be collected and analysed to determine spend, and the range of charge scenarios need to be modelled and assessed for suitability to aggregate.
Energetics can help
Energetics is at the forefront of these changes and has identified considerable savings opportunities for a number of key clients. To learn more about the detailed activities at each of the six steps, contact one of our energy market experts.
For large energy users with many small category accounts, these developments may drive lucrative savings opportunities with a minimal up-front cost.