Energy Pricing Update

01 May 2007Archived News Climate Change Matters

NEM update - May 2007 | Tasmanian Electricity Market Continues to Deregulate - Deadline for 20 GWh Tranche to Enter Market Nears | EnergyAustralia Network Tariffs Increase 6.4% from 1 July | Synergy Tariff Increases |Emissions Trading Scheme Update


NEM update - May 2007

Electricity prices in the National Electricity Market (NEM) continue to rise steeply in all states. Calendar 2008 contract prices have been most severely affected, however in recent weeks there have also been sharp increases in prices for contracts starting in 2009 and 2010. The change in Calendar 2008 (Cal08) futures prices since the beginning of 2007 is shown in Figure 1.

Figure 1 - Electricity Supply Contracts - Calendar 2008 Futures Prices

Figure 1

Source – d-cypha trade

The table below shows the effect of the market price increases since 2nd April 2007 on the 2008 electricity cost of a 10GWh site.

State Cal 08 Market Price at 2nd April 07 $/MWh Cal 08 Market Price at 17th May 07 $/MWh Percentage Increase Additional 2008 Cost
NSW 52.68 73.78 40.05% $211,000
QLD 52.09 81.31 56.10% $292,200
SA 46.90 59.20 26.23% $123,000
VIC 52.99 68.25 28.80% $152,600

Any drop in electricity prices is predominantly dependent on there being drought-breaking rainfall in Snowy, Tasmania and South East Queensland. Should this not occur it can be expected that future contract prices will continue to rise as we get closer to the contract start date.

Current market volatility is also impacting on the physical process of securing contracts, with some retailers not quoting for new business as they find it increasingly difficult to secure backing from generators. Additionally, where quotes are being received they are often only valid for acceptance for very short durations.

Tasmanian Electricity Market Continues to Deregulate - Deadline for 20 GWh Tranche to Enter Market Nears

With the anniversary of contestability for 20GWh+ sites in Tasmania fast approaching, large energy users in the state need to ensure they have a negotiated contract in place to avoid moving onto the "Fallback Contract" on the 1st of July this year. Retailers participating in the Tasmanian market include Aurora, Integral and Country Energy. However, customers are generally entering into contracts to manage risk, not capture savings, with many large users facing an increase in energy costs under the new arrangements. Supply constraints of hydro generation are having a major impact on prices.

Further deregulation is occurring on 1st July with 4 GWh+ customers becoming contestable, followed by 750 MWh customers in July 2008. In each case there is a 12 month grace period where the regulated tariff can still apply. Beyond this timeframe customers must have a negotiated contract or they will be supplied under the "Fallback Contract".

While the government has explicitly stated that the Fallback Contract is not a safety net and it will be linked to the pool price, there are parameters in place to determine how the price for the contract will be set, and it needs to be approved by the Tasmanian Energy Regulator.

EnergyAustralia Network Tariffs Increase 6.4% from 1 July

EnergyAustralia (EA) has released details of their updated network tariffs for financial year 2007/08. Under the new tariff rates network use of system (NUoS) costs in 2007/08 will increase on average by 6.4%. This price increase is to account for ongoing costs and allowance for capital expenditure to meet reliability standards.

In addition to the cost increase, EA has made some structural changes to its tariffs. In particular there is an increasing emphasis on capacity charges and a move away from measuring demand in kW. These changes are intended to encourage customers to improve their load factor and their power factor.

The capacity component of network costs for large business customers on kVA demand tariffs (EA310 to EA390) has increased while the demand component has decreased. EA plans to phase out the demand components over the next two years by rolling them into the monthly capacity charges. Under the new tariff structure, customers with a low (or poor) load factor will experience higher increases in their charges than customers with a high (or good) load factor.

Customers on the existing EA302 or EA303 tariff will be moved to the EA305 or EA306 tariff, where capacity charge will no longer be measured on a kW basis but on a kVA basis. Note that there will be a reset for the capacity value for these accounts.

Synergy Tariff Increases

In the state budget on 10th May 2007 the Western Australian government announced large increases to the cost of electricity for medium to large businesses while keeping costs for residential and small businesses frozen until 2009.

The changes affect businesses charged under Synergy Energy’s published tariffs and represent the first tariff increases in 15 years for medium to large business in Western Australia. The increase is due to the higher cost of generating, transmitting and retailing electricity, especially with the increased demand caused by high economic growth over the last couple of years in Western Australia.

The following outlines the approximate cost increases in 2007/08 for the effected Synergy Energy tariffs:

  • R3 tariff which applies to businesses consuming greater than 50MWh pa will increase by 9%;
  • S1 tariff which applies to larger low voltage customers will increase by 15%; and,
  • T1 tariff, which applies to high voltage customers, will increase by 18%.

Each of the above tariffs will increase by 5% each year for the next four years.

Customers with sites on contract will need to talk to their account manager to find out if there will be any cost increases for their accounts.

The following link shows the tariffs effective 1 July 2007.

Emissions Trading Scheme Update

The Council for the Australian Federation agreed at its 12 April 2007 meeting that national greenhouse emissions reporting would commence by 1 July 2008, either through purpose-built legislation or through the National Pollutant Inventory.

The Council agreed that, as emissions reporting is a fundamental pre-requisite of any emissions trading scheme, if the Commonwealth Government has not introduced legislation in time for the National Greenhouse and Energy Reporting System to be activated by 1 July 2008, the States and Territories will require reporting from this date through the National Pollutant Inventory as an interim measure.

The Council also:

  • agreed that a national emissions trading scheme (NETS) should place Australia on a path towards achieving a 60% cut in national emissions by 2050, compared with 2000 levels;
  • endorsed the National Emissions Trading Taskforce timeline for the implementation of a national emissions trading scheme by the end of 2010. Achieving that timeline includes:
    • entering into an intergovernmental agreement by the end of 2007; and
    • passing legislation through all Parliaments by the end of 2008 or as soon as possible thereafter to achieve implementation of the NETS by the end of 2010.


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