Understanding extra charges on your electricity bills

28 Oct 2010Archived News Climate Change Matters

There are a number of extra charges creeping onto electricity bills over and above your usual retail energy and network costs, in some cases adding as much as 5% to total costs. If you have a large site and have unbundled electricity billing you should see these charges as separate lines on your bill. However, if you have a small site, these charges will be rolled into the bundled prices so they won't be as obvious.

In Energetics' previous newsletter we discussed the substantial increases in network costs coming through in most states. Although these are regulated, many of Energetics' clients have reviewed their network tariffs and seen significant savings through changing to a lower cost tariff. It is advisable to undertake a tariff review when new network charges are published in January and July as there may be an opportunity to transfer easily to a lower cost tariff.

In August 2009, Energetics' newsletter also addressed the increases in state mandatory environmental charges. The focus in this article was that regardless of the absence of a national price on carbon, these state charges would continue to represent a significant cost to business.

In this newsletter, we look at how these extra charges will impact clients now and in the future and advise how much they should really be paying. Some charges are regulated, while others can vary widely between retailers. Energetics advises clients to challenge retailers to check that they are receiving the best deal. When seeking a new electricity contract, account for all the extra charges quoted and where they come from as, in some cases, the best rates do not represent the lowest cost offer once all extra costs have been taken into account.

Large-Scale Renewable Energy Target (LRET)

Charges for Renewable Energy Certificates (RECs) have appeared on electricity bills for some years. Now that the renewable energy target has increased to a 20% target in 2020, there will be separate ‘large’ and 'small' schemes, called LRET and SRES. These are federal government charges to fund large-scale renewable energy projects such as wind farms. The charges are not regulatory and can be negotiated with the retailer. RECs under LRET should cost around $3/MWh this year but will more than double over the next few years. The certificates themselves are currently trading at around $35 each but, as the target increases, the certificate cost is also expected to increase to ensure that supply of renewable energy meets demand.

Small-Scale Renewable Energy Scheme (SRES)

This is a new scheme to fund small-scale residential solar power and hot water systems, where certificates generated have a fixed price of $40 each. Charges on electricity invoices will start from 1 January 2011, but they are effectively uncapped, unlike the large-scale scheme, which has a fixed target. The implications of an uncapped scheme for small-scale generators, is a far higher realisation of renewable energy generation than was originally forecast under the expanded RET scheme. To account for this potential additional renewable capacity and the uncertainty of regulated costs on retailers, most retailers are treating SRES as a pass-through cost to customers. Retailers will not fix customer prices until the government announces the target for the following year. Energetics expects these charges to range from between $2 to $6/MWh. Energetics advises clients to check what their retailer is intending to pass through.

Gas Electricity Certificates (GECs)

GECs apply in Queensland only and are used to fund 15% gas-fired generation in the State. GECs are traded so prices do vary but have remained stable to date. Prices on an electricity bill should be around $1/MWh.

NSW Greenhouse Gas Abatement Certificates (NGACs)

NGACs apply in NSW only with prices also traded and stable. In this case, prices should appear at around $2/MWh on an electricity bill. There is an equivalent AGAC scheme that applies in the ACT.

Energy Savings Certificates (ESCs)

ESCs are applied in NSW to fund energy efficiency initiatives in the State. The number of certificates required will increase annually, and so the cost will also increase annually. For this year, prices on an electricity bill should be around $1/MWh.

Total Impact

The chart below shows what the total impact is for each state and territory. With an average delivered cost of $120/MWh for a large site, these costs will be around 10% of an electricity bill next year.

AEMO (Australian Energy Market Operator) Pool Fees

AEMO pool fees are fixed for each financial year, and are currently around $0.40/MWh (or 0.4c/kWh).

Ancillary Services Fees

Ancillary services fees vary on a weekly basis and are passed through by the AEMO to retailers who, in turn, pass costs onto customers. Generally the retailers set the price at one level and then reconcile this quarterly or annually. Energetics advises clients to check that this reconciliation has taken place as, in some cases, ancillary services fees are overcharged. On average, these fees should be around $0.50/MWh.

Metering

Metering charges are usually set by the retailer, but can range from between $600 to $1,300. It is possible for customers to negotiate directly with their meter provider, as opposed to negotiating through their retailer. Direct negotiation with a meter provided can result in a better price, but also gaining access to next-day consumption data via the internet and a variety of reports.

For further information, contact Energetics about:

  • Optimising network tariffs: a number of clients have recently saved over $100,000 annually from a tariff review;
  • Reviewing metering arrangements and accessing a direct and more transparent service at lower cost;
  • Checking electricity bills to ensure charges are correct;
  • Contracting electricity and gas needs: Energetics can ensure all extra charges quoted are the best value and that prices are fixed to minimise surprises; and
  • Budgeting and planning for future energy costs to make allowances for any price increases.
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