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Your Energy Charges are the costs of raw electricity (kW) which the retailers purchase from the wholesale market and sell to you as the end user. The rates that you can secure are dictated by a wholesale commodity market which is driven by factors such as base generation, government policy, seasonal demand, and competition.
This section of the bill is one of the largest components of the overall bill and is the only major controllable cost in which your retailer is solely responsible.
The main components of this section:
These are the units of the cost charged by your supplier for varying periods throughout the day. Below is an example of a typical bill for a large energy user:
Electricity users who consume in excess of 160,000 kWh/pa ($40,000 approximately), and are on an unbundled agreement, will find a section labeled “Network Charges” on their bill.
The Network Charges cover the costs to maintain the grid infrastructure and the transport of the electricity from electricity generators across the electricity transmission and distribution networks to your site.
Network Charges generally account for 50 percent of a typical bill. They are reviewed on an annual basis and adjusted to reflect the costs of maintaining and upgrading the system.
The Australian Energy Regulator (AER) oversees networks and monitors compliance within the National Electricity Laws and Rules.
Network charges are reviewed annually.
From the 1st July 2021 electricity users in New South Wales, Victoria, Queensland, South Australia, ACT and Tasmania experience a change in their network charges.
Network charges are billed under various regulated tariffs published by the networks. The charges will typically relate to:
Network costs vary from tariff to tariff for each of the network providers. Your new network costs will be determined by applying your site-specific consumption and demand to the newly approved regulated tariff assigned to your site.
The final details of the increases will be published by each individual network operator a couple of weeks before they become effective.
Environmental Charges are costs associated with complying with Government schemes which are aimed at promoting efficient use of energy, reducing greenhouse gas and funding renewable energy generation.
There are currently six schemes which apply to large businesses:
Both the LRET and SRES schemes are linked to the Federal Government’s targets of 20% of energy generation from renewable sources by 2020.
The other schemes are state-based schemes and are regulated by the state governments.
The regulator estimates how many certificates will need to be surrendered for that year to meet the targets.
Based on this estimate, the regulator determines a compliance percentage of the applicable certificates that the liable entity (your retailer) will need to purchase and surrender on behalf of their customers.
Market Charges are fees which are paid to the Australian Energy Market Operator (AEMO) to operate and maintain the National Electricity Market (NEM).
There are two costs which are categorised under Market Charges:
Depending on which electricity retailer and metering services you use, you may find some other charges on your electricity bill.
These charges are set by either your electricity retailer or meter provider and hence actual charges on your bill may vary in quantity and price.
The National Electricity Market (NEM) and Western Australia’s South-West Interconnected System (SWIS) are the largest electricity markets in Australia. The NEM covers Australia’s eastern and south-eastern coasts and comprises five states: Queensland, New South Wales (including the Australian Capital Territory), South Australia, Victoria, and Tasmania.
The SWIS covers south-west Western Australia. Together the NEM and the SWIS cover eighty-six per cent and eight percent, respectively, of Australia’s electricity demand.
For a detailed explanation of the National Electricity Market in Australia, download this PDF
Source: www.aemc.gov.au
Major reforms, including 5 Minute Settlements (5MS), have been introduced in the National Electricity Market (NEM). These reforms are the culmination of rule changes, innovative digital systems and extensive stakeholder engagement and partnership. AEMO will also report on unaccounted for energy (UFE) values as part of the Global Settlement to be implemented from 1 May 2022.
AEMO is responsible for settlement in the National Electricity Market (NEM) – making sure market generators are paid for the energy they provide, and retailers pay for the energy their customers use. Global Settlement introduction means AEMO settles the market using the same process for all electricity retailers. The introduction of Global Settlement process is expected to lead to fewer settlement disputes and provide greater level of visibility of energy uncertainties, known as Unaccounted for Energy (UFE). There are many sources of UFE, some examples include electrical losses, unmetered loads and estimation errors. What is Unaccounted for Energy? Not all energy consumed is currently accounted for by electricity retailers.
UFE refers to the difference between the amount of energy being drawn into a distribution zone and how much is picked up on the meters that has been consumed by end customers after technical loss factors are applied.
There are many possible sources of UFE, these include electrical losses, unmetered loads and estimation errors.
The cost of UFE, which was previously absorbed by the incumbent retailer, will be passed on to consumers. AEMO allocates the UFE to energy retailers in the distribution area and is pro-rated based on their “accounted-for” energy. The UFE charge will then be passed through by Origin to Business Customers within the Regulated Charges section on their invoice. This charge will be a new line item labelled – AEMO UFE Charge.
Unaccounted for Energy will not be charged for these sites:
AEMO will commence allocating UFE charges to all energy retailers, including Origin, from 1 May 2022 and will be passed through to our Business Customers across all states.
Environmental Charges are costs associated with complying with Government schemes which are aimed at promoting efficient use of energy, reducing greenhouse gas and funding renewable energy generation.
There are currently six schemes which apply to large businesses:
Both the LRET and SRES schemes are linked to the Federal Government’s targets of 20% of energy generation from renewable sources by 2020.
The other schemes are state-based schemes and are regulated by the state governments.
The regulator estimates how many certificates will need to be surrendered for that year to meet the targets.
Based on this estimate, the regulator determines a compliance percentage of the applicable certificates that the liable entity (your retailer) will need to purchase and surrender on behalf of their customers.
Throughout the year, when the grid’s available electricity supply cannot meet the forecast demand to maintain power system reliability, AEMO may request for emergency electricity reserves to be made available to the grid. Examples include during bushfires, heatwaves etc.
When this call is made, emergency sources such as generation (generators/batteries) or demand response* are made available to increase the grid stability in that region during peak demand.
Demand response is the term used when large commercial users reduce their load or shut down power, enabling an increase in the electricity supply for that region, that are otherwise not available in the market.
This AEMO intervention mechanism is known as the Reliability and Emergency Reserve Trader (RERT) under the National Electricity Rules (NER). AEMO uses RERT as one of a number of mechanism in the event that a critical shortfall in reserves is forecast ₁
When the emergency mechanism is activated, there are costs involved in administering the RERT process, and costs to compensate the large energy users who partake in the response.
These RERT costs are passed on by AEMO to retailers, these charges then flow on to those customers who consumed electricity in that region, during that time. Due to these RERT events, many commercial and industrial electricity users have received invoices with these additional charges listed.
Capacity or fixed charge: This payment is for contracted participants to guarantee they are available should AEMO need to stabilise the power system.
Activation or variable charge: This charge is applied when an event occurs and the service is triggered. AMEO has a full list of events on their website.
If your business is examining your energy bills and looking at ways to reduce your costs, it’s time to partner with experts. At Sustainable Energy Solutions we help thousands of Australian businesses reduce their energy costs.
Our team of energy brokers can assess your business’s energy needs, compare business energy plans and negotiate you a better offer – call us on (02) 9371 4153 or fill out our contact form.
Energy cost is a significant component of operating expenses for businesses across a range of industries. Many of our clients have now been through several cycles of energy contract negotiations and understand the benefit of tracking the market and gaining expert advice through the tendering process. Whilst negotiating a competitive rate on your energy bill is the logical place to start, most people don’t realise that there are a number of other controllable costs and unfortunately don’t explore the range of options available to them.
One of the common concerns we often hear from our clients is that their network charges are quite high. Network charges refer to the implementation and maintenance of the physical infrastructure, namely, the poles, wires and other equipment drawing power from the electricity grid. On average, network charges account for approximately 50% of a standard electricity bill. Historically, the biggest contributing factor behind electricity price movement on energy bills is due to changes to the network costs.
Energy users can influence the level of Peak Demand on the network and reduce this portion of their bill by ensuring that they are drawing power efficiently. Ongoing savings can be achieved via Power Factor Correction and Network Tariff Review.
We’ve put together the following FAQs to demystify these charges and help you achieve sustainable long-term savings.
Peak Demand is a measure of the highest amount of electricity drawn from the network (grid) at any one time. This is usually over a 15 or 30-minute interval. Demand is charged by the Network Operator and is passed through by your energy retailer.
One of the major contributing factors to a high Demand charge is a poor Power Factor. Power Factor is the ratio between your actual consumption (kW) and your perceived usage (kVa). To have a perfect Power Factor, your site would have a factor of 1 at your highest Demand point. This would mean that the site is using all the power efficiently it is drawing and none is lost. It is now a requirement by most retailers and network providers that your site maintains a Power Factor of 0.9 or above.
If your power factor is below 0.9, it means that your site is not drawing power efficiently and not all power is being converted into usable electricity. Therefore, you are paying for energy that your site is pulling but not actually using. Installing a capacitor bank on your site will improve your Power Factor rating and has a very short payback period.
STC – A Small-scale Technology Certificate is a federal government incentive designed to encourage homes and businesses to install renewable energy systems. The scheme can offer an up-front discount to those who purchase solar systems for their homes or businesses, to a maximum of 99.9 kW size. The certificates can be traded to an energy retailer or used as a discount from the total cost of the system. STCs are available until 2030 and their value reduces each year until the 2030 deadline. For example, if a solar system is installed before the 31/12/2019 the STC entitlement (value) would be for 12 years. This is an incentive to install a renewable energy system sooner rather than later.
LGC – A Large-scale Generation Certificate is the equivalent of one-megawatt hour (MWh) of net renewable energy generated by a solar PV system sized bigger than 100kW. LGCs are paid to the system owner depending upon the energy generated. Like STCs, their availability expires in 2030 with their value reducing each year.
As SES works with a wide range of partners, Energy Efficiency products can be purchased via:
We begin by assessing your business’s energy requirements, which involves your energy consumption profile as well as any specific operational needs, constraints, and renewable energy goals.
We are constantly tracking the energy market to identify industry news and how this impacts market dynamics. This enables us to then take your business’s unique energy profile to suppliers with confidence. We evaluate potential retailers based on pricing, contract terms, customer service, and environmental sustainability.
We then request proposals from multiple suppliers and compare offers. We negotiate with selected suppliers to secure pricing and service agreements, exploring flexible contract options and renewable energy solutions to suit your business needs and goals. We present these offers to you and assist you in selecting a supplier to contract with. Once an agreement is reached, we continuously liaise with your retailer and help resolve any issues relating to your energy supply.
The duration of the energy procurement process can vary depending on a few factors, including the complexity of your business’s energy needs, market conditions, and the specific services or solutions being implemented. However, a typical energy procurement process can be broken down into a few stages, each with its associated timeline:
If your business’s energy needs change, whether due to growth, operational changes, or other factors, we can help you adapt and optimise your energy procurement strategy accordingly.
We will work with you to establish what impacts these changes would have on your energy consumption patterns and supply information to what affect these changes would have on current and/or future contracts.
The cost depends on the size of your business, this can be determined very early on in the process.
There are two ways that our fee can be paid:
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