Understanding electricity network charges and achieving long-term savings

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.

Understanding network charges

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. To receive your free Power Factor Rating for your site, send a recent bill to your Account Manager or upload it to our website. Alternatively, you can call our team on 02 9371 4153.

Network Charges FAQs

What is 'Demand'?

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.

What is Power Factor?

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. 

What does poor Power Factor mean?

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.

Benefits of Power Factor Correction (PFC)

Power Factor Correction (PFC) will help reduce your perceived consumption (kVa) closer to the level of your actual usage (kW), as most network tariffs are now charged based on kVa, thus reducing your demand charges. PFC should also prolong the life of your equipment

Network tariff

Network tariffs refer to the rate that the network provider in your area charges to supply electricity to your site. Network charges vary by location, state, and consumption on your site. In some cases network providers charge a flat rate, in other cases, they charge a “time of use” rate. Network providers review their tariffs once or twice each year.

Network Tariff Review

Ensuring that you are at the appropriate rate for your load profile and location is critical to correct bill accuracy and can save you thousands of dollars each year.

‎For more Frequently Asked Questions, visit our website

Contact us on 02 9371 4153

About us
Sustainable Energy Solutions is a niche consulting firm specialising in energy procurement.  We help our clients to take control of their energy cost by securing competitive electricity and gas contracts for their business or site anywhere in Australia. Our team of experts can also advise on renewable energy products and energy efficiency technology such as solar, LED lighting and Power Factor Correction.

Our goal is to help businesses reduce their energy use and achieve long term savings.